Do we have a shortage of workers, or just cheap employers? Part two 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, important both by itself and as an example of a larger phenomenon:  do we have structural unemployment?  See part one here.

“Anyone who is willing to work and is serious about it will certainly find a job. Only you must not go to the man who tells you this, for he has no job to offer and doesn’t know anyone who knows of a vacancy. This is exactly the reason why he gives you such generous advice, out of brotherly love, and to demonstrate how little he knows the world.”
― From The Treasure of the Sierra Madre by B. Traven (1927)

Contents

Part one (yesterday):

  1. Introduction, about propaganda
  2. Some quotes
  3. Simple rebuttals to claims about worker shortages
  4. For more information about employment patterns

Contents of part two:

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

(5)  More Quotes

“…when you hear an employer saying he needs immigrants to fill a ‘labor shortage,’ remember what you are hearing: a cry for a labor subsidy to allow the employer to avoid the normal functioning of the labor market.”
— Dr. Michael S. Teitelbaum of the Alfred P. Sloan Foundation, quoted in “How and Why government, universities, and Industry Create Domestic labor Shortages of Scientists and high-Tech Workers”, Eric Weinstein, National Bureau of Economic Research, 14 December 2001

“…the problem may not be that there are too few STEM qualified college graduates, but rather that STEM firms are unable to attract them. Highly qualified students may be choosing a non-STEM job because it pays better, offers a more stable professional career, and [are] perceived as less exposed to competition from low-wage economies.”
— “Steady as She goes?:Three generations of Students through the Science and engineering pipeline”, B. Lindsay Lowell et al, presented at Annual Meetings of the Association for Public Policy Analysis and Management, 7 November 2009

“If a genuine labor shortage existed, wages in these fields would have risen dramatically in ways they have not. In addition, unemployment rates in this sector have increased dramatically over the past year, with engineers reaching their highest unemployment rate since 1972. Graduation rates in the STEM fields also indicate that the United States is producing enough graduates to meet the employment needs of the industry.”
— “Review of vulnerabilities and potential Abuses of the L-1 visa program”, Office of the Inspector General, January 2006

(6)  Broader Evidence that these claims are bunk

More broadly, look at actual evidence — not the anecdotes usually cited (ie, employers complaining, as they always do, about workers’ wages):

(a) Jobs Americans Can’t Do? The Myth of a Skilled Labor Shortage” by the Federation for American Immigration Reform, November 2011 — This report contains the following findings:

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  • There is no evidence that there is, or will exist in the foreseeable future, a shortage of qualified native-born scientists and engineers in the US.
  • The glut of science and engineering (S&E) degree holders in the US has caused many S&E graduates to seek work in other fields. Less than one-third of S&E degree holders are working in a field closely related to their degree, while 65% are either employed in or training for a career in another field within 2 years of graduating.
  • Wages in science, technology, engineering and mathematics (STEM) occupations have not kept pace with those of other college graduates, and in some occupations have actually decreased.
  • The Government Accountability Office (GAO) found that some U.S. employers acknowledged that “H-1B workers were often prepared to work for less money than U.S. workers” and this factored into the employers’ hiring decision. … Nearly 675,000 H-1B and L-1 visa holders were approved for work in the US in 2009. L-1 approved visas rose by 53% from 2000 to 2008.

(b) Skills Mismatch’ Causing High Unemployment? Not Quite“, Lisa Shapiro, Huffington Post, 21 March 2012 — Excerpt:

“I do not find any credible evidence of anything approaching a shortage in manufacturing workers anywhere in the country,” said Andrew Sum, a professor of economics at Northeastern University who specializes in education and the labor market.

The Bureau of Labor Statistics also calculates job openings in manufacturing — and its numbers are less than half those cited by the Post, which attributed its figures to the Manufacturing Institute, an industry trade group. According to the government data, last year the average number of vacancies was less than 230,000. There are seven to eight times that many unemployed manufacturing workers, Sum said. The Post reported that the shortage of skilled workers has also pushed up wages. But here, too, Sum said, the evidence does not match up.

