January 24, 2013 Leave a comment
One of the most common explanations for the persistent high unemployment in America since the 2007 recession is the skills gap. An Accenture report estimates that, “about a third of employers worldwide are experiencing critical challenges filling positions due to a lack of available talent, and almost three-fourths of employers are affected by talent shortages to some degree”. Technology and globalization processes have increased the demand for talented and high-skilled workers, and many say that the nation’s education institutions have not risen to meet the challenge effectively.
The Brookings Institute issued a report that includes eleven “new learning skills in the 21st century” that are crucial for our students. These include: simulation, multitasking, and distributed cognition (effectively utilizing tools that enhance mental capacity). Meanwhile, the Center for 21st Century Skills advocates six different skills: information literacy, creativity & innovation, collaboration, problem solving, communication, and responsible citizenship. Proponents of the skills gap view see unemployment as structural, a product of supply falling behind demand in the skilled labor market. A recent Wilson Center publication by Paul Vallas argues that the skills gap “poses a major threat to the United States’ long-term economic competitiveness”. The American education system is falling further behind the performance of other countries, and addressing the “massive achievement gap present within the U.S. between minority and socio-economically disadvantaged students and their more affluent peers” should be a national priority.
However, many disagree with this assessment of a skills gap as the main cause of high US unemployment, and propose a demand-side rebuttal that focuses on the drop in real household wealth associated with the recent recession. This has decreased household demand nationwide and thus crippled job growth. Research done by the Economic Policy Institute argues that persistent unemployment at all levels of education, and in most major sectors of the economy indicates that the current high rates of unemployment are caused by more than just a skills gap. They also attribute the rise in educated labor as a percentage of the total labor force to the rapid growth in sectors that demand high-skilled labor. Other research at the Economic Policy Institute points to record corporate profits in the past year, saying that businesses learned during the recession how to make money with lower labor costs, and now don’t need to hire as many people to make higher rates of profit. Some of this can be explained by the fact that traditionally labor intensive industries have been the hardest hit by the recession, while high-tech companies with lower labor demands have seen the most growth.
To create policy that will improve the state of the economy, it is important to understand the causal linkages for the unemployment problem in America. . For example, structural unemployment cannot be solved with demand-side economics such as stimulus packages. On the other side, education initiatives and on the job training is the answer to a skills gap.
Posted by: Ben Copper
Sources: Accenture, Brookings Institute, Economic Policy Institute, CNNMoney, Commerce Department
Photo Credit: flickr user, Dita Margarita