The Hankyoreh, June 25, 2017
Last week Donald Trump visited a technical college in Wisconsin. He was accompanied by Wisconsin Governor Scott Walker, several members of Congress, and top officials in his administration. The theme was promoting apprenticeship programs that give workers job specific skills. Trump, along with the rest of his contingent, bemoaned the fact that employers cannot find workers with the skills they need. This theme was picked up by many in the media, including many who are not Republicans, who argued that workers in the U.S. are not getting ahead because they lack the necessary skills.
The striking feature about this argument is how widely it gets repeated, even when the evidence continually shows that it is not true. Just to be clear, it is good that U.S. workers get better training. Other countries, most notably Germany and the Nordic countries, do a much better job of training workers who do not get college degrees than the United States.
It is also true that any individual worker will almost certainly be better off in the labor market if they could acquire more skills. Certainly the best advice to a young person completing high school would be to try to go to college or alternatively to get the training needed to be a physical therapist, dental hygienist, or some other moderately well-paying professional. Insofar as the government can facilitate this education and training it will be good for both the workers and the economy as a whole.
But that is very different from claiming that the main reason that millions of workers are unemployed or out of the labor force is that they don’t have the right skills. This claim is endlessly put forward, in both the United States and elsewhere, even in contexts where it is obviously not true.
The unemployment rate in the United States fell to 4.3 percent in May, so the claim that companies may be having trouble finding qualified workers is more plausible now than earlier in the recovery. But even now that the labor market is hugely stronger than at its low points in the Great Recession there is still reason to question the skills shortage view.
First and foremost we are not seeing the sort of rapid wage growth that would be expected if there were widespread skills shortage. This is a story where companies would like to expand their business but are prevented from doing so because they can’t find any workers with the skills they need.
However there are always some workers somewhere who have the needed skills. Companies could offer higher wages to lure workers away from competitors. Or, they can make a point of recruiting in more distant areas and offering to pay travel and location expenses for workers.
We don’t see this sort of bidding war for workers taking place in any major sector of the economy. While there may be a few occupations in a few areas where employers really are bidding up wages rapidly, this is not happening in most sectors of the labor market.
The other reason we know the skills shortage story does not fit is that there is no noticeable increase in the length of the average workweek for any major group of workers. The story we would expect to see if companies could not hire more workers is that they would instead work their existing workforce more hours, paying them overtime if necessary. We don’t see this happening on any large scale either. The length of the average workweek is actually slightly shorter now than it was two years ago. Here also, there is no major area of the economy in which are seeing lengthening workweeks in a manner that would be consistent with the skills shortage story.
While this skills shortage argument still doesn’t fit the data even with a 4.3 percent unemployment rate, it has been regularly made by politicians, pundits and economists even when the unemployment rate was far higher. A quick search of the New York Times found an article highlighting the skills shortage in manufacturing in the summer of 2010, when the unemployment rate was over 9.0 percent. In other words, even when the economy was very obviously suffering from a lack of demand – which can be solved by having the government spend more money -- these people were blaming workers for not having the necessary skills.
France’s new president, Emmanuel Macron, argued a similar position during his recent presidential campaign. Even though France is suffering from 10 percent unemployment, Macron argued that the problem was that unemployed workers lack the skills necessary to get the jobs that are available. Here also the effort to provide workers with more skills is a good thing, but ultimately it is a strategy that will prove ineffective if the real problem is not enough demand in the economy.
In short, the argument that workers don’t have the right skills seems to have endless appeal among politicians and people who write about economic policy. For some reason the argument that unemployment is due to bad economic policy is much less popular among this group.