Skills gap hobbles US employers-Financial Times
Drew Greenblatt has been looking for more than a year for three sheet-metal set-up operators to work day, night or weekend shifts.
The president of Marlin Steel Wire Products, a company in Baltimore with 30 employees, Mr Greenblatt says his inability to find qualified workers is hampering his business’s growth. “If I could fill those positions, I could raise our annual revenues from $5m to $7m,” he says.
He is offering a salary of more than $80,000 with overtime, including health and pension benefits. Yet in spite of extensive advertising, he has had no qualified applicants. He is trying to train some of his unskilled staff but says none has the ability or drive to complete the training.
Mr Greenblatt’s predicament speaks to one of the biggest economic debates about today’s 8.6 per cent US unemployment rate: is it merely a cyclical problem that will shrink as demand recovers? Or is it something deeper and more structural, a “mismatch” between the skills workers have and those companies need?
The idea there is something structurally wrong with the US workforce is controversial among economists but has a certain resonance with the public. Since the emergence of Japan as a technology and manufacturing powerhouse in the 1970s, Americans have been anxiousthat they were losing their competitive edge to better-educated, harder-working rivals.
Economists trying to figure out whether unemployment is cyclical or structural have turned to what they call the Beveridge curve: the relationship between unemployment and the job vacancy rate.
Vacancies, the number of unfilled positions, have risen by 35 per cent since their trough in June 2009 - but the unemployment rate has remained stubbornly high. If there are jobs but people are not filling them, it may be because their skills are not up to scratch, say those who fear structural unemployment.
But a preponderance of economists argue this is a misreading of the data. A recent San Francisco Fed paper finds that vacancies are high relative to hiring across a broad range of industries, including those such as construction, where recent job cuts mean that there is most unlikely to be a skills shortage.
The authors suggest companies may not be trying very hard to fill jobs, while workers in receipt of unemployment insurance may not be trying that hard to find them.
Policy moves by the US Federal Reserve reflect a view that most unemployment is not the result of a skills mismatch. But even those who believe that today’s unemployment problem is primarily cyclical say closing the ‘skills gap’ noted by Mr Greenblatt will be essential if Americans are to enjoy stable work and rising wages.
Ben Bernanke, chairman of the US Federal Reserve, told an audience in Jackson Hole, Wyoming, in August that the US had to ‘foster the development of a skilled workforce’ if it was to enjoy good longer-term prospects. The US education system ‘despite considerable strengths, poorly serves a substantial portion of our population,’ he said.
US companies that are growing say an unqualified workforce is already a significant barrier to hiring.
In a September poll of owners of fast-growing, privately held US companies undertaken by the non-profit Kauffman Foundation, the inability to find qualified workers was cited as the biggest obstacle to growth. Some 40 per cent of respondents said they were being held back by the skills gap, compared with just 13 per cent by lack of demand.
US manufacturers have 600,000 unfilled positions because of a lack of qualified skilled workers, according to a report released in October by Deloitte, the consultants, and the National Association of Manufacturers, an industry body.
‘We have a training programme, but if someone applies for a job and doesn’t have basic math, I don’t have the wherewithal to teach them basic math,’ says Charles Cannon, chief executive of JBT, a maker of food-processing machinery and airport equipment.
American 15-year-olds ranked 25th among the 34 developed countries in the Organisation for Economic Co-operation and Development in maths, 17th in science and 14th in reading ability, according to a 2009 OECD study.
Perhaps the most insightful information of all, from the comment section:
There are two big barriers:
HR and HR.
As the Financial Times requires a subscription (or limit you to 10 articles a month for free —my choice!) I’ve tried to find other references. Often the story is picked-up by other outlets, but this seems to be too new. I did find a PDF from the Assoc. of Chief Human Resources Officers entitled: Educating the 21st Century Workforce from August of 2010.
Along with the analysis of the educational system and the lack of STEM skills and disturbing graphs is this:
As we lay out our concerns and recommendations, we wish to point out that Association member companies operating globally have a special appreciation for the unique characteristics of the U.S. workforce. They find Americans more innovative. They see educational systems in countries outside the U.S. placing too much reliance on rote learning. They find that other countries are not encouraging students to think creatively or engage in integrative thinking. Further, American society is not as hierarchical as are other societies, which means that Americans are more willing to challenge conventional thinking and approach problems in non-traditional ways. Americans are much more open to new ideas and coming up with innovative solutions. Americans often excel at middle management in comparison with their counterparts in other countries, where their cultures make it more difficult to accept the concept of middle management.
So there is hope for us after all???
This October 2011 version of a working paper from the San Francisco Fed, perhaps, gives a better idea of what we know and what we don’t know about the market.
Our decomposition reveals that most of the current deviation from the Beveridge curve can be attributed to a shortfall in the vacancy yield, which measures hires per vacancy. This shortfall is broad-based across all industries and is particularly pronounced in construction, transportation, trade and utilities, and leisure and hospitality, and industries not explicitly classified in JOLTS.
Whether this shortfall is due to (i) mismatch between job openings and unemployed workers, (ii) reduced recruitment effort by employers, (iii) a change in the composition of vacancies and hires, or (iv) reduced search intensity of unemployed persons, is hard to parse out from the data currently available in JOLTS.
More information about the regional and occupational composition of job openings, hires, and quits would go a long way in helping us distinguish between these issues. Moreover, additional data on search intensity of employers, like for example the number of job offers made, would help us better understand the effort with which they pursue filling the job openings they have.
Acronyms and Definitions:
STEM skills- Science, Technology, Engineering, and Mathematics