September 17, 2015
Michael Hiltzik at the Los Angeles Times recently reported on the much-talked-about shortage of STEM workers, or workers in fields that predominantly deal with science, technology, engineering, and mathematics (STEM). He notes that many studies indicate that the shortage of STEM workers is imagined. He also discovered that many of the companies that complain about their inability to find STEM workers are, paradoxically, laying off large numbers of them.
It is difficult to believe that there is a shortage of these workers when there is a substantial amount of slack in the labor market. More than seven years after the start of the Great Recession, the employment-to-population ratio, or employment rate, is still down 2.5 percentage points for prime-age (25 to 54) workers.
Like other supposed labor shortages, if there were a real shortage, wages would be expected to grow. This is because employers would compete over a small number of workers, and they would need to raise wages to attract those workers.
The Bureau of Labor Statistics Occupational Employment Statistics program tracks the average wage of STEM occupations dividing them into four subdomains. These consist of a Health subdomain, a Social Science subdomain, an Architecture subdomain, and a Life and Physical Science, Engineering, Mathematics, and Information Technology subdomain (this last subdomain is where most technology workers would fall). The chart below shows the year-over-year nominal wage growth for the occupations in those four subdomains.
Wage growth for all of these subdomains fell after the Great Recession and none have recovered. All are under 2.0 percent, with wage growth in the Social Science Subdomain close to zero. It’s important to note that this is nominal wage growth, so we would expect real wage growth to be even lower.
There is also data for major STEM occupational groups. This data might show a different story than the broader subdomains. Below is a chart with these major occupation groups, along with data for detailed computing-related occupations often mentioned in the context of STEM.
The general trend is that nominal wage growth is lower now than it was in 2009, with the exception of Computer Programmers, who saw low wage growth in 2009. Wage growth is low-to-moderate, under 3.0 percent for all groups.
This wage data suggest that there is not a shortage of STEM workers broadly, or for commonly discussed computer occupations. (Data on all detailed STEM occupations is available here.) One reason employers might think they can’t find workers is that they may have inflexible requirements for vacant positions. For example, a company might require that workers work for low wages and long hours, or that they have particular certifications or unreasonably specific skills, or vague cultural attributes that favor certain types of people. There might also be an unwillingness to train new workers on-the-job, which was very common in the past.
So when employers complain about not being able to find workers, what they really mean is that they can’t find workers who meet their requirements at the wage they are willing to offer. With the cost of living rapidly rising in areas like San Francisco, where there are many STEM employers, it makes sense that workers would not apply for positions that offer wages they find to be too low.
The story is then not that there are too few STEM workers, but that employers will say they can’t find workers in order to increase the bargaining power that they have and hopefully lower their labor costs. Employers are increasingly pushing for policies shift training costs onto the public and to expand H1B visas, which Hiltzik mentions. Some STEM employers are so desperate to reduce labor costs they even collude to keep down their employees’ wages.
The data indicate that Hiltzik is right to suspect that the STEM shortage is phony. The real story is that employers want to pay workers less.