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The Old Skills Gap Story

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Wednesday, 09 October 2013 05:05

Eduardo Porter used his column today to point to a skills gap in the United States between the skills needed for the jobs being created and the skills of the people currently entering the workforce. The column rightly points out that this gap does not explain current unemployment and that employers could find more skilled workers if they offered higher wages. But it then refers to a study put out by the Brookings Institution:

"Mr. Rothwell says that the problem is getting bigger: while just under a third of the existing jobs in the nation’s 100 largest metropolitan areas require a bachelor’s degree or more, about 43 percent of newly available jobs demand this degree. And only 32 percent of adults over the age of 25 have one."

There are two points that should be made on this comment. First a small one: in the most recent data 33.5 percent of people age 25-29 had college degrees. And, the share of young people in large cities with college degrees would be even higher, since people with more education tend to gravitate to large cities. So the gap between the 43 percent figure and the share of the work force with degrees may not be that large. (It's also worth noting that the Brooking study looked at vacancies in a severely depressed economy. These are going to be skewed towards higher end workers. When the economy is closer to full employment the ratio of retail clerks and assembly line workers to managers increases.)

The other more important point is the one raised earlier by Porter, employers are not raising wages for college grads. The wage is a signal. Higher wages tell young people that it is worthwhile to invest the time and money needed to get a college degree. If young people don't anticipate a payoff for this investment, they won't make it.

This is yet another enduring cost of the prolonged downturn. We can anticipate a future workforce that will be less well-educated because the downturn prevented the labor market from giving the right signals to young people. 

 

Comments (25)Add Comment
We can anticipate a future workforce...
written by Reaganraisedtaxes, October 09, 2013 6:06
...that will be less well-educated because the downturn prevented the labor market from giving the right signals to young people."

I don't agree that students won't make the investment in getting an education if they don't anticipate a payoff. That assumption presumes they'd have other well-paying alternatives in the short-term, and that clearly isn't the case. If employers are signaling that they need higher-educated employees, students will get an education, even if there aren't jobs in the near term, with the hope and expectation that there will be jobs.
...
written by Last Mover, October 09, 2013 6:45
The wage is a signal.


A college degree is also a signal. Even if not necessary to do the job, employers depend on it to separate the presumably more motivated and cultivated from the rest, since in a great recession they can obtain this for no extra pay.
...
written by Art Perlo, October 09, 2013 7:10
Porter said 43% of openings require a degree, only 32% of adults have one. But that's all adults. Older adults, with a lower proportion of college degrees, are more likely to have a job already. It is younger people, who on average are better educated, who are looking for jobs in higher numbers.

Not to mention the studies that show up to half of employed recent college graduates are working in jobs that don't require a degree. If there was such a strong demand for college grads, would so many of them be working at Starbucks?
An employer requiring a college degree certainly doesn't imply a degree is necessary for the job
written by John Wright, October 09, 2013 8:21
My late father, who graduated from college in the Great Depression with a business degree, would relate that "You needed a college degree to pump gas for Standard Oil" in the Depression.

He felt fortunate to be able to pitch his small family grocery store background to land a job as a butcher at Safeway.

So, currently, perhaps the college degree is simply being used for candidate filtering purposes as it was in the Depression.

And employers may look at a highly indebted college graduate as extra motivated.

While my father was no radical, he did look at college as job training that employers valued but not enough to pay higher taxes to make free or inexpensive. He would comment that students didn't even earn minimum wage during their job training college years and that the unemployment rate would be higher if college students were classified "unemployed".



too many college grads, actually
written by MightyMike, October 09, 2013 9:15
The 32% of adults with college degrees matches statistics that I've heard, which are that around 30% of the workforce have a college education, but only 20% of jobs in the American economy require a bachelor's degree. The obvious implications are that a degree is completely irrelevant to the incomes of the vast majority of the population and that we send far too many of our young people to college and have been doing so for decades.
Guest
written by Init4good, October 09, 2013 9:58
RE: "... the downturn prevented the labor market from giving the right signals to young people..."

You make it sound as if the labor market is outside the control of employers. It is employers who give signals, and the biggest signal they've been giving over the last 20 years, is that labor is cheaper, and more profits can be made, by employing ppl in foreign countries.
...
written by Kar, October 09, 2013 10:15
Japan has fantastic human capital but uses it quite poorly,” Mr. Schleicher told me. “The United States is the opposite. It has mediocre assets but is good at extracting value from them.

