The Zombie Skills Gap Meme That Won't Die

Friday, On Real Time With Bill Maher, guest Mike Rowe got the ball rolling, continuing the mythical meme that is the skills gap.

We've all heard it - I know such-and-such company that just can't find any workers to do the numerous positions they are trying to fill. According to the proponents of this fairy tale, the U.S. just isn't training workers to do the jobs businesses need.

Yet, when we actually look at the data, a classic supply-and-demand explanation (with most of the blame on low wages) appears.

As UWM professor Marc Levine notes, "There is, in short, little labor market evidence – when we examine job openings, wages, hours, employment projections, or worker credentials— of a skills gap or structural unemployment...National data on wages, hours, job vacancies, and employment projections provide no evidence that a skills gap has caused high unemployment in the U.S. as a whole –- either before or after the Great Recession. This finding is consistent with the conclusions of a daunting array of research and analysis on the subject. As we have seen, these include: Studies by: a) Scholars from such top universities as Duke, Berkeley, Penn, Stanford, MIT, and UW-Madison; b) Economists from the Brookings Institution, the Roosevelt Institute, the Center for Economic and Policy Research, and the Economic Policy Institute; c) Economists at the Federal Reserve Banks of Atlanta, Boston, and Chicago; and d) Consultant-economists such as the Boston Consulting Group. In addition, articles and commentary by: a) Two recent Nobel Laureates in Economics (Krugman and Diamond); and b) Two former heads of the President’s Council of Economic Advisers (Tyson and Lazear), thoroughly reject the skills gap or structural unemployment as explanations for our underperforming labor market."

The U.S. does have a few industries, in a few locations across the country, where specifically-trained workers are needed. Do you know what happened in those few places? The already-employed workers saw their hours increase to meet the demand, to fill-in for the needed-workers. Wages also rose to attract workers to the job openings.

This structural malady is a small proportion of unemployment. As Rortybomb informs, "A report the IMF put out - The Great Recession and Structural Unemployment - which found find that structural unemployment is 1%-1.75% nationwide, with skills being 0.5%."

In most places, where some falsely claim a skills gap, wages for new hires have not risen, nor have the hours of those currently-employed increased.

Dave Alitg, in The Skills Gap: Still Trying To Separate Myth From Fact, stated, "We have yet to find much evidence that problems with skill-mismatch are more important postrecession than they were prerecession. We'll keep looking, but—as our colleagues at the Chicago Fed conclude in their most recent Chicago Fed Letter—so far the facts just don't support skill gaps as the major source of our current labor market woes."

As I've written, "In reality, this is simple supply-and-demand economics. People don't want to work at grueling jobs for low pay, minuscule benefits, and without a retirement plan. If these jobs were paying living wages and had some sense of security, people would be lined up around the block for the positions."

For Further Reading:
Skills Shortage Sham

Weekend Reading

Budget Bunko
Don't Blame The Work Force
Hey Paul Ryan - We All Depend On Government
Milwaukee, Madison Among Nation's Brainiest
Paul Ryan Hilariously Pretends To Care About Poor People
State Skills Gap Myth Gets Shot Down Again
Union Membership Rate For U.S. Tumbles To New Low
Why Walker Opposes Obamacare

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Myth Of America's Tech Talent Shortage
The Rise Of Genetically Modified Crops
Margaret Thatcher And Misapplied Death Etiquette
Obama Nominates Sleazy Subprime Banker As Commerce Secretary
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Welders Wanted. We Don't Need No Stinking Welders!

Welding Job Fair Fails To Spark Interest

There is such a skills mismatch. Some Wisconsin companies just can't find welders. MATC was nice enough to organize a job fair to facilitate those looking for work connecting with the companies that supposedly need them. Too bad the companies, crying about Wisconsin not having skilled workers to fill positions, also seem to not have the time to show up.

