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Don’t Blame the Work Force
Published: June 15, 2013
There is a durable belief that much of today’s unemployment is rooted in a skills gap, in which good jobs go unfilled for lack of qualified applicants. This is mostly a corporate fiction, based in part on self-interest and a misreading of government data.
A Labor Department report last weekshowed 3.8 million job openings in the United States in April — proof, to some, that there would be fewer unemployed if more people had a better education and better skills. But both academic research and a closer look at the numbers in the department’s Job Openings and Labor Turnover Survey show that unemployment has little to do with the quality of the applicant pool.
THE NUMBERS In a healthy economy, job openings are plentiful and unemployment is low. April’s tally of 3.8 million openings might sound like a lot, but it is still well below the prerecession average, in 2007, of 4.5 million openings a month. It is also far lower than the record high of 5.2 million openings in December 2000, when the survey was started near the peak of a long economic expansion.
Unemployment is also stubbornly high — 7.5 percent in April, or 11.7 million people, a ratio of 3.1 job seekers for every opening. No category has been spared: unemployed workers outnumber openings in all of the 17 major sectors covered by the survey. The biggest problem in the labor market is not a skills shortage; rather, it is a persistently weak economy where businesses do not have sufficient demand to justify adding employees.
THE RESEARCH Peter Cappelli, a professor of management at the Wharton School, has noted sharply different opinions between corporate executives, who typically say that schools are failing to give workers the skills they need, and the people who actually do the hiring, who say the real obstacles are traditional ones like lack of on-the-job experience. In addition, when there are many more applicants than jobs, employers tend to impose overexacting criteria and then wait for the perfect match. They also offer tightfisted pay packages. What employers describe as talent shortages are often failures to agree on salary.
If a business really needed workers, it would pay up. That is not happening, which calls into question the existence of a skills gap as well as the urgency on the part of employers to fill their openings. Research from the National Bureau of Economic Research found that “recruiting intensity” — that is, business efforts to fill job openings — has been low in this recovery. Employers may be posting openings, but they are not trying all that hard to fill them, say, by increasing job ads or offering better pay packages.
Corporate executives have valuable perspectives on the economy, but they also have an interest in promoting the notion of a skills gap. They want schools and, by extension, the government to take on more of the costs of training workers that used to be covered by companies as part of on-the-job employee development. They also want more immigration, both low and high skilled, because immigrants may be willing to work for less than their American counterparts.
There are many reasons to improve education, to welcome immigrants and to advance other policies aimed at transforming the work force and society. But a skills gap is not among them. Meeting today’s job challenges requires action to improve both the economy and pay, including government measures to create jobs, strengthen health and retirement systems, and raise the minimum wage. Fretting about a skills gap that does not exist will not help.