The Myth of Skills Mismatch in America

Once again, the myth of “skills mismatches” is presented as one of the chief impediments to filling present job openings, at least according to Brian Sullivan, a CNBC correspondent.

It took me all of three minutes to look up the Bureau of Labor Statistics article from which Mr. Sullivan drew his 3.2 million figure. It is only sixteen pages long and is practically useless from a statistical standpoint because it aggregates “full-time, part-time, permanent, short-term, and seasonal openings.” Anyone with common sense would want to know how these categories break down since who in Milwaukee would move to Miami for a part-time or seasonal job–leaving their wife, kids, and mortgage behind?

The notes of the article also indicate that the statistics are based on a “random” sampling of 16,000 businesses. We are given no information about the weighting of these samples, although BLS says this information is available upon request. Also, the margin of error is below the standard 95% confidence level associated with a good sample. This makes the survey not “completely” useless but it does make it “practically” useless, meaning we cannot make any good policy decisions based on the information it provides.

Sullivan mentions three reasons why these 3.2 million jobs might be going unfilled: mismatched skills, the immobility created by the mortgage meltdown, and extended unemployment benefits. However, all three are merely assumptions.

The first is belied by a report that employers are discriminating against people who have been unemployed for over six months. A recent article highlighted the plight of these folks, who now make up over 40% of the 16 million people unemployed in this country. Of course, skills can become antiquated, but the first person profiled in the article just above was a bus driver who was working as a “substitute” driver but could not get hired full-time because she had not worked full or even part-time in the last two years. Come on! She can fill in for drivers who don’t show up but they won’t give her a full-time job because she hasn’t had one in two years? What is even more disturbing is that job advertisements are encouraging those unemployed longer than six months not to apply.

The mortgage meltdown argument seems contradictory on its face since those who have been foreclosed on are clearly not made immobile by their mortgages. It would be interesting to know how many of the 16 million that are unemployed have also been foreclosed on, have mismatched skills, or are sitting around “sucking on the government teat.” This might give us some indication of whether the problems are related. However, as I mentioned above the likelihood is that most people are keeping up with their mortgages and staying put, working part-time while their spouse works full-time, or possibly collecting unemployment benefits. We don’t really know because no one is willing to do the spadework required to find out.

Of course, this all leads us to the most “controversial” allegation: that millions are sitting around on their duffs because they don’t want to work. Now, this is an interesting allegation since in order to get “full” unemployment benefits in the first place one must have worked eighteen months of the last two years from the point of “separation” in order to get those benefits. Why would all these people who were clearly willing to work four years ago suddenly not want to work? Why would they want to bring home less money than they did while working, since unemployment pays only a portion of your previous salary—and it is capped?

In other words, if you worked as a manager at Borders and made $50,000 a year you would not get more than half that on unemployment. (Each state varies with the maximum benefit amount, and the average for all states is $298.00 a week. However, you must have earned greater than that amount for eighteen months prior to unemployment to get that average benefit. If you were working a near minimum-wage job prior to unemployment your benefit would not exceed $200 a week, and it would most likely be less.)

Some might argue that this is an incentive not to work; however, since most middle class people live paycheck-to-paycheck, and are heavily in debt, this is not the ideal situation for someone who used to make $50,000 dollars a year. Add to this that some people might not be able to find a ready-job that exceeds his/her benefit and you have an even more complicated situation. Do they sacrifice desperately needed income to work at a job that pays less than their benefit? Do they take part-time work in hopes that it will turn into full-time work? Do they take a temporary job and eliminate the possibility of getting back on unemployment once the job is done?

The bottom line is that most of the people who criticize the unemployment benefit system have no idea how it works. It is complicated because of the way they determine your benefits. For example, if you leave the unemployment system and work for six months at a temporary job paying half what you earned at your previous job, and “if” you are eligible to get back on unemployment, your benefit would be reduced from the previous maximum because they would calculate your present benefit by including your most recent wage information. What rationally economic person would do this knowing that their income will be reduced in the long-term?

In the final analysis the issue of unemployment is far more complicated than we want it to be. We want simple answers like people being unwilling to work, or that people just do not have the skills they need. This makes the last suggestion of Mr. Sullivan even more absurd. He suggests that employers need to pony-up and pay to train their own workers, rather than relying on the government to train people for them. It’s absurd because there is no compelling evidence that a skills mismatch exists. In fact, in our “deskilled” and low-wage economy there is no mismatch except when it comes to the wages employers are willing to pay and the wages for which American workers are willing to work.

Overburdened by public and private debt, suffering from income disparities not seen since before the Great Depression, and caught in the no man’s land of the final battle between the right-wing, free-market fundamentalist and the “liberal establishment,” we are looking in the wrong place for solutions to our economic woes. What are those solutions? Well, it’s hard to be specific, but getting out of debt would be a nice start. However, to do that at the public level would require raising taxes and cutting spending, while keeping alive the government programs we need and want. Privately it means the call to live not within but below our means, to dig ourselves slowly out of the mess we’ve gotten ourselves into.

In other words, the answers are just as complicated as the problems.

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