Do we have a shortage of workers, or just cheap employers? Part one of two.

Summary:  So much of our consensus thinking results from full-spectrum propaganda from well-paid shills working for our ruling elites, well-funded institutions of disinformation and propaganda. This is one reason why we’re losing, and the Republic dying. Here we examine one issue of importance both by itself and as an example of a larger phenomenon.  See part two here.

Contents

Part one:

1. Introduction, about propaganda
2. Some quotes
3. Claims about worker shortages, & rebuttals
4. For more information

Contents of part two (tomorrow):

5.  More quotes
6. Broader Evidence that these claims are bunk
6.  What about employers paying fair wages, but unable to find skilled workers?
7.  For more information

(1) Introduction, about propaganda

Our ruling elites have constructed institutions that manufacture lies at a greater pace and disseminate them more widely than we can provide rebuttals. Lies about the progress of our foreign wars, about their fake debt-reduction plans (eg Ron Paul’s), bogus analysis of economic theory and the economy. We’re not only playing defense, but doing so unsuccessfully.

I have a two foot high pile of 2012’s news articles which can be broadly categorized as “lies”. I’d like to write rebuttals, but could not do so even 24-7. I would like to list them for your review, but that would be a full-time job. Here we examine one, of importance both by itself and as an example of a larger phenomenon.

Here we’ll discuss some specific claims; tomorrow we’ll review research about the broader economy.

(2)  Some Quotes

“Employers are very quick to raise the specter of a labor shortage, but often it’s another way of saying they can’t find the workers they want at the price they’re paying … they are unwilling to meet the price signal the market is sending, so they seek help in the form of a spigot like immigration.
—Jared Bernstein, former Chief Economic Advisor to Vice President Biden, quoted in BusinessWeek, 6 August 2007

“No one who has come to this question with an open mind has been able to find any objective data suggesting general ‘shortages’ of scientists and engineers.”
—Dr. Michael S. Teitelbaum of the Alfred P. Sloan Foundation, testimony before Congress on 6 November 2007

(3)  Specific claims about worker shortages — and simple rebuttals

The claims of skill shortages are almost entirely anecdotal.  Worse, most of the specific stories are bogus. Asking employers if they’d like cheaper workers is good for an easy story and a smile from the publisher, but little but fiction.  Here is a sampler of this swill.

(a)  ‘Skills gap’ leaves employers without workers in pipeline, Boston Globe, 3 July 2011 — demolished with this simple rebuttal:

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Ultra Scientific’s business is growing because Thermo Fischer Scientific is closing their plant in East Providence and laying off 66 workers who do all the things that Ultra does. They are moving production to Virginia and Texas. Neither of them is exactly a hotbed of trained workers.

Here’s what Thermo Fischer Scientific’s Spokesman, Ronald O’Brien, said last August, “At least two or three employees will be asked to relocate, some to other positions, O’Brien said. The bulk of the workers, mainly technicians who produce the test kits to detect diseases, will be laid off and offered a severance package”.

So they were able to hire one of the three PhDs who chose not to move. But you don’t need a PhD to run an HPLC. A lab tech with a high school education can do that. But one thing that is certain is that a PhD in Chemistry will never make enough to pay back the costs of their education at a lab techs salary. Ultra Scientific is within 50 miles of the largest concentration of chemistry education in the world and he can’t find anyone to work for him? The reason why Russo can’t get people is because he is not paying enough!

(b)   “Some Firms Struggle to Hire Despite High Unemployment, Wall Street Journal, 9 August 2010 — Easily demolished by Yves Smith at Naked Capitalism:

So an employer who is having a hard time hiring needs to consider that the generally slack labor marker may not be relevant to his market, and he therefore may need either to change work processes so as to require less specialized labor, train workers, pay more, or do without. We see some of that at work in the story:

At Mechanical Devices, which supplies parts for earthmovers and other heavy equipment to manufacturers such as Caterpillar Inc., part owner Mark Sperry says he has been looking for $13-an-hour machinists since early this year. The lack of workers is “the key limitation to the growth of our business and to meeting our customers’ expectations,” says Mr. Sperry. He estimates the company could immediately boost sales by as much as 20% if it could find the 40 workers it needs.

Trips to several job fairs yielded almost nothing, so the company set up a 10-week training program to create its own machinists. Out of the first group of 24 trainees, 16 made it to graduation.

Mr. Sperry sees extended jobless benefits as one of the main culprits behind his company’s hiring difficulties. Many of the applicants he saw at job fairs, he says, were just going through the motions so they could collect their unemployment checks.

This does not add up. If the company can afford to spend ten weeks training people (and the additional cost of setting up a course), that suggests it could have offered more than $13 an hour, particularly given the opportunity cost of the orders it could have filled if it had had people on board sooner. The article later notes that Mechanical Devices “hire[s] through staffing agencies to help control health-care costs and maintain flexibility.” Um, that means they fire people as soon as orders fall.