Since the beginning of the century, manufacturing wages for production workers have barely increased, Sum said. And in the last two years, as employers have said they’ve been having difficulty filling spots, wages have declined slightly. “If there was a big shortage of workers, than we should find wages rising. But this just isn’t the case,” Sum said. “That doesn’t mean that specific companies won’t ever have trouble finding a machinist, but when you add it all up, it doesn’t amount to very much.”

… The point of the argument is to then say: ‘We don’t need to ramp up demand or infrastructure investment. We need to fix people,'” said Paul Osterman, a professor of human resources and management at the M.I.T. Sloan School of Management. This rhetoric, Osterman added, fits well with another priority for business owners: “Firms are always interested in shifting the costs of training to the public sector,” he said.

Over the past 30 years, experts say, most in-house training programs at manufacturers have disappeared. The programs have never been entirely replaced, even as private and public training programs have been created, with a wide range of success in employment placement. Recently, more companies have looked to states to train their workforces.

North Carolina, for example, spent $1 million to develop a custom curriculum at a community college for workers at a Caterpillar plant. The primary beneficiary, The New York Times reported, was Caterpillar itself.

(c) Worker Skills and Job Quality“, David Neumark and Rob Valletta, Federal Reserve of San Francisco, 30 April 2012 — Abstract:

Some observers have argued that the nation’s high unemployment rate during the current recovery stems partly from widespread mismatches between the skills of jobseekers and the needs of employers. A recent San Francisco Federal Reserve Bank conference on workforce skills considered evidence that employers have had difficulties finding workers with appropriate skills in recent years. However, these mismatches do not appear to be much more severe than in the past. Overall, the conference proceedings suggested the U.S. economy can still produce good jobs for workers at a variety of skill levels.

Click on to enlarge

(d)  “The Structural Signature“, Paul Krugman, New York Times, 8 May 2012 — Excerpt:

Now consider the argument that our problems are mainly structural. The way this story is usually told is that we had too many workers in the wrong industries, that we have to expect a depressed level of overall employment as workers are moved out of these “bloated” sectors.

OK, so what should be the signature of that story? Surely it is that job losses should be concentrated in the bloated sectors, that employment should if anything be rising elsewhere — and wages should be rising in the unbloated sectors more rapidly than in the bloated ones.

So, let’s take a quick look at BLS data on employment and wages. Here’s what we get on a first pass:

(7)  What about employers paying fair wages, but unable to find skilled workers?

A common reply to evidence about “scarce jobs but flat wage” is that the wages offered are “fair”, so they should attract workers.

Do these people believe in capitalism and free markets?  Perhaps they would prefer that wages — or all prices — be set by a board of wise and well-informed technocrats, who plan an efficient and prosperous economy?

It’s economics 101: supply and demand are met by changes in price. If workers are scarce, then wages rise — which will increase supply. If an employer refuses to raise wages (wages are a small fraction of costs in most manufacturing industries), then the employer is just whining about the lack of cheap workers.

(8)  For more information

Other articles about structural vs. cyclical unemployment

  1. The Effect of Modern Technological Conditions upon the Employment of Labor“, The American Economic Review
  2. Is America facing an increase in structural unemployment?“, brief answers from a range of economists, 23 July 2010
  3. Identifying Cyclical vs. Structural Unemployment“, Brad DeLong (Prof Economics, Berkeley), 24 August 2010
  4. Only Advanced-Degree Holders See Wage Gains“, David Wessel, Wall Street Journal, 19 September 2011
  5. Steve Rattner, Card Carrying Member of Top 1%, Tells Us We Should Lie Back and Enjoy Much Lower Wages Resulting From Globalization“, Yves Smith, Naked Capitalism, 10 October 2011
  6. Structural Flashbacks“, Paul Krugman, New York Times, 8 May 2012
  7. More on the structural unemployment thing“, Paul Krugman, New York TImes, 9 May 2012
  8. An excerpt from Paul Krugman’s new book End This Depression Now!: Chapter One – How Bad Things Are

About the coming major destroyer of jobs:  the robot revolution —

  1. The coming big increase in structural unemployment, 7 August 2010
  2. The coming Robotic Nation, 28 August 2010
  3. The coming of the robots, reshaping our society in ways difficult to foresee, 22 September 2010
  4. Economists grapple with the first stage of the robot revolution, 23 September 2012
  5. The Robot Revolution arrives, and the world changes, 20 April 2012

14 thoughts on “Do we have a shortage of workers, or just cheap employers? Part two of two.

