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Home Publications Blogs Beat the Press The Skills Gap is Most Evident in Retail Trade and Restaurants

The Skills Gap is Most Evident in Retail Trade and Restaurants

Saturday, 16 August 2014 08:19

Floyd Norris has an interesting column comparing the numbers of job openings, hirings, and quits from 2007 with the most recent three months in 2014. The most striking part of the story is that reported openings are up by 2.1 percent from 2007, while hirings are still down by 7.5 percent. 

While Norris doesn't make this point, some readers may see this disparity as evidence of a skills gap, where workers simply don't have the skills for the jobs that are available. If this is really a skills gap story then it seems that it is showing up most sharply in the retail and restaurant sectors. (Data are available here.) Job openings in the retail sector are up by 14.6 percent from their 2007 level, but hires are down by 0.7 percent. Job opening in the leisure and hospitality sector are up by 17.0 percent, while hiring is down by 7.4 percent.

If the disparity between patterns in job openings and hires is really evidence that workers lack the skills for available jobs then perhaps we need to train more people to be clerks at convenience stores and to wait tables. 

Comments (24)Add Comment
Demand for Dummies
written by Larry Signor, August 16, 2014 8:54
Is up but the wages are not. If jobs with better compensation are available, why should we expect hiring to increase in the low wage sector?
Ha ha!
written by Dave, August 16, 2014 8:54

Actually, I think one of the problems is an increase in authoritarian hiring policies. Even restaurants and hotels are doing drug tests and refuse to hire people with drug offenses.

It isn't a skills gap, it is a reality gap. If restaurants aren't willing to hire people who have been jailed for minor drug offenses, who is?

We have a creeping authoritarian state through corporate policy. It isn't government, it is corporate policy that is creating an authoritarian state.
Obama Caused the Skills Gap
written by Last Mover, August 16, 2014 9:42

Dean Baker conveniently forgets that as usual, Obama caused structural unemployment and the skills gap with big government regulations that impose unnecessary huge costs on the retail and restaurant trade for each additional hire.

It makes sense. It takes a lot of skill to work one's way through mountains of red tape for such menial jobs, and employers certainly have no intention of bearing the cost of training for these skills, much less paying for them to applicants who already have them.

For example, it takes a lot of time and money to train someone to put on plastic gloves and a hair net, which Obama decreed recently with yet another executive order not subject to review by Congress. Imagine how outrageously high the wage must be to attract skilled employees who already have this training.

Elect Rick Perry America. He will use his own experience and skills to create a black market of labor for these employers that will match their skill requirements with the sub-par wages offered for these jobs.
Pay so low nobody shows up = the "Great Wage Depression"
written by Denis Drew, August 16, 2014 10:44
When supermarket collective bargaining contracts were gutted by lower paying competition (couldn't happen under centralized bargaining which prevents labor's race-to-the-bottom) the quality of new hires went down, more inexperienced, less stable, etc.

When labor's price gets low enough only desperate immigrants will show up. Shocking evidence: 100,000 out of I would guess are 200,000 Chicago gang age, minority males are in street gangs. It is like it's a revolution!

[cut and paste]
Look at Wal-Mart: 7% labor costs. DOUBLE Wal-Mart's average wages ($10 to $20 an hour) and ADD health benefits, paid vacations, etc., and prices might go up 10% (7% + 3%?). If Jimmy Hoffa's Teamsters were in there that would have occasioned long ago. (Teamsters PRIVATELY spread centralized bargaining from sea to shining Teamster sea -- by 1964!)

Look at most of the Americans you meet working on less than specific training required jobs (like x-ray tech): they are embarrassed. They are earning $400-$500 a week. $500 is today's median wage.

Look at the official federal poverty line: 3 X the price of an emergency diet (dried beans only please; no expensive canned) -- a formula from the mid-fifties = $20,000 poverty line for family of three ($400 a week). Realistic minimum needs line based on table 3-2, p. 44 (after adjusting for inflation) in the MS Foundation book Raise the Floor works out to more like $50,000 a year for family of three if it has to pay its own medical insurance ($1,000 a week!). HALF OF AMERICANS NOW WORK FOR HALF THAT POVERTY LINE OR LESS!
[cut and paste]

It's time we recognized there is a "GREAT WAGE DEPRESSION" going on out there (a more apt description than the saccharine "inequality"). Doesn't matter how well the economy bounces back from the Great Recession -- the Great Wage Depression will still be hitting MOST Americans like a Great Tsunami.

