the myth of the "skills gap"

One of the theories being widely thrown around for the high unemployment rates is the idea of a "skills gap", where the unemployed simply do not have the skills that employers are looking for. But is there any truth to this, or is it mostly just myth?

Peter Capelli has looked at the skills gap explanation for labor market weakness and sees more myth than fact:

"Indeed, some of the most puzzling stories to come out of the Great Recession are the many claims by employers that they cannot find qualified applicants to fill their jobs, despite the millions of unemployed who are seeking work. Beyond the anecdotes themselves is survey evidence, most recently from Manpower, which finds roughly half of employers reporting trouble filling their vacancies.

"The first thing that makes me wonder about the supposed 'skill gap' is that, when pressed for more evidence, roughly 10% of employers admit that the problem is really that the candidates they want won't accept the positions at the wage level being offered. That's not a skill shortage, it's simply being unwilling to pay the going price."

Furthermore, on closer inspection it appears that these "skills" which potential employees are deficient in is simply job experience, not any sort of academic training. "Only 15% of employers who say they see a skill shortage say that the issue is a lack of candidate knowledge. Instead, by far the most important shortfall they see in candidates is a lack of experience doing similar jobs. Employers are not looking to hire entry-level applicants right out of school. They want experienced candidates who can contribute immediately with no training or start-up time."

I would like to see a survey of the recent wage history of these so-called "skilled workers", as defined by employers. If these workers are in such short supply, shouldn't their wages be rising rapidly?

If the lack of proper skills is what is holding back hiring, then the most sought-after people in the labor market would be recent college graduates. Sadly, as many graduates, college placement officers, and parents of graduates can tell you, this is not at all the case. This suggests, then that skill mismatch is not the problem and the refrain of "If we only had employees who were ready for the new economy . . ." is a smokescreen. Instead of looking on the labor side of the hiring equation, perhaps the side of the employer needs more attention.

 

That's interesting. It seems you have it all figured out.

Are you talking about in Sweden, Finland or Norway?

Where exactly are you referring to?

 

"The skills gap" - I suspect that this is idea is really the perspective of business owners, and has been adopted by free-market/free-trade economists into a sort of theory. Focusing on the idea of a skills gap deflects attention away from the problem of lack of job opportunity and low wages. But the progressives in academia would also be likely to withhold their criticism from this idea. After all, if there is a skills shortage it implies that the universities need more funding. In fact university professors and academic economists (including the socialist ones) are some of the most vocal in favor of expanded education to meet the skills shortage.

Ha ha, no we have a slightly different situation here.

I do some reading around in various english language publications, and this notion of a "skills gap" seems to be floating around mostly in the UK, USA, and Canada.
I can tell you from several people I have met that scientists and engineers in the USA have a high un- and under-employment rate, and for several complex reasons the actual reality of the problem is not reflected in the official unemployment statistics. I also met a business graduate from a fairly prestigious school in the USA that failed to find any decent jobs and instead became a self-employed motorcycle mechanic. So if there is a skills gap, I am not exactly sure what these "in-demand skills" actually are.

 

A conspiracy, a conspiracy! Clearly the type of rot you need to feed your empty nationalism.

Skills gap? Its easily empirically tested through objective analysis. One can, for example, refer to 'hard to fill vacancies' and illustrate the extent of skills shortages and how they impact on firm behaviour and outcome

 

What you obviously didn't read was that these "skill shortages" are simply lack of work experience in that particular type of field. Employers just do not want to provide on the job training like they used to. Perhaps all this may be an unintended consequence of the increased levels of employee mobility between different companies. When workers switch between different jobs more, it means that there is a longer start-up time needed for employers to train their workforce, more time is needed for the new employees to become adjusted to the new jobs. And so employers may be less willing to train new employees if these employees are not as likely to stay with the company long. So increased labour mobility has its downsides too.

No, not a conspiracy. It just so happens that whenever there is some false idea about how society or the economy works, and both the business interests and those in academia have reason to embrace it, there is just no other intellectual group with enough influence to question it.

It used to be that the labour unions and the Christians held a large measure of intellectual clout, but this is no longer really so much the case anymore.

Think about it: the two most socially and politically influential groups are the schools and the large business interests (particularly finance as of late). They go along with the idea of a skills shortage because it is beneficial to them. Everyone else gets screwed.

Another example of this sort of alliance was between the large lighting companies (Osram, Philips) and the environmentalists. Together they pushed to promote CFL bulbs and create lighting efficiency mandates. The lighting companies held a monopoly on the new market through patents and have seen huge profits. Yet CFL bulbs are, for several reasons, not really energy efficient, costs much more money overall, actually result in more CO2 emissions in many cases, and may actually be worse for the environment, and creates all sorts of new inconveniences/dangers. Who loses? The consumer. So you have business interests with lobbying money and plenty of outspoken environmentalists with plenty of sympathy from the progressively environmentally-minded media. Who is going to question them?

Then please do...
If you have evidence that a skills shortage actually exists, I would like to see it. What exactly are these skills that the labour force is deficient in? Please tell.

 

Essentially you're saying "its not a conspiracy theory, its a conspiracy theory". The truth is more mundane: you're talking drivel. It isn't surprising, for example, to see greater skills gap problems in Anglo-Saxon countries where there is insufficient upskilling and a skewing of resources to low skilled equilibria

Mere conspiracy theory drivel. The analysis into skills gaps comes straight from employer questionnaires. Analysis into hard-to-fill-vacancies isn't a conspiracy. Its an understanding into how labour market weaknesses translate into lost economic opportunity.

Skills shortages are defined in numerous ways. Hard-to-fill-vacancies is one. I'm not interested in how you've warped your own understanding (although there is some irony value to be had!)