Other employers seem not to recognize they are lowballing:

Paul McNarney, owner of The Mower Shop in Fishers, Ind., says he has been looking for a good lawnmower mechanic so he can guarantee a one-week turnaround on repairs. He received only two responses to an Internet ad he placed a couple of months ago, even though the job can generate income of more than $40,000 a year, depending how many mowers the mechanic repairs. Similar ads he placed before the recession attracted more than a dozen candidates, he says.

“My thought was that in a cr— economy I could probably find somebody good because a lot of people were looking,” says Mr. McNarney, who has been in business for 13 years selling everything from simple lawnmowers to big riding models for large properties. “I didn’t find anybody.”

Let’s see. McNarney apparently already has a repairman; this “hire” is to shorten McNarney’s turnaround time. But this “job” appears to be paid on a piecework basis, on referrals from McNarney, and this new worker probably only would get work at a few peak times a years, since the current repairman is presumably top banana. So the $40,000 number is pure BS.

In fact, the logical response to that ad would be to compete with McNarney, not work for him. Why let him take the markup on your time for erratic referrals, meaning no job security? But the subtext of the article is that the buyer, meaning the employers, is always right.

(c) “Pay a sticking point for manufacturers seeking skilled workers“, by Annie Baxter, Minnesota Public Radio, 26 January 2012 — Excerpt:

Like a lot of manufacturers in Minnesota, Haberman is hiring. The openings include five positions for high-skilled machinist jobs that pay up to about $60,000 a year. But company officials haven’t been able to fill the jobs and as a result haven’t taken on the new business they need to grow.

A recent survey of manufacturers across the United States found that as many as 600,000 jobs are vacant due to a shortage of skilled workers. The poll, conducted by Deloitte and The Manufacturing Institute, declared that factories are experiencing a moderate to severe shortage of qualified workers. … In his State of the Union speech this week, President Barack Obama echoed that concern — a lament heard in factories across Minnesota.

Among the workers the company recruited is Mike Beedle, a quality control technician who has worked in manufacturing for 25 years, said he likes the company but is not crazy about his pay. He’s still making about a third less than he did in a similar job at a medical device company that laid him off 5 years ago. “If you want to know where I am with money, it’s gone down a lot in the past few years,” he said. “I’m not happy about that.” To Beedle, his declining wages suggest there is an oversupply of workers like him — not a shortage. So he doesn’t totally understand manufacturers’ gripes. “They don’t get the skilled workers they want, but they expect a lot; the more you pay, the better the worker you’re going to get.”

That makes sense to experts. Steve Hine, the state’s head labor market analyst, said if skilled manufacturing workers were scarce, companies would have more job openings and offer higher wages. “It seems that offering higher wages would be a natural response.” With a labor shortage, out-state manufacturers who often have the toughest time filling positions would see a greater need to offer higher wages to attract workers, he said.

But that’s not happening. The data on job openings for highly coveted machinists who can operate or program computerized machining tools doesn’t show an unmet demand for such skills. According to the most recent numbers, the median wage offer for such top machinists was $19 an hour. That’s a healthy salary. But it’s lower than the salary offered a few years ago, before the recession.

“If you go back to the fourth quarter of 2007, the median wage offering was $19.23, slightly higher, but nonetheless higher,” Hine said. “So the wage offers in this area have fallen.” But the decline in wages is nothing like the huge drop in job openings for computer numerical control machinists. They’ve plunged about 70% from their peak four years ago. That pattern repeats itself across other jobs, like welders.

Mechanical engineers, by contrast, have seen a rise in job vacancies. But wages for those workers have been stagnant since the start of the recession.

Hine said with vacancies and wages both dropping, he doesn’t buy the argument that there is a worker shortage in the state. Others say if manufacturers really do feel pinched for workers, they should provide more on-the-job training. Even many in the industry believe that’s true.

… While Beedle isn’t scoping out other gigs, he does understand the impulse to do so. “That’s business, capitalism at its finest,” Beedle said. “If the company is in it for money, why can’t the worker be in it for money?”

If wages don’t rise, the complaints about a shortage of skilled workers may well continue.

(4)  For more information about employment patterns

1. Important: Globalization and free trade – wonders of a past era, now enemies of America, 16 March 2011
2. America passes a milestone!, 20 January 2010 — More jobs in government than manufacturing
3. Yes, it is a “mancession”, with men losing more jobs than women. Just like all recessions., 5 October 2009
4. Update on the “mancession”, 2 December 2009
5. A look at the engines of American job creation, 12 January 2010
6. An ominous trend: number of Americans working for the government vs. those making things, 5 March 2010 — Update to the Oct 2009 post.
7. The coming big increase in structural unemployment, 7 August 2010
8. Important: The coming Robotic Nation, 28 August 2010 — Part 1 of 2
9. Important: The coming of the robots, reshaping our society in ways difficult to foresee, 22 September 2010 — Part 2 of 2
10. Economists grapple with the first stage of the robot revolution, 23 September 2010
11. Arithmetic of decline: America’s lost decade for jobs, 27 November 2010
12. A status report about the US economy (we party so hard we cannot hear the alarms ringing), 27 March 2012
13. A tool of the 1% tells us about the wonderfulness of unemployment, 8 April 2012
14. About the April jobs report – no new jobs, a result bought at great cost, 4 May 2012