US Labor Shortages / There’s only one problem with this story: It’s mostly fiction

Are we missing a couple million jobs? These would be jobs that exist but lack workers to fill them. The notion that the recovery is being hobbled by too few skilled workers is seductive. It might explain today’s stubbornly high unemployment and why aggressive government policies to promote recovery have been so ineffective. Low interest rates and big budget deficits can’t cure bottlenecks in the job market. They can’t make construction workers into computer scientists.

There’s only one problem with this story: It’s mostly fiction…

For starters, most vacancies are routine. They’re just-posted job openings or those reflecting workers retiring or switching employers. Some skill shortages always exist in a sophisticated economy, says Brookings economist Gary Burtless. “Are they serious enough to explain today’s high unemployment rate?” he asks. “The answer is an emphatic no.” In April, the unemployed totaled 11.7 million; another 6.3 million people wanted a job but weren’t looking. These figures dwarf the number of vacancies.

If shortages were widespread, Burtless and other economists argue, wages would be rising rapidly as employers competed for scarce skilled workers. There’s scant evidence of this. From April 2012 to April 2013, average hourly manufacturing wages rose 1 percent, reports the Labor Department. Over the same period, the gain for all private nonfarm workers was 1.9 percent. Among computer programmers, inflation-adjusted wages have remained flat for a decade, says a study by the Economic Policy Institute, a liberal think tank.

Similarly, economist Paul Osterman of the Massachusetts Institute of Technology surveyed 925 manufacturing establishments in 2012 about worker shortages. Three-quarters reported no shortages, defined as vacancies lasting three months or more. Of the rest, most shortages were less than 10 percent of their workforces. “Very few firms responded by reducing production,” says Osterman. “The most common reaction was to outsource” domestically — to send business to other American firms. Labor bottlenecks haven’t crimped recovery, he concludes. A study by economists Edward Lazear of Stanford University and James Spletzer of the Census Bureau agrees.

Chosen excerpts by Job Market Monitor

via Employers lack confidence, not skilled labor – The Washington Post.