Those who follow the rants from our business leaders and their allies in politics and the media have been struck by a disquieting cry in recent months. We have been repeatedly told that, even though we have more than 25 million people unemployed or underemployed, businesses are unable to find qualified workers.
For example, last week New York Times columnist Thomas Friedman took us to Illinois where Doug Oberhelman, the CEO of Caterpillar, one of the largest companies in the country, complained that he could not find qualified hourly workers for his manufacturing facilities. Oberhelman went on to complain that he also could not find engineering service technicians or even welders.
Friedman also recounted a conversation with Chicago's new mayor, former Obama Chief of Staff, Rahm Emanuel. According to Friedman, Emanual complained about "staring right into the whites of the eyes of the skills shortage." Friedman recounts a story from Emanuel about two young CEOs in the healthcare software business who claimed that they have 50 job openings today, but can't find the people.
There are many other accounts like the ones in Friedman's column of businesses who find their growth prospects stunted by their inability to hire good workers. There are two parts to this story that should bother people.
First, in spite of all the complaints in the media about businesses not being able to find good workers, this problem doesn't seem to show up in the data. According to the Bureau of Labor Statistics, the overall ratio of job openings to existing jobs is just 2.3 percent. This is down by almost a third from its pre-recession level.
Mr. Oberhelman's experience at Caterpillar doesn't seem to be common among his peers; the job opening rate in manufacturing is just 2.0 percent. Even in professional and business services, the category that would likely include the workers that the software execs wanted, the job opening rate is just 3.5 percent, down by more than 25 percent from pre-recession levels.
As a group employers also don't seem to see inadequate worker skills as a problem when asked in surveys. The National Federation of Independent Businesses has been asking its members about the biggest problems they face for more than a quarter century. In the most recent survey only 6 percent listed labor quality as one of their top problems. This is up from the 3 percent at the trough of the downturn, but down sharply from the 24 percent peak reached more than a decade ago.
While the experience of CEOs cited by Friedman might appear to be atypical since it is not reflected in the data, there is another aspect to the problem that is even more disconcerting. These CEOs apparently do not know how a business is supposed to respond to the inability to find qualified workers.
According to standard economics, when businesses can't fill job openings, they are supposed to offer higher wages. If these businesses offered higher wages, then they could lure away workers from their competitors. They may also be able to attract workers from other states or even other countries. Certainly there are workers somewhere in the world who have the skills that are needed to work at Caterpillar or at software firms run by Mr. Emanuel's friends. If these CEOs raised wages high enough, then these workers would be willing to work for their companies.
However, they have not chosen to raise wages to the market clearing level for some reason and therefore can't get the workers they want. Apparently, these CEOs do not know how to raise wages.
This inability to raise wages is also reflected in the data. There is no major occupation group that has seen substantial increases in real wages over the last decade. Even college graduates as a group (excluding those with a post-graduate degree) have not seen an increase in real wages over the last decade. This indicates either there is no problem of skills shortages or that companies are increasingly being run by CEOs who do not know how to increase wages.
Since it would be rude to imply that CEOs are not being honest when they complain about the lack of skilled workers, we should assume that they don't know how to raise wages. This is a problem that could be easily remedied. The government could offer short courses to CEOs and other top executives that would teach them how to raise wages and why this would be beneficial to their firms.
These raise-waging instruction sessions should not be very expensive; even the thickest CEO could probably learn how to raise workers' wages in a day or two. Most state and local governments could afford the cost, which should be easily repaid in stronger growth when employers learn how to address their skills shortage.
Companies should not have to forego expansion and workers should not have to be unemployed just because CEOs don't how to raise wages. The skills shortage problem can be fixed.
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The thing that's not mentioned here but is worth mentioning is that a lot of companies open manufacturing facilities and distribution channels in other countries because those countries demand it as terms of doing business in their country. We have no such rules that I can see in the US. While I agree that outsourcing to China, et al... is now all about cost, it started out with companies not being allowed to do business in China without creating jobs over there.
We don't seem to have that here in the USA...unless I'm missing something (which is entirely possible)
We work harder and longer than ever for less and less. All the while, our companies are netting record profits and executive compensation has gone through the roof. Perhaps these companies would have an easier time attracting talent if they would pay them decently. When "pay for performance" is getting a 2.5% raise rather than a 2% raise after years pay freezes and pay cuts, how can companies expect to find and retain talent?
Now I know this article is all about Trades more than College but it really is all the same. Our companies want to pay $30k for a trained employee no matter what discipline they followed. Maybe a little more for some but not really. And you better be able to start producing the first day you are there.
But then again, if you have the skills and years of real world experience you are way too expensive so they can't use you.
The government can't help. They will figure it out. Duh!! Companies are losing business because they have fired too many people. They have cash on hand. Traditionally in this position you hire the best you can afford so you are a great position for the recovery. Good businessmen will figure it out, others will cause theirbusinesses to fail.
They certainly haven't taught that skill in Business schools in a long long while.
In 2011 employees get paid so little that they can't even afford to shop at Walmart and have to go to the dollar store. This is progress?
In Germany, companies and unions work together to create a manufacturing plan. Part of that plan is that German companies work with schools to foster the right kind of education and train highly skilled technicians as part of a collaborative effort. Asian companies do the same.
If American companies want to have skilled employees, they may want to become a responsible part of the community in which their employees live and from which they derive benefits to operate.
A division of Caterpillar, Solar Turbines, has a big operation in my city. They do no work with the many junior colleges, high schools and three big universities in town (University of California famous for its engineering school, a State University of 30k students with a large engineering school and business school, a Catholic University). Plus several other large universities in the region and all the junior colleges.
One simply cannot take a CEO seriously about lack of employees with certain skill when the company won't act as a responsible part of the communities in which it does business - if they refuse to work with local educational resources to create the skilled employees they need.
We need heroes and heroines and we need them yesterday. How many leaders are sitting on the sideline afraid to fight for what they know is right? If you feel outnumbered try to remember that we're all human. The majority of us just want to love our families and live a peaceful life. That's not to much to ask for is it? You must remember that not everyone is cut out to be a leader. Those blessed with such abilities have a choice. They can use their strength to push for positive change or personal gain. In the end that personal gain means nothing if your entire country is crumbling around you.
some of the states with the highest concentrations of skilled workers also have the highest unemployment rates - Michigan and Ohio come quickly to mind
Continual lowering of wages and benefits
ONgoing cheapening of production
Raising prices to consumers when brief market advantage allows it.
Since everyone is in competition with each other (Workers and corporations),
this ultimately spells a horrible life for both.
Workers jump first.