Posted by: coastcontact | December 10, 2013

The American Skills Gap

The skills gap in U.S. manufacturing has hit a vast array of industries that are having trouble filling their workforce needs with properly trained workers who can step right in and help companies.

As an example, across the jobs spectrum in the laser industry, from designing equipment, to finding workers to install and repair laser machinery, to manufacturers that need skilled employees on the plant floor, the lack of workers with the necessary skills has become a major problem.

To believe an exhaustive new report by the Organization for Economic Cooperation and Development (OECD), the skill level of the American labor force is not merely slipping in comparison to that of its peers around the world, it has fallen dangerously behind.  A new OECD study finds that the US is well behind its global competitors in math, reading, and computer skills.

The highly skilled in the United States earn a much larger wage premium over unskilled workers than in most, if not all, other advanced nations, where regulations, unions and taxes tend to temper inequality. So if the rewards for skills are so high, why is the supply of skilled workers so sluggish?  The answer is not clear.

Socioeconomic status is a barrier. Not only is inequality particularly steep, little is done to redress the opportunity deficit of poorer students. Public investment in the early education of disadvantaged children is meager. Teachers are not paid very well, compared with other countries. And the best teachers tend to end up teaching in affluent schools.

To speed growth, we must close the widening skills gap that exists in all of our industries.  Washington lawmakers do not appear to be inclined to take the proactive lead that is necessary.  This means that large companies and industry organizations will have to take the lead.  That can be accomplished through lobbyists in the capitol or sponsoring training programs.  The question is will private industry take the lead when labor costs are so much lower in other nations?

Sources for this article is news.thomasnet.com/IMT/2013/12/10, The New York Times,OECD  

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Responses

  1. If economic stagnation persists for a long period of time, it might not keep up with the inflation. People won’t be able to buy the same amount of goods and services as before. With the increase in population and decreased spending, this can also lead to greater stagnation and maybe even recession. In order for the economy to grow back, government intervention is usually required.

    • We had “stagflation” in the 70s. It was a period where there was slow economic growth and relatively high unemployment but inflation continued almost unabated. Fed Chairman Paul Volker’s policies did shake off the stagflation but at the cost of a recession.

      Today’s issue revolves around a skills gap. The symptoms may seem the same but the solution will have to be different.

  2. When rich countries trade with poor countries, the low-skilled workers in the rich countries may see reduced wages as a result of the competition, while low-skilled workers in the poor countries may see increased wages. Trade economist Paul Krugman estimates that trade liberalisation has had a measurable effect on the rising inequality in the United States. He attributes this trend to increased trade with poor countries and the fragmentation of the means of production , resulting in low skilled jobs becoming more tradeable. However, he concedes that the effect of trade on inequality in America is minor when compared to other causes, such as technological innovation, a view shared by other experts. Lawrence Katz estimates that trade has only accounted for 5-15% of rising income inequality. Robert Lawrence argues that technological innovation and automation has meant that low-skilled jobs have been replaced by machine labor in wealthier nations, and that wealthier countries no longer have significant numbers of low-skilled manufacturing workers that could be affected by competition from poor countries.


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