THE skills gap has become rather pervasive in policy discourse both here in Maine and in the U.S. Despite wage and other data suggesting there isn’t a broad labor/skills shortage, policymakers at the state and federal levels insist that there is, and that this shortage is what is constraining economic and job growth. As a result, training programs and attempts to boost the supply of college grads are prescribed to “cure” the skills gap. These measures aren’t likely to work. You cannot focus solely on the supply side of the issue and not take stock of the demand. In other words, is there adequate demand for an increase in this labor?
The skills gap is shortage in the supply of qualified applicants at any price. The price part of that definition is what has driven the opponents of the skills gap debate; wages are not rising at a rate to suggest a shortage. The focus on the wage piece of the skills gap debate has ignored another crucial aspect. Note that the skills gap debate in Maine usually entails statements like ‘there is a skills gap in Maine’. If the solution is to increase the supply of college grads and training programs within Maine, that insinuates that the applicant pool from which employers draw from is confined by the state’s borders. Maine long suffered from brain drain, meaning human capital left the state for various reasons (job opportunities, higher wages, better weather, etc. Well, if human capital can leave the state, then certainly it can return. Because human capital is mobile, simply increasing a geographic region’s stock of it does not mean it will remain in that region (unless we want to tear down the Piscataqua River Bridge, and build a moat around the rest of the state . . . which would be a shovel ready jobs program).
In other words, if there’s a hole your bucket, and water is running out, pouring more water into the bucket is not going to fill the hole. When college grads are leaving the state, simply increasing the supply of grads is not necessarily going to resolve the problem unless the cause of the first exodus is resolved–which is demand problem. Moreover, people who get trained in a particular field have another option to geographic flight; industry flight. Look at it this way. People trained in state A can go work in state B,C,D,E, etc. Now substitute industry for state. Same problem.
Another problem with increasing the stock of human capital, particularly via the increase in college/trade school grads, is that there is nothing to suggest this will produce “qualified” applicants. For instance, from a recent Financial Times piece discussing how jewelers in the UK are facing a skills shortage (my emphasis:
Three-quarters of jewellery businesses that plan to recruit in the next few years prefer to take on adult workers who already have the necessary skills and experience, though 40 per cent said they would consider graduates. A third said they had tried to recruit staff over the past three years, with half encountering problems because of a lack of experience and specialist skills.
And on this side of the Atlantic, from a PPH piece published last year by Steve Mistler (again, my emphasis):
Ann Marie Martin, the new head of Idexx recruitment, said the challenge in Maine lies in filling technology positions, software engineers and developers. She estimated that the company has 15 job openings just in those fields, some of which have been vacant for more than a year.
Martin said Idexx doesn’t hire many people straight out of college. It’s looking for highly skilled, experienced workers and tends to recruit “passive candidates,” people working elsewhere and not necessarily hunting for another job.
This is that old line that all of us have been told; you need experience to get a job, but you need a job to get experience. While the above to instances of labor recruitment are not necessarily comprehensive of what is occurring in the labor market, it is reasonable to believe that businesses across the board are increasing their demands of potential workers. Why? Simple. The Great Recession.
With the recession brought unemployment across industries, and with unemployment comes an increase in the applicant pool. With more applicants than jobs, potential workers competed against one another for those scarce jobs. As a result, businesses could post jobs with higher job requirements than they might have during boom years. This also cuts down on the costs of training programs (something businesses have, on a national level, really cut back on over the past decade or so).
Even if employers are not trying to exploit a flooded applicant pool, there’s still a potential problem with believing that increasing the stock of human capital will cure the skills gap. With college comes a spiffy piece of paper (and a load of debt), but rarely (if ever) does it come with “experience.” And if businesses are unwilling or unable to train new workers, then that spiffy piece of paper might land you a job at Starbucks.
I don’t have a bucket analogy for this, but the resolution to the lack of experience/training is fairly simple; tighten the labor market. As the applicant pool begins to dwindle, and employers then have to compete for the remaining labor supply, they will have to skill up their own workforce; that is, businesses will have to hire people without the experience businesses could formerly demand when the applicant pool was flooded, and provide to those people the training necessary. (Of course there are fields where specific training and education is required, such as doctors, lawyers, engineers, etc.).
The problem with the skills gap from a policy approach is that there is too much focus on the supply side of the problem. As Richey Piiparinen recently wrote on Brain Drain hysteria in the Rust Belt:
Talent attraction, then, is only part of the formula in Cleveland’s ongoing and difficult economic restructuring. Talent production is also needed, for both natives and newcomers, regardless of the age group. But emphasizing the latter entails knowing the score on the former. Brain drain hysteria breeds desperation.
And desperate times call for desperate measures—and bad policy.
Similarly, before Maine policymakers fully push the state’s policies into increasing supply, there needs to be an examination of the demand for labor. Given stagnant wages and brain drain, it’s hard to see increasing the supply of labor as sound economic policy. If you can’t keep the current supply in Maine, what’s increasing that supply going to do?
There’s a hole in the bucket . . .