That Skills Gap? It Doesn’t Exist.

The problem, it turns out, isn’t that there aren’t enough workers with the skills that available manufacturing jobs require. There are plenty of such workers. The problem is that there are too few employers who are willing to pay for those skill sets, as Adam Davidson lays out for us in the New York Times:

Earlier this month, hoping to understand the future of the moribund manufacturing job market, I visited the engineering technology program at Queensborough Community College in New York City. I knew that advanced manufacturing had become reliant on computers, yet the classroom I visited had nothing but computers. As the instructor Joseph Goldenberg explained, today’s skilled factory worker is really a hybrid of an old-school machinist and a computer programmer. Goldenberg’s intro class starts with the basics of how to use cutting tools to shape a raw piece of metal. Then the real work begins: students learn to write the computer code that tells a machine how to do it much faster.

Nearly six million factory jobs, almost a third of the entire manufacturing industry, have disappeared since 2000. And while many of these jobs were lost to competition with low-wage countries, even more vanished because of computer-driven machinery that can do the work of 10, or in some cases, 100 workers. Those jobs are not coming back, but many believe that the industry’s future (and, to some extent, the future of the American economy) lies in training a new generation for highly skilled manufacturing jobs – the ones that require people who know how to run the computer that runs the machine.

This is partly because advanced manufacturing is really complicated. Running these machines requires a basic understanding of metallurgy, physics, chemistry, pneumatics, electrical wiring and computer code. It also requires a worker with the ability to figure out what’s going on when the machine isn’t working properly. And aspiring workers often need to spend a considerable amount of time and money taking classes like Goldenberg’s to even be considered. Every one of Goldenberg’s students, he says, will probably have a job for as long as he or she wants one.

And yet, even as classes like Goldenberg’s are filled to capacity all over America, hundreds of thousands of U.S. factories are starving for skilled workers. Throughout the campaign, President Obama lamented the so-called skills gap and referenced a study claiming that nearly 80 percent of manufacturers have jobs they can’t fill. Mitt Romney made similar claims. The National Association of Manufacturers estimates that there are roughly 600,000 jobs available for whoever has the right set of advanced skills.

Eric Isbister, the C.E.O. of GenMet, a metal-fabricating manufacturer outside Milwaukee, told me that he would hire as many skilled workers as show up at his door. Last year, he received 1,051 applications and found only 25 people who were qualified. He hired all of them, but soon had to fire 15. Part of Isbister’s pickiness, he says, comes from an avoidance of workers with experience in a “union-type job.” Isbister, after all, doesn’t abide by strict work rules and $30-an-hour salaries. At GenMet, the starting pay is $10 an hour. Those with an associate degree can make $15, which can rise to $18 an hour after several years of good performance. From what I understand, a new shift manager at a nearby McDonald’s can earn around $14 an hour.

The secret behind this skills gap is that it’s not a skills gap at all. I spoke to several other factory managers who also confessed that they had a hard time recruiting in-demand workers for $10-an-hour jobs. “It’s hard not to break out laughing,” says Mark Price, a labor economist at the Keystone Research Center, referring to manufacturers complaining about the shortage of skilled workers. “If there’s a skill shortage, there has to be rises in wages,” he says. “It’s basic economics.” After all, according to supply and demand, a shortage of workers with valuable skills should push wages up. Yet according to the Bureau of Labor Statistics, the number of skilled jobs has fallen and so have their wages.

So much for the “invisible hand” of the free market and those marvelous “market signals” that magically regulate and coordinate and match up buyers and sellers in countless and uncountable daily financial transactions that work out to the mutual and shared advantage of all parties, who help each other without even meaning to, just by acting out of their own individual greed and selfishness. We don’t need safety regulations because manufacturers and merchants will not want to lose customers due to inferior products. We don’t need labor unions because employers will always and naturally want to attract and keep the best, most qualified and skilled workers by offering competitive salary and benefit packages. If you’re good at what you do and you have the skill sets employers are looking for, they will pay you whatever the fair market price is to get you and keep you and avoid losing you to the competition.

