Thoughts on skills shortages

In Transition: Recognizing Economic Turning Points

52nd Annual ConferenceCouncil for Community and Economic

ResearchOklahoma CityJune 6, 2012

Greg Weeks, Ph.D.Brandt Information Services

www.Brandtinfo.com

December 1, 2011

Do we have skill shortages?

Yes: The retirement of highly educated and skilled baby boomers will lead to shortages of critical skills, particularly in some industries.No: High unemployment rates across the nation means that the presence of millions of unemployed workers are available to fill any available jobs.Yes: Rates of return to higher education have been increasing since 1980.No: Education levels are projected to rise.

Skill shortages: a labor market issue?

Widespread shortages of critical skills can derail economic growth.

The gestation period for education and training programs makes training system responses to skill shortages difficult.

Markets may mitigate skills shortages, but the time frame for a market response may be too long.

Policy responses (increasing training opportunities) may exacerbate the problem.

Skill shortages: background 1.0

Wage rate ($)

Quantity of Labor0

Supply of available labor (specific skill)

Demand for labor (specific skill)

WS

WE

D1

S1S2

Skill shortage

Dis-equilibrium

Skill shortages: number of unemployed

US: number of unemployed workers

Seasonally adjusted, thousands

100500959085Source: Bureau of Labor Statistics

16000

14000

12000

10000

8000

6000

4000

16000

14000

12000

10000

8000

6000

4000

Skill shortages: Background 2.0

Skill shortages: Background 2.1

U.S. educational and occupational wage differentials were exceptionally high at the dawn of the twentieth century and,

decreased in several stages over the next eight decades.

But starting in the early 1980s the labor market premium to skill rose sharply and,

by 2005 the college wage premium was back at its 1915 level.

The twentieth century contains two inequality tales: one declining and one rising.

Skill shortages: Background 2.2

An increase in the rate of growth of the relative supply of skills associated with the high school movement starting around 1910 played a key role in narrowing educational wage differentials until 1980.

The slowdown in the growth of the relative supply of college workers starting around 1980 was a major reason for the surge in the college wage premium from 1980 to 2005.

Institutional factors were important at various junctures, especially during the 1940s and the late 1970s.

Source: Claudia Goldin and Lawrence F. Katz. “The Race between Education and Technology: The Evolution of U.S. Educational Wage Differentials, 1890 to 2005”. NBER Working Paper No. 12984. March 2007. http://www.nber.org/papers/w12984.pdf?new_window=1 From their book with the same title

Skills shortages: returns to education, employment + earnings

Bachelor Degree & Higher Some College, Less than Bachelor Degree

High School Graduate, No CollegeLess than High School Diploma

10050095Source: BLS

16

12

8

4

0

16

12

8

4

0

Seasonally adjusted, age 25 and older, percent

Skills shortages: AARP source

Retrieved from: http://assets.aarp.org/rgcenter/econ/labor-force-projections-workers-education--gates-foundation.pdf

Skill shortages: AARP outlook

Skills shortages: AARP data

Skills shortage: AARP Conclusions

Skill shortage: conclusions

National, widespread skills shortages are unlikely before 2018

Local, temporary shortage may occur These shortages will be mitigated by migration,

immigration, and wages The training system should respond to perceived skills

shortages with some caution and stay with a strategic longer run plan.

Unemployed workers are a prime source of needed skills. The role of the public (and private) labor exchanges is to

increase the efficiency of labor markets (make the supply and demand matches easier).

Questions?

Greg WeeksGreg.weeks@brandtinfo.com

(850) 577-4980