New York Times Issues Strong Rebuke of 'Skills Gap' Theory, Calls It 'Corporate Fiction'

This is a ridiculous image.

New numbers released by the U.S. Bureau of Labor Statistics show that there were 3.8 million job openings in April of 2013. Yet, the unemployment rate was at 7.5 percent that same month. This disparity is often attributed to a “skills gap,” something which suggests companies are hiring but American workers are not qualified for the open positions. The New York Times, however, isn’t so sure.

This weekend, the NYT editorial board provided an analysis of these numbers. They call the concept of a skills gap “corporate fiction, based in part on self-interest and a misreading of government data”:

In a healthy economy, job openings are plentiful and unemployment is low. April’s tally of 3.8 million openings might sound like a lot, but it is still well below the prerecession average, in 2007, of 4.5 million openings a month. It is also far lower than the record high of 5.2 million openings in December 2000, when the survey was started near the peak of a long economic expansion.

Unemployment is also stubbornly high — 7.5 percent in April, or 11.7 million people, a ratio of 3:1 job seekers for every opening. No category has been spared: unemployed workers outnumber openings in all of the 17 major sectors covered by the survey. The biggest problem in the labor market is not a skills shortage; rather, it is a persistently weak economy where businesses do not have sufficient demand to justify adding employees.

Touching on research from Wharton School of Business Professor Peter Cappelli, the piece argues that the gaping economic valley we are actually peering into is more wage gap than skills gap. The laws of economics suggest that a labor shortage results in a rise in wages. And a rise in wages is certainly not something U.S. businesses can claim to be in hot pursuit of:

If a business really needed workers, it would pay up. That is not happening, which calls into question the existence of a skills gap as well as the urgency on the part of employers to fill their openings. Research from the National Bureau of Economic Research found that “recruiting intensity” — that is, business efforts to fill job openings — has been low in this recovery. Employers may be posting openings, but they are not trying all that hard to fill them, say, by increasing job ads or offering better pay packages.

Corporate executives have valuable perspectives on the economy, but they also have an interest in promoting the notion of a skills gap. They want schools and, by extension, the government to take on more of the costs of training workers that used to be covered by companies as part of on-the-job employee development. They also want more immigration, both low and high skilled, because immigrants may be willing to work for less than their American counterparts.

It is encouraging to see the New York Times addressing training, something we love around here.

For more on the imaginary skills gap read: I think I saw a ghost. Wait, no. That was just the “skills gap.”

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