Yeah.

13 comments to That Skills Gap? It Doesn’t Exist.

  • Certainly these jobs should pay more than $10/hour, I will not dispute that. However, saying that the jobs are advertised at a low wage does not prove that the workers are actually available. The assumption is that the workers are out there in droves but will not work for $10/hr, and if the employers will just raise the offer to $40/hr the jobs will fill immediately. That’s an assumption, not proof. Has anyone interviewed thousands of workers who have the skills and have declined the jobs in question? Has anyone advertised jobs at $40/hr and filled them immediately with fully qualified workers? If so, let’s see that data, because merely saying that the $10/hr jobs don’t get filled does not, by itself, prove that qualified $40/hr workers are available.

    Again, I’m not disputing that skilled work should pay better than $10/hour, so don’t go putting words in my mouth and saying that I am on the side of the evil employers or that I’m claiming that skilled workers are actually not available. I’m merely saying that the inability to fill skilled jobs at $10/hr does not, all by itself, prove that filling them at $40/hr would happen.

    • Don Henry Ford Jr.

      Also ignored is the fact that employers must compete with imported products produced by what is in essence slave labor from other third world countries. Only mega-companies can compete in this arena.

      Your sights are aimed too low when you go after a small producer such as this.

      Control a few critical choke points: the creation of new money, the setting of interest rates, supplies of esential raw products necessary for production and access to markets, the details below take care of themselves.

      • Don Henry Ford Jr.

        PS. Foreigners can also learn skilled jobs. They can and they do.

        And they work for less money.

        The race to the bottom continues.

    • The article briefly address the issue of whether or not raising wages is feasible, saying, “Manufacturers, who face increasing competition from low-wage countries, feel they can’t afford to pay higher wages.”

      They don’t actually “feel” they can’t raises wages, they have accounting spread sheets with data and actual numbers which allow them to know for sure than they cannot raise wages and still make a profit. Economist Dean Baker is very fond of saying that employer should just raise wages until they fill jobs, proving that he has never been in business.

      In comments to the article is one owner of such a manufacturer, which owns several of the CNC machines in question. He says that in 2008, 2009, 2010 and 2011 his company made no profit, and that last year he took $14,000 for his own personal salary. So how easy is it going to be for him to significantly raise the wages for his CNC operators? He doesn’t just “feel” that he can’t do that, he knows it for sure.

      • Four years without profit. That guys either running a start-up, in which case he’s plowing money back into his company for equipement etc and should/could be doing the same with wages — or he’s broke. As for $14k salary – don’t make me laugh. If true, he’s homeless and probably vehicle-less. More likely he’s getting the company to pay his housing (because his pension owns it and rents it to him for a buck a year), his car and his dining-out expenses then deducting it all from his company’s tax liability.

        • Lots of assumptions there, Steve. He could very well be living on credit cards. Unlike you, I don’t presume to know what he uses to pay his personal bills, and I don’t make accusations without a shred of evidence. It is not only new bisinesses that lose money these days, and assuming that he is a start up based on nothing more than the statement that he has lost money during the four years of the recession does not strike me as particularly logical. I believe General Motors lost money for several decades after a century in business.

          Even assuming that all of your assumptions about his personal and professional misconduct are true, does he have cash available to quadruple the wages for his CNC operators?

    • ScentOfViolets

      If so, let’s see that data, because merely saying that the $10/hr jobs don’t get filled does not, by itself, prove that qualified $40/hr workers are available.

      I’m scratching my head on this one; where is anyone assuming these $40/hr skilled workers are out there? It’s more than sufficient to point out that people not being willing to work for $10/hr is in no way evidence for a skills gap. In other words, the burden of proof is on the person making the claim, and citing a lack of enthusiasm for these paltry wages is in no conceivable way, shape or form a proof of this particular assertion.

