America has a serious shortage of skilled workers and that is a primary cause of our lack of job creation. Right? Wrong!
We have been bemused for the past few years as an ecumenical group of business leaders, academics and experts have put forward the argument that training and developing a more skilled workforce would help drive job creation. It seems to us that this is a basic misunderstanding of cause and effect.
We can have a philosophical debate about which came first -- the chicken or the egg. But when it comes to job creation there should be no such argument. Organizations and individuals who create new organizations are the chicken -- they are the job creators. Employees and skilled workers are the eggs -- they are the job holders.
That's not to say that we don't need skilled workers in the United States. But, as a wide variety of recent studies have demonstrated, the extent to which the skills of the workforce influences business decisions is a modest one and the actual "skill deficiencies" of the current American workforce may be significantly overstated.
For example, in a March Harvard Business Review article, Michael Porter and Jan Rivkin reported that a survey that they had done revealed that by far the leading reason that a company would move out of the U.S. was "lower wage rates in the destination country -70 percent." Thirty-one percent of the survey respondents cited "better access to skilled labor" as a "reason for leaving." But 29 percent cited "better access" as a "reason for not leaving." So, that makes "skilled labor" a "push" rather than a clear and compelling driver of job creation for the United States.
After examining labor demand data from the Chicago Federal Reserve, Matthew O'Brien, associate editor of The Atlantic, in June wrote, "We should expect wages to be rising much faster in sectors where employers can't find enough qualified workers. ... But that hasn't been the case." Instead, in the period from May of 2006 through May of 2011 there has been a "general shortfall of demand" for the "low, medium and high skill workers" that has moved "more or less in tandem."
Professor Peter Cappelli of The Wharton School supports O'Brien's position in a June 12 article for Time Business titled, "The Skills Gap Myth: Why Companies Can't Find Good People." After analyzing a Manpower survey, which showed that "roughly half of the employers were reporting having trouble filling their vacancies," Professor Capelli astutely notes, "roughly 10% of the employers admit that the problem is that the candidates they want won't accept the position at the wage level being offered." He continues to observe for those who indicate there is a skill shortage, "by far the most important shortfall they see in candidates is a lack of experience doing similar jobs."
The Bureau of Labor Statistics reports that there currently 3.4 million job openings in the United States. Our careful review of the top 50 occupations with the most projected openings for 2010-2020, posted by the CareerOneStop of the Department of Labor on its careerinfonet, shows that the majority of the current and future job openings are "low skill" requiring less than high school or high school degrees.
So, if skill shortage is not central to the country's job creation dilemma, what is? In our opinion, America has had significant problems since the beginning of the great recession on the following five key factors that drive significant job creation:
Small businesses and entrepreneurial startups, large corporate growth and development, government investment, clustering and construction, consumer demand: those are the key factors in the job creation algorithm. Appropriately weighted and aligned they produce the output which is jobs. They are out of synch now. We need to correct this.
On July 9, Thomas Kochan of MIT wrote a The Huffington Post blog titled "The Jobs Crisis: Time to Treat It as a National Emergency." In his post, Professor Kochan recommended developing a "Jobs Compact" and major investments in job creation. We called for a similar comprehensive and sweeping approach in our 2010 book, Renewing the American Dream: A Citizen's Guide for Restoring Our Competitive Advantage.
The citizens and the country have begun to mobilize and there is an emerging consensus that this is a complex demand side issue that must be addressed in an integrated and coordinated manner. It can and will not be corrected simply through training and development or increasing the supply of skilled workers. It's time to set the concept of a skilled workforce shortage aside -- unless, of course, it's applied to current status of Congress.