Faulty Excuses

The Journal Sentinel recently reviewed Scott Walker's job creation record. The findings, as we've all seen, are quite disappointing. Yet, the Journal believes we shouldn't be pointing fingers or finding fault. They don't think such things matter. The Journal feels we should just "focus on policies that will help give the economy a boost over the long-term."

So, right off the bat, since it is the subheader to their article, if they're so concerned with boosting long-term economic prospects, why did the Journal support Scott Walker's refusal of nearly a billion dollars in federal aid for a train which, when completed, would have better connected a crucial economic mega-region - Minneapolis, Madison, Milwaukee and Chicago?

I guess if I were partially responsible for such an generation-altering economic blunder I wouldn't want to focus on fault, blame, or finger-pointing either.

Hilariously, the Journal believes the only two choices for fault are either: 1) it's Walker's fault or 2) it's the recall election organizers fault. No responsibility for the largest newspaper in the state? Nope. As the public keeper-of-record, the watchdog, our fourth estate, they have no responsibility in presenting truth, what works and what doesn't, what is right or wrong? Hmmm, how about it's mostly Walker's fault, but he couldn't have done all the damage he has without the support and endless articles, apologies and endorsements from the Journal Sentinel.

Their obfuscation tour continues, "But his political finger-pointing is pointless. Not that Walker doesn't deserve responsibility - he's the governor. But the problems facing the state's economy go far beyond the power of a single person to solve." This seems like a much different tone from the newspaper than when it was endorsing Walker during his campaigning. We were going to be "open for business" and the Journal agreed. But now that we're not open for business, the Journal feels its "pointless" for the public to remember who steered them wrong.

At this point the article veers off into the Journal 'buzz-words as policy' section. They talk of "entrepreneurial," "risk-takers," "research," and "venture capital." Here, again, they stump for a state-funded venture capital fund. Another Scott Walker-supported idea that has fizzled and proven unimpressive elsewhere. Again, ideas - whose were they? Were they successful? Right? Wrong? This will be another one of those ideas Walker and the Journal push for, but when it fails (doesn't produce anywhere near the results they expect), they would like us all to forget whose idea it was.

They point to an economic lethargy among upper Midwest states as an explanation for our poor performance. All these states have large manufacturing sectors, which have been underperforming, thus  things are bad. Yet, as this chart from UW-Madison economist Menzie Chinn shows, our Midwest neighbor states have outperformed Wisconsin.

Next, the Journal goes back to another well-worn (false) explanation - structural unemployment - the skills mismatch. The Wisconsin unemployment rate is hovering around 7 percent. One percentage point of that may be structural, but the majority of our unemployment is not. And, this is normally the case, even in a recession (although structural unemployment may increase slightly toward the 1.5 percentage point range). Structural unemployment can exist, but it's not the majority of our unemployment, thus is does not explain, nor provide the prescription for, unemployment. UWM professor Marc Levine recently released his own study debunking this skills mismatch meme the Journal continually tries to push.

The Journal then points out that construction and its ancillary jobs are down and they imply they don't think they'll be coming back. Hello?! Housing bust? Great Recession? Now, I don't think they'll come back to the housing bubble numbers (that's why it's called a bubble), but they will no doubt recover and stabilize as the economy does the same. We'll always need windows, doors and construction.

"Should we hold Walker responsible? Of course. He's the one who promised that 250,000 private-sector jobs would be created during his first term -  a pledge that he is far from fulfilling. But politicians always get too much blame when the economy is weak and too much credit when it is strong. We think that's the case here," the article hedges. Talk about having your cake and eating it, too. So, yeah, he's kinda responsible, but can he really do that much anyway? He's trying, that's all that matters. Lets just stick our collective head in the sand and move on. It almost seems this article merely used the 'whose to blame?' question as a springboard for a rant about pet projects and policy prescriptions favored by Walker and the Journal Sentinel.

