Response to Paul Krugman's op-ed "Jobs and Skills and Zombies"
More than 6 years since the start of the recession, unemployment in America remains high. Although today’s 6.3% is far below the 10.0% unemployment rate of 2009, this downward trend cannot be hailed as a major cause for celebration as much of it is accounted for by discouraged workers exiting the workforce. This evidence raises the question: why are there still so many people who cannot find work?
One explanation that has been frequently referenced by politicians and business-people alike is a ‘skills gap’ whereby workers in the U.S. lack the skills that employers demand. Proponents of this theory say that due to the globalization of the economy and rapid technological progress over the past 50 years, today there are far fewer low-skilled jobs available and instead American employers need more ‘middle-skill workers’ who often require specialized training.
However, as Paul Krugman rightly points out in his recent New York Times article “Jobs and Skills and Zombies,” the argument that the skills gap is a primary cause of unemployment in the U.S. does not hold up to analytical scrutiny. If there were skills shortages in certain industries, we would expect to see some sectors where there were more job openings than unemployed workers. In fact that is not the case; across all sectors and occupations, the number of unemployed workers is far above the number of job openings. We would also expect to see employers intensifying their recruitment in certain sectors, by offering higher wages, more benefits, and supporting training programs. But in fact, in examining data on wages from the past 5 years, there is little evidence that employers have been increasing wages in certain sectors to try to attract more qualified workers. If companies are not willing to increase wages to attract the skills they need, then the problem is not with the supply, but the demand for labor. Many companies claim that they cannot increase wages and remain profitable because they compete with countries overseas that have much lower labor costs. While this is a valid concern, it demonstrates that the problem they are facing is attributable to the globalization of labor markets, not a skills shortage, and should be seen as such.
Technical solutions (like training workers) are always more popular than political ones (changing fiscal policies or corporate practices) because they are less controversial. While the evidence against the existence of a skills gap is extensive, it may prevail in public discourse because the actual problems of weak aggregate demand and global labor inequities seem intractable. Additionally, it is important to note that while there is not a national skills shortage that can explain high unemployment, there are some more localized, industry-specific skills gaps. For example, a Boston Consulting Group study found that 5 key manufacturing cities (Baton Rouge, Charlotte, Miami, San Antonio, and Wichita) had significant or severe skills gaps. The workers in shortest supply in these cases were welders, machinists, and industrial-machinery mechanics. These gaps may not be captured in national unemployment and wage data, but they are certainly significant issues facing the people in those locales. Thus, workforce development programs structured to first identify whether significant gaps exists in certain regions, and if so, support structured training programs may have some success in supporting businesses and reducing unemployment. However, these technical fixes should not preclude other fiscal and political changes that are more likely to get at the root of national unemployment and give more Americans access to decent work.
 Heidi Shierholz, “Is There Really a Shortage of Skilled Workers?” Economic Policy Institute, Jan. 23, 2014, http://www.epi.org/publication/shortage-skilled-workers.
 Jamie Dimon and Marlene Seltzer, “Closing the Skills Gap,” Politico Magazine, Jan. 5, 2014, http://www.politico.com/magazine/story/2014/01/closing-the-skills-gap-101478.html#.U5mJbrs3xbl.
 Shierholz, “Is There Really a Shortage of Skilled Workers?”
 “Skills Gap in U.S. Manufacturing is Less Pervasive Than Many Believe,” The Boston Consulting Group, Oct. 15, 2012, http://www.bcg.com/media/pressreleasedetails.aspx?id=tcm%3A12-118945.