      In fact . . . wouldn’t the only way to verify this claim be to actually offer higher wages and then see how many people show up? As I said above, your post is rather, er, confusing.

      • Where is anyone assuming these $40/hr skilled workers are out there?

        Well, the cited article did. It says, for instance, that “Many skilled workers have simply chosen to apply their skills elsewhere rather than work for less.” It also says that “even as classes like Goldenberg’s are filled to capacity all over America, hundreds of thousands of U.S. factories are starving for skilled workers,” suggesting that they are learning the skills but not being hired.

        I also referenced Dean Baker’s oft-repeated assertion that when employers have rouble hiring that all they need to do is raise the wages until theyfill the positions.

        • ScentOfViolets

          Wow, in the absence of hard figures, words like ‘many’ sure take a beating, don’t they? In fact, it seems like you’re using it to mean ‘most’.

          I think it’s reasonably clear that a) the people saying there’s a skills gap have no evidence for this assertion, b) the burden of proof is on them to provide the evidence for the skills gap, not on the skeptics to prove there isn’t, and c) you’re going to keep saying otherwise despite these burden of proof standards being both well-known and elementary.

          Come back when you’re willing to acknowledge this elementary point; then we’ll talk. Oh, and bring some evidence of this skills gap; hard data, facts and figures. Words like ‘many’ are not substitutes for numbers.

          • Are we having fun splitting hairs? I’m not using the word “many” to mean anything. I didn’t use it at all, I quoted it.

            I keep being fascinated by people reading things that I’m not saying. Did I say I was attemting to prove there IS a skills gap? I did not. What I said was the others who are saying that there is not one are not offering sufficient proof, merely by saying the low wage offers does not fill jobs. The writer of the article suggests that if employers would raise wages that the jobs would be filled. So does Dean Baker, and so does Paul Krugman.

            None of them offer proof of their statement. The article suggests that “many choose not to work for low wages.” I did not suggest that, I merely quoted it. None of the three have published cases where the same employer has tried offering higher wages and filled the jobs as proof of their assertion.

            Don’t tell me to “come back when I have some facts,” tell Adam Davidson, Paul Krugman and Dean Baker that.

          • I meant to say that yes, if one is going to claim that ther is a skills gap one should be prepared to prove it. By the same token, if one is going to claim that there is not a skills gap, that it is instead a wage gap, then one should be prepared to prove that as well, and they have not done so merely with what they have offered.

  • Krugman:

    Kudos to Adam Davidson for some much-needed mythbusting about the supposed skills shortage holding the US economy back. Whenever you see some business person quoted complaining about how he or she can’t find workers with the necessary skills, ask what wage they’re offering. Almost always, it turns out that what said business person really wants is highly (and expensively) educated workers at a manual-labor wage. No wonder they come up short.

    And this dovetails perfectly with one of the key arguments against the claim that much of our unemployment is “structural”, due to a mismatch between skills and labor demand. If that were true, you should see soaring wages for those workers who do have the right skills; in fact, with rare exceptions you don’t.

    So what you really want to ask is why American businesses don’t feel that it’s worth their while to pay enough to attract the workers they say they need.

  • Lex

    The fact that manufacturers feel/can’t raise wages because they face such stiff foreign competition is true; it’s also a straw man. The same economic theories and people who espouse and implement them as national policy that say that wages will rise for skills in demand are the same ones that trumpet free trade to lower labor costs for manufacturers which will make everyone better off by paying less for finished goods.

    Show me an historical example of a developed, manufacturing economy without significant protections for the sector. Someone please do it. Maybe Germany, but that’s incredibly well developed and focuses on marketing its product as high quality. The East Asian manufacturers all practice Mercantalism. The United States used to do the same, and when it stopped, its manufacturing base started to be hollowed out quite quickly.

    Add to this the US belief that price is the most important decision making factor within a consumer economy and manufacturing is fucked. The small manufacturers aren’t going to be able to compete with cheap imports and the customer most likely won’t pay more for higher quality. A few of us will, but not enough.

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