Sunday, March 26, 2006

The myth of the skilled worker shortage

The NYT attacks the hoary nostrum that education and retraining is the answer to layoffs (emphases mine).
Retraining Laid-Off Workers, but for What? - New York Times

... Saying that the country should solve the skills shortage through education and training became part of nearly every politician's stump speech, an innocuous way to address the politics of unemployment without strengthening either the bargaining leverage of workers or the federal government's role in bolstering labor markets.

But training for what? The reality, as the aircraft mechanics discovered, is painfully different from the reigning wisdom. Rather than having a shortage of skills, millions of American workers have more skills than their jobs require. That is particularly true of college-educated people, who make up 30 percent of the population today, up from 10 percent in the 1960's. They often find themselves working in sales or as office administrators, or taking jobs in hotels and restaurants, or becoming carpenters, flight attendants and word processors.

The number of jobs that require a bachelor's degree has indeed been growing, but more slowly than the number of graduates, according to the Labor Department, and that trend is likely to continue through this decade. "The average college graduate is doing very well," said Lawrence F. Katz, a labor economist at Harvard. "But on the margin, college graduates appear to be more vulnerable than in the past."

The Labor Department's Bureau of Labor Statistics offers a rough estimate of the imbalance in the demand for jobs as opposed to the supply. Each month since December 2000, it has surveyed the number of job vacancies across the country and compared it with the number of unemployed job seekers. On average, there were 2.6 job seekers for every job opening over the first 41 months of the survey. That ratio would have been even higher, according to the bureau, if the calculation had included the millions of people who stopped looking for work because they did not believe that they could get decent jobs.

So the demand for jobs is considerably greater than the supply, and the supply is not what the reigning theory says it is. Most of the unfilled jobs pay low wages and require relatively little skill, often less than the jobholder has. From the spring of 2003 to the spring of 2004, for example, more than 55 percent of the hiring was at wages of $13.25 an hour or less: hotel and restaurant workers, health care employees, temporary replacements and the like.

That trend is likely to continue. Seven of the 10 occupations expected to grow the fastest from 2002 through 2012, according to the Labor Department, pay less than $13.25 an hour, on average: retail salesclerks, customer service representatives, food service workers, cashiers, janitors, nurse's aides and hospital orderlies.

The $13.25 threshold is important. More than 45 percent of the nation's workers, whatever their skills, earned less than $13.25 an hour in 2004, or $27,600 a year for a full-time worker. That is roughly the income that a family of four must have in many parts of the country to maintain a standard of living minimally above the poverty level. Surely lack of skill and education does not hold down the wages of nearly half the work force....

... By the spring of 2004, however, out of more than 800 mechanics from United who had gone through her program or were still going through it, only 185 were working again.

Despite their skill, 33 of those 185, or 18 percent, were earning less than $13.25 an hour working in warehouses, on construction jobs, in restaurants or in retailing. Some were "throwing boxes," as the mechanics put it, for FedEx, which paid them only $10 an hour at its shipping center in Indianapolis. They took the work, which entailed loading and unloading air freight packages, for two reasons: FedEx offered them company-paid health insurance, which some of the mechanics desperately wanted, and they saw in the job a gamble worth the hardship, given the glum alternatives.

... Of the 185 mechanics back at work in the spring of 2004, most earned $14 to $20 an hour as heating and air-conditioning repairmen, auto mechanics, computer maintenance workers, freight train conductors (CSX happened to be hiring) or cross-country tractor-trailer drivers, having graduated from a two-week driver-training course offered by Ms. Bucko's people.
Economists have seen this coming for a while. It's likely to get much worse, and this article should be read alongside a recent review of the status of the black American male. Black men are the 'canary in the mine' -- they suffer first.

My prescription? Glad you asked!

1. Universal healthcare in a multi-tiered system. (The universal care is "good enough", not "the best".)
2. Increased taxes on high earners and large asset holders.
3. Reinstate the estate taxes.
4. Universal 401K style savings that can be used both for retirement and for savings. Tax free accumulation on investments, when withdraw you pay taxes at current levels. (Zero if unemployed).
5. Make it easier for people to leave the labor market (see #1).
6. Eliminate any tax features or acccounting rules that in any way encourage outsourcing.
7. Measure what's happening and publish the results.
8. If #1-#7 aren't working, then get radical.

#7 seems obvious, but my recollection is that Bush has eliminated much of this measurement.

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