Heartwarming.
It is not the absolute wage that matters; it's the wage *difference*
written by A Greek bearing facts, October 09, 2013 1:29
The payoff from attending college is NOT determined solely by the absolute real wage earned by college grads. It is determined by the expected DIFFERENCE between the lifetime earnings earned by a college grad and the earnings of the same person if he or she settles for a lesser credential. The gap in expected lifetime earnings can continue to rise--as I think it has--even if the real wage earned by college grads stops increasing. Why? Because the real wages earned by community college and high school grads may decline (I think they have) OR because the job-finding success of community college and high school grads continues to deteriorate compared to that of college grads.

This isn't a complicated point. The payoff to an additional year of schooling depends on the out-of-pocket and opportunity cost of that schooling and the expected GAIN in lifetime income that the extra schooling will cause. The last time I checked, that expected payoff has continued to increase, notwithstanding the fact that the real wage of employed college grads has stagnated.
Concur with above but in addition
written by jumpinjezebel, October 09, 2013 1:56
Most of the jobs that pay well are going unfilled due to the mismatch between self imposed pain by employers. The skills they're looking for are not generally taught in College. The ability to think, conceptualize, reason and team playing are more important than being a whiz at c++.
...
written by skeptonomist, October 09, 2013 4:06
Porter says skills of US workers are "slipping" but gives no proof of deterioration - the OECD study is brand new and I have not seen anybody refer to any previous study which would indicate that US workers had higher skills in the past. Of course many of the countries which now compete with the US were in a much lower state of development 50 or more years ago, so some decrease of US educational advantage with respect to those countries is natural and desirable. The US was in a much better position in terms of manufacturing and a number of other areas in the post-WW II era for several reasons which had nothing to do with the level of training and education of US workers. Productivity is of course not determined very much by worker skill but by amount of labor-saving machinery (and therefor capital investment) - judging by this column Porter and some others he quotes are unaware of this.

If the percentage of college graduates in the US is getting worse relative to other countries, there are some obvious reasons for this, especially the increasing cost coupled with stagnant family income, which Porter does not mention. States and other governments seem to be shouldering less of the cost of higher education, although I don't have figures for this.
Looking at job requirement in a down economy also skews data.
written by Pine Treeconomics, October 09, 2013 4:26
With a surplus of workers in the market and wages depressed, employers can ask for the moon from potential employees. As a result, projecting the number of jobs requiring college degree need in 20__ based on what employers are asking for now is ridiculous.

Moreover, the wage gap has grown between college and non-college educated workers, but that is driven by a decline in the latter rather than an increase by the former:

http://www.stlouisfed.org/publications/re/articles/?id=2219

So, the gap's growing, but can we say this is an indication of demand for college degrees, or evidence of a buyer's market oversupplied by college degrees?
...
written by watermelonpunch, October 09, 2013 7:03
Yeah, I'm with John Wright & Pine Treeconomics.
I'm skeptical of any kind of data regarding the requirements required for job openings right now, and I have been for some time.

Pretty much ever since about 4 to 5 years ago (coincidence?) I started seeing a LOT of job ads (local to me) that stated a college degree is required for jobs as a part-time receptionist who does light duty clerical work, greets visitors, and answers phones. And, for $9 per hour.
In 2010 I saw one that stated up front - 15 hrs per week at $8.25/hr - college degree required.
And, about 2 years ago I started seeing them not only require college degrees, but requiring a college degree RELATED to the particular business.
This is on top of already requiring VERY industry specific experience for what would ordinarily be very non-specific type of job duties. Like requiring specific experience with specific types of industries, or specific types of software (sometimes proprietary).

I even heard of a firm, doing something related to the Marcellus Shale, who got someone with an engineering degree in their temporary 1 year assignment administrative secretary position.
After that, I view reports of "engineers in high demand" with great suspicion.
...
written by watermelonpunch, October 09, 2013 8:03
written by Last Mover, October 09, 2013 6:45
A college degree is also a signal. Even if not necessary to do the job, employers depend on it to separate the presumably more motivated and cultivated from the rest, since in a great recession they can obtain this for no extra pay.


There can certainly be some truth in this, of course.
But only if you're comparing college grads with non college grads with similar experience (or no experience).

So then why pass over someone with 20 years of specific experience to a job, with a really dedicated work history, for a college graduate with no work experience at all?

I think, frankly, the college education requirement, could be little else than a proxy for age discrimination.

In some cases it's quite blatant:

(recent local job ad)

In that case, they say "recent"... which is actually right on the EEOC list of prohibited practices:
http://www1.eeoc.gov//laws/pra...forprint=1
For example, a help-wanted ad that seeks "females" or "recent college graduates" may discourage men and people over 40 from applying and may violate the law.