    1. I’m not even remotely in the same league as Krugman. These posts just collect and assemble the works of others. Just journeyman journalism.

    2. I’ve seen Lawrence Lessig speak about corruption of government and the need to take responsibility for what we have created and strike at the root of the problem. It was very similar to Fabius Maximus but I think the about the authors page is pretty clear on who Fabius is. It’s always more interesting if it’s a mystery though.

    3. (1) About Lawrence Lessig (Professor, Harvard Law): articles at Rolling Stone, 5 October 2011

      (2) “It’s always more interesting if it’s a mystery though.”

      The mystery certainly makes me happier when reading the hate mail. We’ve already had one author withdraw from the hostile and threatening responses to his articles.

  1. Great article.

    I amazes me how people will get a dollar value in their head for a “competitive rate” for a service. The “competitive rates” are often from decades ago, while here in California rental housing rates increase 100% every ten years.

    To make matters even worse, at the Fed’s targeted core inflation rate of 2%, the dollar loses 25% of its value in eleven years. (Core inflation does not include food and energy.)

  2. Although not addressed specifically to this post, a recent posting on Alter Ner by Noam Chomsky does look at this issue and others in assessing the possibility of revolution in the USA. It could be good reading and should be seriously considered. Here’s the link: “A Rebellious World or a New Dark Age?“, Noam Chomsk, TomDispatch, 8 May 2012.

  3. FM: An aside. Have you received any notifications regarding access to your site? Recently, when I wanted either to read a post by following the e-mailed link or to post a comment, when I clicked, I would get the error that I was not connected to the internet. However, I was, and I could access almost anything else. Though I am not a conspiracy theorist, I can’t help but wonder about this interference, maybe by Microsoft Internet Explorer. Why only your site?

  4. An aggravating factor is the inflation in requirements for certification and titles in addition to whatever experience and formal education employees must have. For instance, it is no longer enough to be a licensed engineer with 20 years project management experience — one must also be a “certified professional in project management” from some specialized institute or have a master in project management.

    Of course, obtaining those titles and certificates costs money, maintaining them may cost money (certificates must typically be renewed every few years), and corporations often assume that individuals will bear the expenses themselves — after all, it is an “investment” in their personal skills. It does not mean that these documents are worthless: for instance all software engineers I know who got one of the Microsoft certifications assured me that they were solid (albeit highly specialized), and could not be passed without serious work.

    Certification requirements are affecting a whole range of professions; it is increasingly used by HR departments to screen applicants (easier to tick the box “has certificate XYZ” than evaluating a CV or performing an interview), to calibrate salaries (certificates become the requirement to have the normal salary; no certificates mean lower than normal salary, more certificates bring the assessment “overqualified”).

    I suspect that the inflation of such requirements — and the corresponding inability of potential employees to match the ever changing variety of titles sought for by HR department — is another justification for that “not enough qualified applicants” narrative.

    1. The certification craze may have more to do with the “for profit” education industry than an entrance barrier created by the professionals (Guild). The States use licensing as a tax, because “services” generally are exempt from sales taxes.

      One aspect of the Globalists is that they want these certifications and licensing requirements normalized across the 50 States because the disparate requirements make it much more difficult to practice labor arbitrage with temporary workers. (Nursing and CPA services have been under attack for years.) Temporary foreign workers are arguably more mobile than established citizens

      When the temporary worker can’t service a contract, due to local requirements, they return home to be benched and preserve capital in the lower cost economy. The airfare and idle asset is problematic to the outsourcing firm because without some kind of compensation the temporary worker will jump ship.