Employers are interested in profit. That automatically leads to on-the-job training. Indeed, a country such as the UK- in comparison to the likes of Germany with a more developed vocational training system- is more reliant on such training systems.

Only in terms of 'general training' where human capital is not linked to employment within a specific firm

 

Nope. The biggest determining factor (during this recession and many others) is level of education. The highest levels of unemployment are amongst those with the least education and plummets rapidly if you have a four year degree or more. Whether that's attributable to what's learnt during those years of schooling or whether it's simply a signaling mechanism to employers is another matter.

 

The whole point I am trying to make is that we should not erroneously jump to the conclusion that more formal education will bridge the "skills gap". If there really was a shortage, salaries for these skilled workers would be going up, and there would not be as much un- and under-employment of educated professionals as we are seeing.

 

You do realize the other possible explanation is that we do have a shortage of skilled workers, and that their wages don't go up because we have no price integrity due to rigged markets correct?

 

Rigged markets? Could you flesh out what you mean and what is involved?

 

Its rather complicated, and varies for each industry, but here is the model:

http://www.linfo.org/standardoil.html

http://are.berkeley.edu/~sberto/StandardOil.pdf

For example in the health care industry, price integrity is rigged through the pay for service model, and by the fact they are exempt from anti-trust laws.

 

The health care industry isn't one known for severe underpayment. Also it would be strange to refer to monopoly on two fronts. First, there is still competition (as workers can shift between industries). Second, there is a positive empirical relationship between firm size and wages

 

I don't think you are tracking what I am saying at all.

The monopoly standard oil had allowed it to manipulate the railroads to control the actual supply of oil. It was the monopoly that allowed it to own all the refineries to once again control the fundamental premise of supply and demand.

When you rig the fundamental premise of capitalism in supply and demand, you have rigged the game.

The pay for service model does this in HC, by stating Doctors only get paid to perform procedures, give prescriptions, or write referrals. This model artificially raises demand, by reducing preventive care, by removing any incentive for it, and incetivising more procedures, more medicine, and more things the hospitals and insurance companies can charge for.

 

Sounds like you don't actually understand your own argument. You're confusing monopoly power in the product market with monopsony in the labour market. That has ensured unsupportable comment

 

Yes, that "rigged market" thing might apply to physicians.
The government is taxing everyone to pay for healthcare, but then fixing the prices. In the USA, for example, there is a Medicare tax on personal income, and it is illegal for doctors to charge the patient more than a certain ammount when the doctor is being paid with Medicare money. If things get bad enough, this might begin to create an underground economy. But if the government finds out, Medicare will no longer give that doctor any money to treat patients in the future.

So it is a form of price rigging. If a patient wants to pay more for a type of medical treatment, he would not be getting any of his Medicare taxes back. It is like an additional tax if one wants to operate outside the fixed-price system.

 

The "going price" is one in which a transaction takes place.

This is like saying the home it is the home buyer that is at fault when a home seller can't get the bubble price for their house.

How many college grads have you asked how often they use their education in the job. The many I have asked, use little of it.

In addition, the skills honed to excel in academia don't assure success in the work place.

Short supply only raises wages if the employer can sell the product of their labor for more.

Re-read the your comment about job experience in the second paragraph above. Which is most vluable, an auto mechanic with 20 years experience, or a person that went though a trade school?

Why would someone out of work turn down a job because the pay is too low? Do they have a better offer, or are they getting enough from unemployment that they can afford to be picky.

Given two potential employees with exactly the same education and experience, which would you hire, the one that took any job, or the one out of work, waiting for a "suitable" job?

 

Don't get your point, that group has the lowest unemployment numbers by a significant margin.

 

Wrong! MRPL is based on physical productivity and price. A supply shock does not need higher product price for higher wages

 

Here is my experience with so called "skills gap". When I graduated college, I tried getting a job as a customer service rep. I thought how hard can it be to pick and answer the phone. Well when I was looking for work as a customer service rep, employers wanted 3-5 yrs experiences with a college degree.

Today these same companies hire tongue tied Indians that can't speak English. So much for needing a college degree to answer the phone.

The truth is money talks b.s. walks. Employers don't want to pay. That's the real story of these so called shortages.

 

You haven't actually given a story. What on earth are you trying to say. Employers are irrational? Employers are cost minimisers?

 

Would any one in his or her right mind set up a business in a place where people aren't sufficiently well educated if there wasn't low costing labor? Virtually everywhere in the US the people are poorly educated, but expect high wages. It doesn't make sense to set up in the US.

 

What does MRPL mean?
What supply shock are you referring to?
If the product price doesn't increase, where doe the extra money come from to pay a higher wage?

 

I don't know how much clearer I can make it.

Employers are only concerned about price. Every time they cry that they can't find anyone, they are really crying about having to pay.

Let me repeat myself. When I applied for a customer service job, the want ad read 3 to 5 yrs experience required with a college degree. Then I see these corporations hire people who can't speak English to answer the phone.

If the guy who answer the phone can't speak English, why then did corporations require American applicants have 3 to 5 yrs experience and a college degree? I'll tell you why. Because when a third world employee makes 1 dollar an hour, corporates will tolerate a lot more mistakes.

So it all comes down to price.

 

They care about cost minimisation? Wowsers! That's a 'so what?' moment. To derive an inefficient outcome from the profit motive requires some hardcore thinking!

 

You clearly haven't a clue how supply & demand operates. MRPL is the marginal revenue productivity of labour. It defines labour demand. It is generated by marginal physical productivity of labour and product price. A supply shock (i.e. a reduction in the required labour) will lead to a movement along the MRPL (reflecting the impact on MPPL). No product price increase is required