A Closer Look

US – Evidence demonstrating a skills shortage is not found in wage data

To an economist, the most accessible and persuasive evidence demonstrating a skills shortage should be found in wage data. If employers urgently need workers with skills in short supply, we expect them to offer higher pay to prospective new employees who possess the skills. When workers with crucial skills are offered better wages by expanding employers, they are in a strong position to demand better pay from their current employers, even if their own employer is not expanding. Current employers must match the wage offers of growing employers or risk losing their key employees.

Where is the evidence of soaring pay for workers whose skills are in short supply? We frequently read anecdotal reports informing us some employers find it tough to fill job openings. What is harder to find is support for the skills mismatch hypothesis in the wage data. Last week the BLS released its quarterly report on the pay of full-time wage and salary workers. The median full-time worker earned $782 a week in spring 2014. That wage was $6, or 0.8%, more than the median earnings received by workers one year ago. While other wage series show modestly faster gains in pay, there is little evidence wages or compensation are increasing much faster than 2% a year. Even though unemployment has declined, there are still 2.5 times as many active job seekers as there are job vacancies. At the same time, there are between 3 and 3½ million potential workers outside the labor force who would become job seekers if they believed it were easier to find a job. The excess of job seekers over job openings continues to limit wage gains, notwithstanding the complaints of businesses that cannot fill vacancies.

Capture d’écran 2014-07-31 à 14.01.43

Chosen excerpts by Job Market Monitor. Read the whole story at  Unemployment and the “Skills Mismatch” Story: Overblown and Unpersuasive | Brookings Institution.

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