But even just requiring a degree could easily weed out those with huge amounts of applicable experience (because they never needed a college degree for exactly that thing before).

And of course the reasons are many for wanting to weed out potential qualified applicants that are "too old", I think that's established.

Of course I realize my beefs here all involve anecdotal or circumstantial evidence.

Is there any evidence that would suggest my suspicions are off-base? Because I would be eager to consider that I could be wrong. And I would be interested if there is any actual data on the college graduates by age filling positions that don't really require a degree.
...
written by Christiaan, October 10, 2013 7:08
Also, employers ask for college degrees even if the job does not really require it.
Mathematicians, $86k. No, it doesn't seem that we value skills much (or not in SF)
written by Rachel, October 10, 2013 7:14

Biochemists, $89 thousand a year in SF.

On the other hand, people with more market power are doing better. Anesthesiologists make about $210,00, according the BLS ($290,000 according to CNN Money). Financial managers make $156.

Of course in the case of medical and financial products, the buyers belong to the innocent general public, easy to overcharge.

In the case of tech workers, the buyers are not only in a better bargaining position, but also seem to have more control over the debate. So they and their friends blame a skills gap, rather than tech firms' failures to recruit and train.
...
written by peter t, October 10, 2013 9:26
Per the first graphic in the provided link (tertiary educational attainment, OECD nations), only 2 countries have a greater percentage of the population aged 55-64 with a tertiary education. However 15 of the 38 nations have a higher percentage of those aged 25-34 with college degrees. We've essentially made no improvement in college graduation rates in the last 30 years. We are 8th from last among these countries in the percentage attaining tertiary science education, well below the OECD average. To me this implies both stagnancy and a science gap. And many of the jobs of the future will require some advanced science background.
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written by peter t, October 10, 2013 9:39
Link
http://www.decisionsonevidence...-ranking/
Let's make it clear
written by Opir, October 10, 2013 11:38
This post indicates that the author is still thinking about the last battle, which was already lost. The new battle is very different: jobs. First, let's clear up any confusion about why many people choose to go to college (aside from many of the well-known ones like the promises of how it would lead to a 1950's style middle-class lifestyle; because their parents made them; because it's rite-of-passage; or because their friends are there), for /whatever/ major they choose (or are able to handle): it feels like they have to in order to even be in the running for jobs, because HR uses the presence of a degree, _any_ degree as a first-line FILTERING mechanism. In down economic times especially, when you're getting 200 resumes for a job that could be done by someone with a 4th grade education, you need some way to cut down that pile and that is one of the easiest ways to do it.

Viewed in that light, you can see why so many people are very, very upset by all this. Politicians, the media, their parents, their friends have all told them "get a degree or you'll be a [metaphorical] fry cook" and now it's "get a degree if you want to be able to even get a job as a fry cook." Rephrased, it's "a bachelor's degree is the new high school diploma", and so it becomes about the fact that you got the degree at all that matters. If you don't, there are 199 people (who have the same (lack of) experience you do), but do have the degree. Theirs goes in the "scan again to filter for some other reason" pile, yours goes in the trash.

Jobs aren't going to magically start appearing just because people have gone to college. Look at countries/regions (like parts of India) with incredible numbers of underemployed and unemployed college grads, for instance; supply does not create its own demand.

So why is this? Why are there less jobs? We know about the demand0-side issues from Krugman, et al., but he acknowledges (along with others like Autor, Ford, Cowen) that technological unemployment - automation, robotics - are going to lead to an ever increasing number of Zero Marginal Product workers, and a declining need for actual human beings to do any work

So, now we 1) need fewer people to work every day due to automation, 2) still tell people that they should get a degree, only to have them wind up working in Starbucks (displacing a former worker who had no degree - there's that filtering again) AND send them into absurd levels of debt while we're at it 3) have people fighting over the scraps of jobs that are left, all while inflating the credentials needed to get them with each passing year (in a few years, those personal assistant will need Master's, not Bachelor's degrees)

It's also clear where all this leads, to the dismay of many: a guaranteed income society. We'll be forced to accept that many, perhaps even MOST people will not be needed for work. There will be nothing for them to do, and nothing we can do about it. The people that do work will be the robot designers, maintainers, politicians, managers, personal service people, and some miscellaneous workers. Everyone else will be part of a "sports, arts, and leisure" society. That will be a few more decades out, but it's coming, and no one should have any illusions about what that means. Our conception of our societies as defined by work will need to change, and we'll need to accept that people who do not work are not lazy, ne'er do wells or parasites, but that they are the result of the transition to post-work (and hopefully post-scarcity) societies. The calls for bringing back factory jobs, re-empowering unions, mass job creation programs, all that last-war solution stuff, are short-sighted and misguided; there's no turning back the tide, and we should adjust our thinking accordingly.
...
written by DavidS, October 10, 2013 1:52
I don't think you're reading this accurately.