Now, the Journal turns back to another of their favorite "development" ideas - venture capital. To believe such is a panacea, we must ignore, "Josh Lerner, of Harvard, has found the number of exceptional venture capitalists is very small. Harold Bradley, of the Kaufmann Foundation, believes venture capitalists have plenty of money, but allocate it very inefficiently, and therefore should not be receiving additional public dollars with the hope of boosting a local economy. Bradley and Carl Schramm, in an article for Business Week, write that the current focus on fees has promoted start-up flipping rather than nurturing." Scott Walker and the Journal Sentinel want venture capital to be a centerpiece, a major investment, of our economic development playbook. This disregards the fact that venture capital, overall, has been a bad/subpar return on investment. And, when it has been successful, only a very select few were rewarded.

Plus, we're just exiting an economic downturn caused by speculation and gambling - casino capitalism. We've seen how destructive this can be. Scott Walker, Alberta Darling, and the Journal Sentinel's answer to this is to double-down and speculate with venture capital (supported with public dollars).

The article closes with a buzz-word bonanza and one more debunked idea - young companies are the answer, they create new jobs. As I've written before, "The pace of hiring may be strong in young companies, but what they also fail to mention is that the pace of firing is also higher amongst younger companies."

So, whose fault is it anyway? It's largely Scott Walker's. But the Journal Sentinel also bears responsibility for supporting his election and for pushing his debunked ideas. And, all this does matter.

The Mythological Skills Gap

The Skills Gap & Unemployment In Wisconsin: Separating Fact From Fiction

Beyond the anecdotes of local employers, the Wisconsin and Milwaukee labor markets show no statistical evidence of a skills shortage:

Wages: If Wisconsin employers were encountering a shortage of skilled labor, wages would be going up, but in Wisconsin real wages have declined since 2000. By contrast, in states such as North Dakota and Wyoming, where there really is demand for and a shortage of skilled labor, caused by a boom in the energy sector, real wages have jumped by double digits since 2000. Wisconsin wage "growth" also lags the national rate, another sign that there is no labor shortage here. 

Hours: In contrast to states with tight labor markets such as North Dakota, there is no evidence that Wisconsin employers are adding hours to their existing workforce, to compensate for an alleged skilled labor shortage. Average weekly hours worked in Wisconsin are down 4.3 percent compared to 2000. 

Occupational Projections: Although promoters of the skills gap idea claim that the skills requirements of future jobs will vastly outstrip the skills and education of Wisconsin workers, occupational projections for the state reveal that 70 percent of projected openings through 2020 will be in jobs requiring a high school diploma or less. 

Underemployment and Workforce Overqualification: In reality, Wisconsin and Milwaukee suffer from the opposite of a skills gap: an economy that generates too few quality jobs and a labor market that is characterized by the underemployment and overqualification of skilled and educated workers. 25 percent of Milwaukee's retail salespersons hold college degrees (up from 11 percent in 2000); 60 percent of Wisconsin's parking lot attendants have had some post-secondary education. The "job gap" has created a skills mismatch of sorts in the Wisconsin and Milwaukee labor markets, but it is the inverse of the one commonly put forward: it is a mismatch of too many highly educated workers chasing too few "good jobs." 

Rising Human Capital: Contrary to skills gap rhetoric, educational attainment has increased dramatically in Wisconsin and Milwaukee over the past decades. Nearly 90 percent of Milwaukee's adult population holds a high school diploma (up from 50 percent in 1970), and 31 percent hold at least a bachelor's degree (up from 11 percent in 1970). Gains in UW-Milwaukee The Skills Gap and Unemployment in Wisconsin 6 educational attainment have occurred for all racial and ethnic groups. All data point to consistently rising human capital formation in Wisconsin and Milwaukee.

Low Wages, Not Skills Mismatch

More evidence from Catherine Rampell invalidating the skills mismatch story.

Are There Really No Good Job Applicants Out There?

What’s especially odd about these survey responses is that if employers are having trouble finding qualified workers, they should be bidding up wages to attract the few qualified workers who are out there. But that’s not what the data show.

Average hourly earnings in the private sector fell over the period that businesses reported having increased trouble finding qualified workers (December 2009 to September 2012). Perhaps this means businesses are having trouble finding qualified workers precisely because they’re unwilling to pay new hires enough money.