      In my humble opinion, Guilds and Tariffs (especially international business communications) are the solution to the labor arbitrage problem and would create ancillary employment (overhead and management employment) both here and abroad by dividing market share and breaking monopolies.

    2. Certification is a legal tool used by government (colluded with monopoly) to keep competitors away.

      aguest, I’m working in software industry. I need 20 min conversation with interviewee to figure out his qualification. And, you are right – certification received 12 month ago means nothing.

  5. The claim that “if workers are scarce, wages should rise” used to apply to workers in America and other first-world economy, but no longer does. Today, with automation + the internet, if workers in America are scarce, businesses use this as an opportunity to either automate the job out of existence or offshore it to a vastly cheaper third-world worker.

    As economist Tim Duy remarked:

    “US firms have no intention of adding net new capacity, planning instead to source any excess demand from overseas. This implies that the manufacturing recovery will not be a net positive to US growth. It also implies that the trade deficit will widen further and that the challenge of global imbalances will remain unresolved. The rise of Dollar assets abroad will with either force a fall in the US dollar which would then create more incentive for export and import-competing industries or, more likely, encourage the accumulation of reserve assets among foreign central banks.

    “In short, I continue to worry that policymakers are ignoring the possibility that increasing reliance on external production to satisfy US demand has contributed significantly to the jobless recoveries we have seen this decade. Something is very different this decade. I think it is a mistake to write off this decade’s shift in manufacturing as simply a repeat of the agricultural experience. At least agricultural output continued to rise as its relative employment importance fell. The capacity numbers are telling us the same can not be said of manufacturing any longer. And in the past, the relative decline in manfacturing jobs was matched by a more than corresponding increase in service sector jobs. No longer the case; job growth is flat for a decade. If we intend to ignore this issue, the supposed reality of tradable services had better get a lot more traction very quickly. Otherwise, we are further solidifying a permanent underclass of citizens who require the constant support of fiscal authorities.”

    Source: “Anomalous Capacity Reduction,” Tim Duy’s Fed Watch, July 2010.

    The return of certification and credentialization, which has now spread like a cancer to fields as inane as masseur or hairdresser, is all about efforts by increasingly embattled medium-wage workers desperately trying to preserve their jobs and jack up their wages. As former engineers and paralegals and former programmers find themselves reduced to working as hairdressers and masseurs, the process of certification and credentialization will exponentiate in a frantic effort to keep their wages from eroding any further.

    1. While true, that’s missing the point. As the articles by Krugman cited show, the employment crash affected almost the entire economy. We’re mad about manufacturing, as these comments show. But that’s only 11 million of the 131 million workers. Explaining this by looking only at manufacturing is fun but myopic.

      To be more specific, many sectors have lost jobs due to simple cutbacks — not automation or offshoring. Three examples are government, construction, and finance. The service sector has lost 2 million jobs since end 2007. See this BLS table.

    2. I disagree. Credentialization and certification are not at all being pushed by wage earners. Rather, they are

      1) Implemented by professional organizations to make money out of associated training courses and exams, and to act as gateways to the corresponding domains of expertise. The rank and file in those professions is not at all thrilled to have to spend time and money to acquire and maintain those credits.

      2) Enforced by corporations to filter out applications, off-load the expense of training and acquiring specialized expertise onto employees, and lock down salaries (one can have all the necessary experience, and a firm will be glad to hire you, but the absence of a required formal credential/certificate will result in a lower salary).

      I have seen what you rightly call a cancer affecting engineers, nurses, pharmacists and software programmers. No professional likes it. Nobody seems to be able to “jack up wages” through it. They have certificates, but never seem to have the right one for a job. Those who do not because they entered the profession long ago see their experience and skills devalued through the lack of those newer titles. Professional organizations keep inventing new ones. And then HR departments complain that they do not get those hoped-for skilled workers…

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