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Why Employers Are to Blame for the 'Skills Gap'

Economists have become increasingly skeptical about the skills gap narrative, not least of all because of the absence of real wage inflation.
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Complaints about a "skills gap" that make it difficult for employers to fill open positions have become commonplace in discussions about the economy and unemployment levels. Workers, the story goes, simply don’t have the educational background or professional training for the kinds of jobs that exist in today’s knowledge economy.

The argument certainly feels like it makes sense--things have changed an awful lot in the past decade, and it could be that older workers simply don’t have the necessary skills for employment today. 

Related: Wages Rise and - Surprise - Skilled Workers Are Now Easier to Find

The trouble is that economists have become increasingly skeptical about the skills gap narrative, not least of all because of the absence of real wage inflation. After all, if skilled workers were in high demand but short supply, the laws of economics suggest they would be able to demand, and get, higher wages.

A new paper by Peter Cappelli, a professor at the Wharton School’s Center for Human Resources, should help solve the puzzle of the skills gap. In a comprehensive survey of the literature on the subject, Cappelli reports little hard evidence to support the theory. He notes that when it comes to workers’ skills, the most pervasive problem in the U.S. right now is that many individuals are working jobs for which they are overqualified.

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He suggests that what is really driving the discussion about worker skills is a combination of employers seeking to hold down payroll costs by keeping wages as low as possible - and a longer-term effort to transfer responsibility for training workers from employers themselves to the taxpayer.

"The evidence driving the complaints about skills does not necessarily appear where labor market experts might expect to see it, such as in rising wages," Cappelli writes. "Instead, it comes directly from employers - typically from surveys - who report difficulties hiring the kind of workers they need. The assertions explaining their reported difficulties center on the idea that the academic achievement of high school [graduates] is inadequate or that there are not enough college graduates in practical fields like computer science and engineering. The recommendations from these reports include increased immigration and use of foreign workers as well as efforts to shape the majors that college students choose." 

Related: The Flaws in the Federal Job Training Program

Numerous economists have noted that when employers raise wages, skilled employees suddenly become easier to find - and Cappelli notes that much of the discussion about a skills gap appears to be driven by employers looking to hire workers on the cheap. 

More telling, though, is that Cappelli, who is also the author of the book Why Good People Can’t Find Jobs, notes a disinclination among employers to train existing workers; he says they look instead to hire individuals who already possess a specific skill set. In many cases, he finds, the business community is pushing the public sector to provide the sort of training that workers used to receive through apprentice programs, professional development programs and other on-the-job training.

"The view that emerges from these arguments is one where responsibility for developing the skills that employers want is transferred from the employer onto job seekers and schools," he writes. "Such a transfer of responsibility would be profound in its implications."

While increased training programs could reduce businesses’ costs, Cappelli notes, the end result is likely to be a less efficient system in which key job-related skills are necessarily left out.

Related: The Long-Term Unemployed May Finally Get a Break

"Schools, at least as traditionally envisioned, are not suited to organize work experience, the key attribute that employers want," he writes. "Nor are they necessarily good at teaching work-based skills. Those skills are easiest and cheapest to learn in the workplace through apprentice-like arrangements that one finds not only in skilled trades but also in fields like accounting and medicine.

"Unlike in the classroom," he continues, "problems to practice on do not have to be created in the workplace. They exist already, and solving them creates value for others. Observation and practice is also easiest to do where the productive work is being done, and employment creates incentives and motivation that typical classrooms cannot duplicate."

Cappelli closes with a message for the research community. The myth of the skills gap, he says, only exists because, in the absence of hard data on the issue, advocates of a particular position find it easy "to make claims that are simply assertions and claims that even casual acquaintance with real evidence would indicate are false."

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