The Skills Mismatch Myth

Dave Altig, Atlanta Fed, The Skills Gap: Still Trying To Separate Myth From Fact:

"We have yet to find much evidence that problems with skill-mismatch are more important postrecession than they were prerecession. We'll keep looking, but—as our colleagues at the Chicago Fed conclude in their most recent Chicago Fed Letter—so far the facts just don't support skill gaps as the major source of our current labor market woes."

For Further Reading:

A Manufactured Paradox

The Skills Crisis & Job Training

Skills Shortage Sham

Weekend Reading

American Corporations Made Record $824 Billion Last Year
Assessing Yet Another Round Of Structural Unemployment Arguments
How To End This Depression
It Was The Housing Bubble, Stupid
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The Legendary Paul Ryan
Lehman E-mails Show Wall Street Arrogance Led To Fall
Private Jobs Increase More With Democrats In White House

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Don't Let Business Lobbyists Kill The Post Office
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Retirement, Slipping Farther And Farther Away
Taxed By The Boss
Taxes And Employment
Tax Me, For F@%&'s Sake!
Worker Skills And Job Quality

A Manufactured Paradox

The chief executive of the Wisconsin Economic Development Corporation and the secretary of the state Department of Workforce took to the Journal Sentinel to "inform" readers of a workforce paradox in Wisconsin. Or, to at least lay the groundwork for such a talking-point to help move forward more legislation which will supposedly address this manufactured paradox.

It's amazing when similar-minded people whom have advocated less regulation, lower taxes, and the general expansion of service industry jobs over the past three decades suddenly decide manufacturing is a crucial sector and that we must have a renewed focus on industrial policy.

Nevermind that the typical economic policies they've pushed over the past few decades have decimated manufacturing employment. Policies that have weakened unions, driven down wages, and outsourced many of the good-paying manufacturing jobs to low-wage countries. [The combination of low-road economic development and neoliberal policies.]

Now the government must rework the educational system's curriculum, provide more job training, and provide tax credits and relocation incentives to improve the same manufacturing employment that past policies decimated. Regardless of the fact that, "There is little evidence of absolute declines in cognitive or hard skills in the United States or generally poor performance relative to other advanced industrialized countries," as reported by associate professor Michael Handel.

The writers engage is some fairytales to make their point in the article. They claim part of the reason manufacturing employment and jobs have declined is because we haven't talked about them enough as being desirable employment. They also regurgitate the well-worn idea of structural employment - matching people who can do the jobs with where the jobs are needed. [As Rortybomb informs, "A report the IMF put out - The Great Recession and Structural Unemployment - which found find that structural unemployment is 1%-1.75% nationwide, with skills being 0.5%."]

People have chosen service jobs over manufacturing because of the diminished wages offered by the manufacturing jobs. The manufacturing jobs today have lower wages, reduced health care and slim to non-existent retirement packages. Why would a worker chose a challenging, skilled manufacturing job under such circumstances when they could just as easily take a similarly compensating service industry job, which is often, also, much less physically demanding?

If the writers were serious they would be addressing trade agreements, tax-policy toward outsourcing firms, and discussing the need for a comprehensive industrial policy focused on America's need for a strong manufacturing sector and it's link to our infrastructure and self-sustainability. Instead we get more apologetics and scapegoating. Like most businesses these days, the manufacturers want the inflated profits, but none of the social responsibility of good wages and a secure retirement for their workers.

It's not that we don't have workers who can do these jobs, it's just easier [cheaper] for the well-represented [lobbyists] manufacturing companies to appeal for government hand-outs than to pay wages necessary for the work. Thus, a whole cottage industry of cranks has arisen to create this fantasy of structural unemployment and skills mismatch.

Rather, this is simply a story of supply and demand. Until the manufacturers are willing to pay respectable wages to attract workers to these jobs, the manufacturers will continue claiming the educational system must be failing, the government isn't doing enough, and everyone but the manufacturers are responsible for these supposedly unfilled jobs.

