The Skills Gap Fallacy

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.”..

via Ed Crego, George Muñoz and Frank Islam: The Skilled Worker Shortage Fallacy.

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