Page 5 - Skills-Gap-Report-2015

Do Skills Gaps Exist?
There is very little hard labor market data that supports the existence of skills gaps. Sometimes, broad brush labor figures are used. You often hear comments like, “Right now, there are 80,000 job openings in Michigan and 300,000 unemployed job seekers. So there must be a mismatch of available skills and available jobs.” However, that is a misinterpretation of that common labor market data. Those numbers represent a single, point-in- time snapshot of the labor economy. The large majority of those jobs are filled relatively quickly. When similar figures are cited a couple months later, for the most part they represent different
job openings and different job seekers. This is all part of the normal labor market “churn” in our economy. Those figures do not provide evidence of a skills gap.1
Almost all support for the existence of skills gaps comes from employer surveys. And, almost all surveys suggest there is a skills gap.2
The consistency of this information cannot be disregarded. Yet, some economists are skeptical of the existence of broad based skills gaps across industry sectors. According to those economists:
• The consistency itself might cause the survey information to be questioned.
For instance, in response to surveys conducted by The Manufacturing Institute, employers have been citing extreme skills gaps in every survey since 2001.3
• For the most part, wages have not risen.4 Traditional economic supply and demand theory would dictate that wages will rise if the supply
of labor cannot satisfy the demand. However, this may be tempered in the United States by the downward pressure on labor costs caused
by global competition. Wages are rising in “low wage” areas around the world.
• The use of overtime is not increasing.5 If real demand for labor is higher than the available supply, we would expect to see increases in use of overtime.
• Significant numbers of employers are requiring greater skills, experience, or credentials than they have in the past.6 Some economists assert that this is evidence that demand for workers
is soft. In the past, it was more common for employers to hire lesser skilled individuals, invest significant resources to train them, and increase their responsibilities and wages as they became more skilled and productive.7
Many employers may wish to implement this approach, but lack the resources
or cash flow to invest in training less productive employees.
Many employers may be reluctant to invest significant resources to train new employees because the labor force is increasingly mobile, and workers tend to switch jobs more often than in the past.