The American skills shortage is a meme. It is a tired argument used to lobby for increased temporary guest workers who bring low wages and it is a red herring used to explain away unemployment while bolstering austerity’s selfish bottom line.
Writer Robert J. Samuelson recently took to the pages of the Washington Post with an op-ed that debunks much of this meme. “Employers lack confidence, not skilled laborers,” Samuelson says:
Superficially, it seems compelling. Consider the evidence. The Labor Department’s latest estimate (February) of job vacancies was 3.9 million, up 80 percent from the latest low in July 2009. Just recently, the Wall Street Journal reported a “shortage of help hits nursing homes.” Employer complaints of scarcities abound, notes Darrell West of the Brookings Institution. Even in 2010, manufacturers said they couldn’t fill 227,000 jobs. More than half (55 percent) of state governments report difficulty hiring for IT openings. Microsoft says it struggles to fill thousands of computer science slots.
Then there’s the “Beveridge curve,” after English economist William Beveridge (1879-1963). He noted a relationship between unemployment and job vacancies. When unemployment is high, vacancies are few, because workers quickly fill them. But when unemployment falls, vacancies actually rise, as employers scramble to meet their needs. What’s puzzled economists is that there are more vacancies now than were expected at today’s high unemployment rate. This suggests job mismatches: workers lacking needed skills or living where the jobs aren’t.
On closer inspection, the logic unravels.
A key factor in disproving the skills shortage meme is the disconnect between current wages and alleged worker shortages. Basic economics would suggest that if a shortage truly existed companies would be gunning mightily for the skilled workers who are out there. This would result in a sudden rise in average income across shortage-hampered industries. Such a rise has not been witnessed, though:
From April 2012 to April 2013, average hourly manufacturing wages rose 1 percent, reports the Labor Department. Over the same period, the gain for all private nonfarm workers was 1.9 percent. Among computer programmers, inflation-adjusted wages have remained flat for a decade, says a study by the Economic Policy Institute, a liberal think tank.
Similarly, economist Paul Osterman of the Massachusetts Institute of Technology surveyed 925 manufacturing establishments in 2012 about worker shortages. Three-quarters reported no shortages, defined as vacancies lasting three months or more. Of the rest, most shortages were less than 10 percent of their workforces. “Very few firms responded by reducing production,” says Osterman. “The most common reaction was to outsource” domestically — to send business to other American firms. Labor bottlenecks haven’t crimped recovery, he concludes. A study by economists Edward Lazear of Stanford University and James Spletzer of the Census Bureau agrees.
Instead, Samuelson argues that companies are refusing to take the financial risk of hiring more workers or expanding due to shaken confidence, not lack of available labor:
The answer almost certainly involves employers, not workers. Businesses have become more risk-averse. They’re more reluctant to hire. They’ve raised standards. For many reasons, they’ve become more demanding and discriminating. These reasons could include (a) doubts about the recovery; (b) government policies raising labor costs (example: the Affordable Care Act’s insurance mandates); (c) unwillingness to pay for training; and (d) fear of squeezed profits. In practice, motives mix.
The training aspect is particularly disheartening. Not only are companies actively disinforming and dissing the American worker in the near-term by claiming a false skills shortage, they are shaping a future, through apprenticeship ignorance, that has no chance of being fundamentally more prosperous than the present. It’s the worst of both worlds.
Most squeezed by the meme/plague, according to Samuelson, are the long-term unemployed:
The chief victims of this shift in business behavior seem to be the long-term unemployed (more than six months), as some fascinating research by economists William Dickens and Rand Ghayad of Northeastern University suggests. By their estimates, virtually all the reduction in hiring falls on this group, regardless of their other characteristics (age, education, industry experience). Many firms seem to have concluded that the long-term jobless are damaged goods.
Take a look at Samuelson’s entire op-ed.