The Exchange

What Do 3 Million Job Openings Tell Us About the Skills Gap?

The Exchange

By Maureen Conway

This post is part of an Aspen Institute Business & Society Program conversation series exploring ways to align the incentives of business and the capital markets with the long-term health of society. To learn more, visit www.aspenbsp.org.

At last report, there were approximately 3.6 million jobs open in the U.S., and the Bureau of Labor Statistics has reported more than three million openings at the end of each month for over a year now. In a context of high unemployment, many conclude that this figure must mean that employers cannot find workers with the appropriate skills for the jobs that are open—that is, that there is a "skills gap".[1] In looking more carefully at the job openings numbers, however, this conclusion seems unfounded.

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What Do We Know About the Available Jobs?

The reported number of job openings comes from the Bureau of Labor Statistics, courtesy of a monthly establishment survey called the Job Openings and Labor Turnover Survey or JOLTS. And, since the recovery started, JOLTS has found a growing number of job openings at the end of every month—most recently reported at 3.6 million.

Employers can have jobs open for many reasons—for example, they may need to replace workers that have retired or moved to different jobs, or their business is growing and they are adding jobs, or they have been unable to find workers with the skills they need.  Since JOLTS does not ask questions about how long jobs have been open, how much they pay, or what skills are required, it is hard to draw firm conclusions about which of these reasons explains current job openings.

In the most recent report, the survey found 4.2 million hires during the month and about 4 million job separations (layoffs, retirements, quits, etc.), similar to the results of the preceding few months. When the number of openings is viewed in this broader context of continued economic recovery and an economy that employs 143 million people, some of whom are bound to change jobs at times, then 3 million openings at a single point in time does not seem unusually large. In addition, there is no evidence that openings are concentrated among high skill jobs. For example, in the last two months, retail trade & accommodation and food service, sectors known for having large numbers of low-wage jobs, account for 30 percent of openings, while manufacturing, the sector most frequently cited as struggling due to an inadequate supply of skilled workers, has accounted for only six percent of job openings. On the basis of these commonly cited data, it is hard to draw the conclusion that a "skills gap" is a major contributor to our current unemployment problem.

So, Is There a Skills Gap?

The short answer seems to be "no," or at least not yet.

Most labor economists will point out that we have not seen any increase in wages in skilled-trades occupations in manufacturing, or other kinds of occupations that are frequently cited as experiencing a skills gap. Taking a close look at wage data in manufacturing, the Boston Consulting Group recently found that less than one percent of the manufacturing workforce, in a handful of labor market areas, is affected by a skills gap. In its survey of employers, Manpower finds that, among U.S. employers having difficulty filling jobs, 54% report that the reason positions are difficult to fill is that workers are looking for more pay than is offered and 44% report that applicants lack experience.

But such reasons cast doubt on the idea of a skills mismatch, as it is not unreasonable to expect employers to pay the going rate for the skills they need, or to provide opportunities for workers to gain experience doing the jobs they need done. So the driver of current high rates of unemployment certainly does not seem to be the inadequate skills of the American workforce.

Still, There Is a Problem

All this is not to suggest, however, that skills issues are not worth some serious attention. Certainly a well-educated and skilled workforce is important to the country's economic strength. And some industries, such as utilities and construction, are facing the retirement of skilled trades people without an obvious pipeline to replace these workers.

A puzzle, however, is why businesses that are concerned about the skills gap don't seem to see themselves as part of the solution. It would seem logical for businesses, which have an obvious interest in building a skilled workforce, to play a leading role. Indeed, at one time, it was not unusual for businesses to invest resources and effort into training their workers, through apprenticeship systems and other forms of on-the-job training. We need models in which both private industry and the public sector play a strong role in building the skills of the American workforce. And we need companies in which workers can benefit from improving their skills and acquiring experience.

Business and the general public have a shared interest in a strong workforce, and should have a shared vision--and shared investment strategy--to develop the next generation of skilled workers.

[1] For example, see recent reporting from 60 Minutes: "Three million open jobs in U.S., but who's qualified?"; CNN Money: "Corporate America: Don't give up on your workers"; and Thomas Friedman: "If You've Got the Skills, She's Got the Job."

Maureen Conway is executive director of the Economic Opportunities Program (EOP) at The Aspen Institute and the director of EOP's Workforce Strategies Initiative.

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