For Further Reading:
Has The Great Recession Raised Structural Unemployment?
Latest in (Lack of) Structural Employment

Sunday Reading

The Book Of Jobs
Corporate Profits Up. Taxes Not.
Fannie And Freddie Fantasies
Top 5 Tax Myths of The GOP Spin Machine
How Many Colberts Are There?
Structural Adjustment For The Middle Class?
The City Solution
Urban Development Legends
What Is The Contribution Of The Financial Sector?
What Is The Real Unemployment Rate, And How Could We Tell?

Weekend Reading

Bradley Foundation Builds Conservative Empire
For Business, Golden Days; For Workers, The Dross
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$7.7 Trillion in Secret Federal Reserve Loans To Banks?
State Jobs Carried An Asterisk
Structure Of Excuses
Take A Stand Against School Vouchers
Why School Choice Fails

Prosperity, Poverty & Unemployment

In an article celebrating the Milwaukee area's good job growth, the most concealing quote has to be, "It's possible to have prosperity and poverty right next to each other. We're kind of accumulating, in the human resources sense, tons of people who just don't have employable skills. I don't know what you do to flip that around."


Another great obfuscation of our increasingly unequal society, alongside the talking-point of structural unemployment. 


We have poverty alongside prosperity because the prosperous have taken control of government and steered all the economic gains back into their own pockets. There are plenty of jobs [infrastructure, public works] which could employ the supposedly unemployable if only we had the political will.


It should also be noted that there is a general lack of interest in poverty. It's rarely mentioned. It's rarely talked about. They are the unspoken class in American society. We're much too concerned with quarterly returns, tax breaks for the job "creators," and keeping up with the Joneses. 1 in 6 Americans lives in poverty. Yet, we're more concerned about making sure the richest among us don't see their taxes rise 3 percent.


The idea that there aren't skilled workers to do the needed jobs is really just a diversion of responsibility by the job "creators". People can't get by on the wages being offered. We keep hearing how businesses just can't find workers to do the job. It's the fault of government, universities, the technical schools. But all of this myth-making misses the rudimentary economic principle of supply and demand. If there is work that needs to be done, yet workers are hard to find, business either goes to where the workers are, or they pay a wage high enough to attract the workers they need.


This also exemplifies the double-standard many anti-tax, pro-business people hold. They are job creators. They shouldn't have to pay taxes or have social responsibilities. But when they are unwilling to pay the market wage, the government must come to the rescue and train workers, provide subsidies, or help them out in some fashion. And, we shouldn't forget (as Elizabeth Warren recently reminded) about the roads, the court system, police protection, and other public services that allow their businesses to operate - services that we all pay for.


In another [two articles mentioning poverty! - I guess that will be all we hear about it for the rest of the year] recent article (which displayed the usual passerby/woe-is-me/only-time-will-tell attitude toward poverty), Tom Hefty, ex-Blue Cross executive, blamed Milwaukee politicians (i.e. Democrats) for "economic decline and rising poverty rates" in Milwaukee. Backhandedly blaming Democratic policies for all economic calamity. Yet, seemingly oblivious to the fact that poverty is increasing 5 times faster in the suburbs than in the city. 


Policy is failing workers, the poor, the middle class, 99% of us, whether we're in the suburbs or the city. The reality is: tax cuts are no panacea, and, good government does more for the majority of citizens than "free" markets and privatization. Poverty and unemployment are a failure of leadership...business executives included.


For Further Reading:
Assessing Structural Unemployment 
Debunking The Theory of Structural Unemployment
Deconstructing Structural Unemployment 
It's About Job Shortage, Not Skills Mismatch 
Jobs Revisions Bust Structural Unemployment Myths
The Myth of Structural Unemployment
Structural Unemployment & "Skills" Mismatch
Structural Unemployment Myths 
Structural Unemployment 
Structure of Excuses 
Who's Unemployed?