Where Is the Skills Gap?
by Minjae Park
We often hear chatter about the “structural issues” that ail our economy, such as a supposed skills mismatch that is restraining hiring.
Take, for example, The New York Times’ Thomas Friedman in a column this May: “The Labor Department reported two weeks ago that even with our high national unemployment rate, employers advertised 3.74 million job openings in March. That is, in part, about a skills mismatch.”
Bloomberg published a story last Wednesday titled “Companies Say 3 Million Unfilled Positions In Skill Crisis: Jobs.” The story cites those same Labor Department numbers, as well as a survey in January by ManpowerGroup in which half of 1,361 U.S. employers reported not being able to find workers to fill positions.
The conclusion from this structural explanation is appealing in its simplicity: Educate and train our workforce.
Barbara Kiviat, in The Atlantic, argues the skills mismatch concept appeals to both sides of the political divide. She writes, “Those on the right get to talk about taking personal responsibility for upgrading one’s skills, while those on the left get to emphasize how we must do a better job with education, that great pathway to an egalitarian society.”
But educating and training workers is only part of the solution, and the problem it identifies and responds to—a big skills mismatch—doesn’t go far in explaining the causes of our unemployment problem.
The Center for Economic and Policy Research, in a scathing rejoinder to Friedman’s column, wrote:
Actually, it’s not very much about a skills mismatch. The number of job openings in the economy is still down by more than 25 percent from its levels in 2000. Also, if it were the case that the economy had a serious problem of skills mismatch, we would see major sectors of the economy in which average hours worked is rising (because firms can’t get more workers) and in which wages are rising. There are no major sectors that fit this description.
Paul Krugman, in a not-so-subtle jab at his Times colleague, blogged in June, “Am I totally certain that the problem isn’t structural? Hey, I’m not totally certain of anything! But there really is no evidence, none at all, for a story that nonetheless gets asserted as absolute fact in op-ed after op-ed.”
Matthew O’Brien at The Atlantic referred to a chart in a study by the Federal Reserve of Chicago that shows demand for high skill workers tracks the changes in medium and low skill workers.
That Chicago Fed study found “some limited evidence” of a skills mismatch. But one of the study’s authors, Jason Faberman, a senior economist at the Chicago Fed, told Reuters the high unemployment rate has been “an aggregate demand issue more than skills mismatch issue.”
So why do so many employers say skills mismatch is such a big deal, as in the Manpower study cited in the Bloomberg story? Kiviat suggests it’s in part to get government to contribute to job training costs. The skills mismatch trope, as she calls it, is “an argument for sharing labor-training costs with government agencies, non-profits, and institutions of higher education; it would hardly be fair to expect them to bear the full burden if the American workforce itself is defective.”
Dave Altig and John Robertson and the Atlanta Fed conducted their own survey of 100 businesses in the district represented by the Atlanta Fed and found:
Despite the fact that we see some evidence consistent with skill mismatch, it is far from clear that this issue is the smoking gun that explains the current anemic state of job growth. When asked if a dearth of skilled applicants is a persistent problem, our survey respondents overwhelmingly answer “yes.” But when asked if they have had more difficulty hiring over the past 12 months, the overwhelming majority answered “no.”
Even among the minority of businesses that report recent hiring difficulties, only half indicate that this difficulty is restraining growth.
They found little evidence that the skills mismatch problem is more important post-recession than pre-recession. They conclude that “so far the facts just don’t support skill gaps as the major source of our current labor market woes.”