Why the ‘skills gap’ doesn’t explain businesses’ slow hiring
LE SUEUR, Minn. — Customers can’t get enough of Cambria’s quartz countertops, and the million-squarefoot production facility here is racing to keep up. Under bright lights and high ceilings, churning machinery fuses quartz crystals into heavy slabs and polishes them until they shine.
This facility is short 40 production workers. It took months to find all the workers for a new assembly line added earlier this year — even after Cambria boosted entry-level wages from $16.66 to $18 an hour. The labor shortage is costing the company some $3.8 million per month, said Marty Davis, the company’s president and CEO.
Employers across the country, from manufacturers in rural Minnesota to hospitals in New York City, are having trouble filling jobs. It now takes about 28 workdays to fill the average job vacancy, compared to about 24 days, on average, in 2007.
The declining unemployment rate has made it more difficult for employers to find workers, but it’s still tougher than it should be given the current jobless rate. Since the recession ended, the number of job openings has increased faster than the number of new hires.
The usual explanation offered by business and education groups is that too few Americans have the right skills for the openings. The way to close this “skills gap,” they say, is to improve job training and more closely align higher education to employment.
But this solution, promoted by politicians as the way to help workers left behind by globalization and automation — both major challenges for the country in the 21st century — is too simplistic.
Throwing more public dollars at education and training won’t be enough to connect willing workers to open jobs. In many places, employers are also setting wages too low, defining qualifications too narrowly, or not recruiting widely enough. Many people who are eager to work can’t because they lack transportation, or don’t have anybody to watch their children during the workday.
Besides, a lot of the open jobs that employers are struggling to fill right now don’t require any education or training beyond high school.
“I think (the) ‘skills gap’ has run its course. It’s overhyped and overrated,” said Janice Urbanik of Partners for a Competitive Workforce, the umbrella organization for workforce efforts in the Cincinnati area. “I don’t think it’s the only factor, and to some extent it’s not even the primary factor.”
President-elect Donald Trump made restoring lost manufacturing jobs a centerpiece of his campaign. He says he will bring back jobs by cutting taxes, rolling back regulations and renegotiating trade deals. His position on education and training for displaced workers is unknown.
It’s true that over the past 30 years, education and skill requirements for jobs have been rising, as a Pew Research Center study recently found. (The Pew Charitable Trusts funds both the Pew Research Center and Stateline.)
But that long-term shift doesn’t totally explain why jobs have been sitting open since the Great Recession ended. The U.S. hasn’t experienced the massive wage growth you’d expect from a shortage of workers, although wages did start rising last year. Many economists say that if there were a shortage of workers, wages would be going up more.
They say the lack of wage growth proves the U.S. has a demand problem — not enough good jobs — rather than a supply problem — not enough skilled workers. The idea that all we need to do is train workers is “fundamentally an evasion of a profound social challenge,” former U.S. Treasury Secretary Larry Summers said during a panel discussion hosted by the Brookings Institution last year in Washington, D.C.
“Training is very important and indeed necessary,” Summers told Stateline. “But it is not sufficient to meet either the near-term challenge of assuring demand and preventing recession or the longer-term challenge of the structural loss of jobs for less-skilled workers.”
National employment numbers provide a broad overview of the labor market, but they are too murky to explain why employers can’t fill certain jobs. The closer you get to the local level, the clearer it becomes that multiple factors hold back hiring, and that those factors differ by job, industry and location.
“The national skills gap notion is a fallacy, because there’s no national labor market. There are regional labor markets,” said Lesley Hirsch, director of the New York City Labor Market Information Service. Regional labor markets have slightly different dynamics depending on the industry mix and the types of workers there.
The head of Minnesota’s Labor Market Information Office, Steve Hine, knows this well. Twice a year, Hine’s staff surveys a cross section of Minnesota companies to ask them about their openings. In 2012 and 2013, it followed up with employers looking for workers in health care, engineering, manufacturing and information technology — fields supposedly suffering from a skills gap.
When hiring was difficult, employers gave multiple explanations for it. In 2013, for example, Minnesota manufacturers said two-thirds of all their openings were hard to fill, but that only 14 percent of positions remained open purely because applicants didn’t have the right education and training.
Instead, most employers had a hard time filling jobs because of a mix of factors. A lack of applicants with the right skills was one reason. But there were many others, including location, low wages and undesirable shifts.
“The job is not that specialized,” one manufacturer said of a position it had trouble filling. The problem was finding someone willing to live in a small town and work long hours for low pay.