Centralized bargaining -- LEGALLY MANDATED: all employees under similar job descriptions work under one (local?) collectively bargained contract with all firms -- restoring a fair and balanced labor market. Also restoring the political forum: the average person has equal political financing and number of lobbying reps as ownership and 99% of the votes. Instant make over (not takeover -- just fairness) of America -- overnight. (Late dean of the DC press corps David Broder told a new journalist that when he came to DC 50 years ago all the lobbyists represented labor.)
written by skeptonomist, August 16, 2014 12:00
According to the BLS (see FRED CES4200000008) real wages in retail have been going down since about 2002, while average wages throughout the economy have been going up slightly.

As I pointed out before, real wages over the last 60 years or so show very little response to economic conditions. Apparently employers are willing to put up with vacancies and turnover rather than offer more money to get the workers they claim they want. This is one of many areas where the oversimplified dogmatic assumptions in economics textbooks just don't describe reality. Retailing has been changing greatly and it seems that employers have been finding new ways to reduce wages.
Real Wages Actually do Respond Strongly to Economic Conditions
written by Dean, August 16, 2014 12:14
Sorry Skeptonomist,

if you look at real hourly wages and regress them against the unemployment rate, you will find a very strong inverse relationship at the 10th through 50th percentiles, as Jared Bernstein and I showed in our book. This is a case where we are deriving our statements on the economy from evidence which you apparently are determined to ignore for some reason.
Wage growth and the unemployment rate
written by Dean, August 16, 2014 1:00
Just got another piece in on the topic http://chicagofed.org/digital_...14_327.pdf
written by skeptonomist, August 16, 2014 3:45
Maybe I didn't make it clear enough that the lack of apparent response of wages to unemployment is a recent development - or maybe Dean didn't look carefully at the diagrams I referred to. Here is the one from an earlier comment:

Yes, there was a negative correlation of unemployment and wage growth in the earlier 20th century, but things changed. Real wages reached their all-time high around 1973. The big drops from then to 1975 and 1978 to 1980 are actually a result of inflation - nominal wages increased during this time, just not nearly as much as inflation. Anyway inflation was down to moderate levels by the end of 1982 and from then on it should be very obvious that there was not an anti-correlation of unemployment and wages - the only time this relationship existed was 1995 to 2000. Numerically, the correlation coefficient of the absolute change of unemployment and the percent change in real earnings starting at any time 1983 or later is always small and positive.
It seems that employers have had greater control of wages since 1973 or earlier, and finding the reason for this may be important in reversing the growth of inequality.
I hear bachelor degrees
written by Lord, August 16, 2014 4:06
may not be enough for them these days.
I Don't Agree With Skeptonometry
written by Larry Signor, August 16, 2014 8:45
Dude, it just don't parse your way. Look at your own graph and explain the obvious inverse relationship between unemployment and wages. And what's up with the random scale thing? Regression, dude.
written by jerseycityjoan, August 16, 2014 11:27
These industries are demanding more temporary foreign workers. I would think the more unfilled openings they have, the better their graphs and PowerPoint presentations look to politicians and others. They like to claim that they can't find anybody, they like to claim all kinds of things so that they can get more cheap labor while they minimize their taxes and rip of their employees and the public. So does the national Chamber of Commerce as well as the various tradegroups for restaurants and hotels.
written by skeptonomist, August 17, 2014 8:45
The Chicago Fed paper shows national data in their figs 1 and 2, but since there is no relationship there between unemployment and wage growth, their results are actually based on state-by-state analysis. They do not give the data, equations or any sample calculations for this so it is not possible to evaluate the results from this paper.

Larry Signor, why don't you read what I wrote? I said there is no negative relationship between unemployment and wage growth after 1983. I did the regression, and the coefficient is always positive. What is shown in the diagram is fully consistent with this. If you or Dean or anyone else can show an actual meaningful negative correlation after 1983 then you will have something. Since the discussion is usually about national data it would ideally be based on that, but even state data would be something. What were the correlation coefficients for the Chicago Fed study? These are not given.