The relative presence of college degree-holders in the population is orthogonal to the problem.

In ten years, there will be even fewer low skill jobs.

This also means far fewer junior staff at law firms, investment banks, and technology companies.

The tech companies I've worked for take great pride in using as few people as possible to deliver the product. In fact, it's often the case that the smaller the team, the more respect it receives from the organization.

Indeed, because it is so difficult to find software engineers, the guys on these teams sometimes earn more than $500,000 a year.

If present trends continue, I would not be surprised if in 20-30 years, high-skill areas like New York City, Silicon Valley, and Boston (for its universities) were to secede from the US in favor of becoming city-states like Singapore.

Most of the rest of the US is a mismanaged cesspool, so why pay taxes to support it?
...
written by watermelonpunch, October 10, 2013 2:20

I do think the U.S. could a heck of a lot better in educating the population, and that we're behind is bad for a number of reasons.

I also would like to see higher education become "the new high school diploma", in the sense that ideally, I'd like to see a civilization that can afford to "educate unnecessarily".
I think this could be beneficial to society as a whole, to have an intellectually strong population, in general, regardless of the training or skills or knowledge required in their line of work.

And yes, many jobs of the future will require a sturdy science education.
Many jobs NOW require science education!

That said, I do not think we're anywhere near having a civilization where most jobs require advanced training & education, that takes 4+ years to complete.

(Especially if our economy has room for improvement that would increase the ratio of retail clerks to professionals.)

Even so, my neighborhood still needs people to come & collect the trash, and anyone who's had to call their local cable internet provider about a problem knows that automated phone trees can only go so far to solving some relatively simple problems.

So I just can't see that shoving people through 4 years of classes & 10 years of paying off huge student loans, for the purpose of them spending 30 years working low income jobs requiring little more than 2 weeks of training.

I'm intrigued by the idea I read about put forth in Switzerland, regarding a "guaranteed basic income".
I think it could be cost-effective and efficient, in the sense it would put to rest most of this garbage nonsense controversy about disabled people, seniors, and single parents. And it would cut down on the resources needed to prevent & catch complex fraud in various complicated means tested systems.

And I don't buy into the nonsense that it would destroy productivity because "most people are lazy" either, because if that tended to be true, we would've never gotten as far as we have in our civilization over the past thousands of years.

They may say that "necessity is the mother of invention"... but come on, do we REALLY need Roombas and Hello Kitty toasters for survival of our species??
I would argue that astrophysics research is absolutely essential to humans' very-long-term survival, but I'm pretty darn sure that wasn't Galileo's motivation.

I also saw somewhere in a comments thread where someone said they think people underestimate how much being deprived can actually prevent people from "working hard" and being productive.
It's true even if you think about just the basics of not getting proper nutrition and the effect of that on being able to expend energy to complete physical OR mental tasks.

I think there's a chicken-egg quandary here.

Does having people encouraged somehow to get advanced educations in a nation, raise the quality of living of the bulk of citizens?

Or does an increase of people having advanced educations come from having a nation where a lot of people have a certain standard of living?


I'm thinking nothing happens in an isolated vacuum.

And, as usual, I'm going to harp on the fact that I think the guys who come round & collect our trash are providing an essential service in a civilization that doesn't just prevent a blight in our neighborhood, but is actually essential to the health of the people, and therefore I believe that those garbage collectors deserve to have a quality life with a reasonable standard of living in our society, regardless of how much "smarts", training, or education they don't need to complete the task.

Just because a bulk of the population is unwittingly willing to pay obscenely more to a young woman for shaking her butt into some guy's nether regions on a stage, doesn't make it right, doesn't make it sensible, and doesn't make it efficient, and sure isn't proof that an open market will naturally take care of civilization's advancement.

(Though I also think the butt shakers deserve a living wage too, if that's what the people want them to do.)
Whatever happened to hiring concerns about "overqualified" workers?
written by John Wright, October 10, 2013 2:27
In the past, employers were reputed to be reluctant to hire people who were deemed "overqualified" as a result of education or training.

Usually it was stated the overqualified worker would not be satisfied with the job and would move on to a better opportunity quickly.

But I don't hear as much about this concern now.

