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.