Again, there were big changes in many of the relationships involving wages in the 60's through the 80's. This is the time when real wages ceased to parallel GDP and even crashed badly (using the CPI), and when inequality began to increase. If you use relationships from an earlier time, or assume that they did not change, you will get wrong answers when you try to understand these things.
The Lie of the Labor 'Shortage'
written by Globus Pallidus XI, August 17, 2014 9:48
There is not, there has never been, there never can be, a labor 'shortage'. It sometimes happens that demand for a given class of labor outpaces the supply. This only means that wages go up. A labor 'shortage' is also sometimes referred to as prosperity. It threatens only those vicious rentiers whose only god is the easy profits that automatically come from ever cheaper labor.

Any billionaire or pundit who talks of a labor 'shortage' as anything other than an unalloyed good should be stripped of all wealth and forced to spend the rest of their lives working in Bangladesh for 50 cents an hour. To encourage the others.

Hourly wages
written by Dean, August 17, 2014 10:23

In our book we did use national unemployment data and we got a solid inverse relationship between hourly wages and unemployment-- sorry you don't like the data.

btw, you are using weekly wages, this is affected by changes in average hours. These fell sharply in late 70s and 80s as many women entered the labor force and worked part-time. You should also check the CPI you're using. Looks the CPI-U which overstates inflation in the 70s by around 7 pp. You would want to use the CPI-U-RS going back to 1978 and CPI-U-X1 for prior years. Both are available on the BLS website.
Don't shop where you can't work
written by David, August 17, 2014 11:50
I'm getting sick of places not hiring our local job seeking teenagers and desperate needy adults and instead opting for Spanish speaking people who are usually uneducated, can't speak coherent English and who have no connection to our community whatsoever.

Paraphrasing what one manager explained to me after I buttonholed him about this. "Once a critical mass of Spanish speakers is in the kitchen, back rooms or loading dock, then only Spanish speakers will be hired so that people can communicate."

Fine, if my people aren't good enough to work in their stores, then I guess we aren't good enough to spend money there.
why is this even a controversy....
written by pete, August 17, 2014 12:29
As Jared said in the Times piece on Yellen a year or so ago, real wages had to fall to get unemployment down. Krugman has been arguing the same thing for the U.S. as well as southern Europe. Econ 101. Clear from the 70s that inflation bashed wages good. Workers cannot simply keep up, which is why inflation is not really a good strategy, though it is tempting since everyone gets back to work.
SOME real wages have to fall
written by Dean, August 17, 2014 3:50

Just to be clear, my co-author (Jared Bernstein) did not say that real wages in general have to fall. He said that real wages in some sectors have to fall. I trust that you can see the difference.
written by Jurassic Carl, August 17, 2014 5:23
There is a shortage of brand new 2014 BMW2 Series cars.

I have posted an offer of $15,000, but have heard no positive responses from dealerships.
written by dwb, August 17, 2014 5:54
Its not a skills gap, its a geography gap. Too many people are still locked into negative equity and cannot move.
Dean, the problem is that it is never made up
written by pete, August 17, 2014 6:11
So it is a sectoral problem. Some, like plumbers and carpenters, were overpaid in the mid 2000s due to the housing boom, so they needed to take a cut, which is tough. Inflation would have brought their relative wages down faster (they would rise slower than other sectors like Uber drivers, without having to take a nominal cut). Sounds good on paper, but the overall effect of inflation has been a been a decline in overall wages. Its just to easy for capital to capture inflation based rents. The stock market is doing fine.
anyway looks like typical macro, not sectoral, to me....
written by pete, August 17, 2014 6:20
From the Applebaum article, NYT Oct 26,2013:

“I want to be really careful about advocating for lower wages because I typically advocate for the other side of that equation,” said Jared Bernstein, a fellow at the left-leaning Center on Budget and Policy Priorities and a former economic adviser to Vice President Joseph R. Biden Jr. “But I think higher inflation would help.”
Nope, Jared did not call for a general decline in wages
written by Dean, August 17, 2014 9:12

Jared has written on this issue extensively. I really don't give a damn if there is one quote from a reporter than might seem ambiguous.
written by robert hernandez, August 22, 2014 2:03
Thanks for sharing all this statics...
They were too helpful. We can choose our reasonable hotel.... The condor is so reasonable with respect to their amazing services. Condor Hotel is thy name of high quality service, cost effective staying solution in Brooklyn, incredible environment, nice food, gorgeous decor and the list goes on. You would certainly going to enjoy your stay here. So whether you come with your family or business partner, staying at this place can really work wonder.
condor hotel
Very pleased
written by Harold E. Quillin, August 22, 2014 1:47
to see many people thoughtful and concerned citizens are working on this.

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About Beat the Press

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.