I suspect the employers believe the job market will not be creating many of these "better opportunities" in the near future, so hiring an overqualified worker is not much of a risk.

BA is the new HS diploma
written by Kaleberg, October 10, 2013 6:41
Given the number of college graduates I know who are working low end hospitality sector jobs, I feel that anyone who is arguing that there is a skills gap in the sense that our society is not producing enough college graduates is at best ingenuous, possibly ignorant, but more likely a pernicious part of the problem.

Basically unemployment is so high that employers use the possession of a bachelors degree as a way of weeding out applicants from the lists of hundreds. This means that a job applicant is so much more likely to get a job as a bus boy if he or she has a college degree as opposed to a mere high school diploma that having a college degree has become a de facto requirement for the job. In fact, if you look at the various job sites, you will often find a bachelors degree listed as a job requirement for clearing tables and other such work.

Anyone with open eyes cannot fail to see that our skills gap has little to do with a lack of college degrees.
...
written by Opir, October 10, 2013 8:04
The other thing that should be addressed is the complaint that people got college degrees, sure, but they got the wrong one (STEM is the answer to everything!) Let's think about that, and while we're at it about some of the attempts at fixing the student loan problem.

What, however, would happen if all the "useless" degree-holders decided to go into STEM instead? Assuming they all did amazing, we'd wind up with a glut of people with degrees in "good" subjects, which does nothing to magically create jobs (having a STEM degree does NOT mean you're going to start a company!) - it only helps where there are already shortages. Once those are filled, we're back where we started (and wages may get pushed down due to a talent glut.) That's the best case scenario, too. What would be worse? What would the reality likely be? If everyone did rush into STEM, a good portion would fail out (not everyone is cut out for it. Really, some people just do not have the attitude, mindset, demeanor, worldview, interest, etc.) and be left with no degree (or they'd switch to one of those useless ones) and still be debt - right back where we started again (as above, see parts of India.)

So what about fixing student debt? Lowering tuition is great. Initiatives that allow income-based repayment or schemes to just make it free at the point of service and pay for it out of taxes are great, but lack of jobs as the core issue remains. For those of you who believe college should not be considered a job training program, that's wonderful; it means, however, that people going into debt for a great education that does not get them a job is a terrible idea (and we should either move to a free system or tell people to just use MOOC and books.)

Either college is a job training program with high costs and horrible returns (and degrees are first-line filtering mechanisms for jobs), or it's purely for edification and should be free. This world where we pretend it's the latter, but know it's the former continues to end for so many in nothing but tears.
Echoing Opir
written by Cameron Hoppe, October 10, 2013 10:52
STEM is advertised as an answer to everything, but we actually produce more STEM graduates per year than STEM jobs. Add in H-1Bs and you've got a worker glut of 20%. Researching one's degree doesn't always matter, because markets turn as quickly as consumer preferences do. I know many, many many STEM grads waiting tables and cashiering at gas stations.

If one examines the job openings that require a degree, he or she will find that most of them require experience in the field as well. Usually five or more years of experience. The number of entry level jobs for scientific, engineering, and technology fields is very small right now.

The thing to understand about scientific, engineering, and medical-care degrees is that they show the graduate is qualified to go through the new employer's rigorous training program. Very few employers are willing to spend money on those training programs. As a result, a high percentage (I'd guess 25%) of workers are locked into jobs and industries they're not ideally suited to do. Since employers are reluctant to spend on training, experienced workers have a plethora of employment options--but only in their existing field. Skills are not regarded as transferable.

Furthermore, there's an expectation among employers that the "ideal" candidate exists and can be had for cheap. I know recruiters right now who are looking for network engineers who are proficient in Unix and Windows with a strong background in database administration. Virtually all network engineers specialize in one operating system. Few are "highly competent" in db admin, too. I know another who's looking for a person with an advanced degree in chemical engineering, at least five years as an engineering supervisor, with knowledge of facilities management and environmental regulations, and willing to relocate to a small town on the Great Plains. Both of these positions sound like multi-person jobs to me. I personally think 30% of the "skills gap" is actually a sanity gap. Another 65% is due to risk aversion--it's a guts gap. I'd estimate only 5% is actually due to lack of transferable skills and untrainable workforce.

Whatever the reason, what it all adds up to is a broken labor market, and all the tragedy that comes with it.
Following on to Cameron Hoppe,
written by John Wright, October 11, 2013 9:19
At least in the electronics industry, the search for the perfect employee at a low price is termed looking for the Purple Squirrel.

Here is Electronic Design's William Wong's writeup.

http://electronicdesign.com/blog/purple-squirrels-and-salary-surveys

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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