Tuesday, June 18, 2013

On the Skill Gap: Aren't US Workers Good Enough?

The skill gap argument:  That US workers no longer have the skills US firms require,  is an interesting one.   The argument places the blame of labor market mismatches and even unemployment squarely on the shoulders of the workers and the US school systems.  But is that the only theory going?  What evidence do we have of such a general skill gap?

A gap between the skills of job applicants and the demands of the job they apply for no doubt exists in individual cases, even quite often (though it could go both ways when unemployment is high), and there might even be specific jobs for which the whole market shows the same pattern.

But employers have been known to blame the skill gap for their inability to find workers in a form which doesn't make much sense.  To give you an extreme example, if I'm an employer looking for a qualified engineer at ten dollars per hour, I'm going to find a biiiiig skills gap.  That's because the pay rate is not right and people who have student loans to pay from their engineering degree cannot afford to take such a low-paying job.

In short, statements from employers alone shouldn't be regarded as firm evidence that general and large skill gaps exist.  The wages offered in a particular labor market should reflect properly functioning market conditions, not just someone's own desires about how little to pay, and the other variables which might have changed should also be analyzed. 

As an example of the latter, might it not be the case that US firms in the past were willing to train people for a specific job and that this willingness has now declined?  And what is the impact of outsourcing here?  Perhaps it is the wage offers for jobs which have changed  more than the job applicants' qualifications for the same?  The concept of a "skill gap" that is relevant to employers is not quite the same as some absolute deterioration in US worker qualifications.  Indeed, those qualifications could in theory go up while the global wages for their labor would decrease, in real terms.  That would look like a skill gap of a type.

I haven't studied the literature on the general skill gap argument sufficiently to make any overall divine pronouncement about it.  But it certainly makes sense to look at the whole question critically and to keep in mind who benefits from which argument.