Unemployment, Schools, Wages, and the Mythical Skills Gap

Conventional wisdom holds that the American workforce lacks the specialized skills that employers are looking for, and that this “skills gap” is the main, if not the only, explanation for our persistently high unemployment rate—especially our long-term unemployment rate. Paul Krugman helpfully exploded this idea in his New York Times column on Monday, making these key points:

  • The ratio of unfilled jobs to unemployed workers today is quite low by historical standards. There are always unfilled jobs, because workers leave and employers have not yet had time or opportunity to hire replacements. This is a frictional, not structural, phenomenon. There are very few, if any, jobs today that remain unfilled because employers cannot find workers with the needed skills.
  • Today’s long term unemployed have skills comparable to those of recently laid-off workers “who quickly find new jobs.” The long-term unemployed face a shortage of demand for their labor, not skill requirements beyond their education and training.
  • If there really were a skills shortage, we would expect to see wages increasing in job categories where skills are allegedly in short supply. But such wages are not increasing.

Nor have wages increased for quite a while. It is especially telling that wages of college graduates, not just those of non-college educated workers, have been flat for a decade, and that young college graduates have been faring poorly, even prior to the 2008 recession. According to a recent report of the New York Federal Reserve Board, the percentage of recent college graduates “who are unemployed or ‘underemployed’—working in a job that typically does not require a bachelor’s degree—has risen, particularly since the 2001 recession. Moreover, the quality of the jobs held by the underemployed has declined, with today’s recent graduates increasingly accepting low-wage jobs or working part-time.” In other words, “skills gaps” are responsible for neither our unemployment problems nor our wage problems.

Of course, if skills shortages or mismatches aren’t the answer, we need another explanation for why wages have been flat for the vast majority of workers, at all education levels, over the last ten years. Researchers and economists at EPI have published many reports and articles over the years debunking the skills shortage myth and offering alternative explanations. These resources are provided at the end of this post.

Krugman properly bemoans one policy consequence of the skills shortage myth: a failure to correct “disastrously wrongheaded fiscal policy and inadequate action by the Federal Reserve” to create full employment. And, he adds, “the skills myth shifts attention away from the spectacle of soaring profits and bonuses even as employment and wages stagnate.”

But there is an additional policy consequence of the skills myth that Krugman failed to mention: a belief that we need to radically reform—indeed dismantle—our public education system because schools are failing produce the skills needed for a “21st century economy.” For President Obama, Secretary of Education Arne Duncan, Washington think tanks, and even Krugman’s op-ed colleagues at the New York Times, all that’s needed to explain why we should narrow the curriculum to test prep in math and reading, replace experienced teachers with untrained college graduates, and expand charter schools or even provide private school vouchers, is the belief that our schools are failing to provide the skills that employers demand.

If the skills gap myth has been so thoroughly debunked, then what is left of the conventional justification for a radical reform of our public schools, along the lines that first the Bush and then the Obama administration have promoted?

Of course we should improve our schools. But treatment based on a faulty diagnosis is bound to be a failure. Education policymakers should take a deep breath, disabuse themselves of the skills shortage myth, take a second look to determine what truly needs to be improved, and design programs aligned to those improvements. Attacking the narrowed curriculum that has resulted from a skills-myth obsession with basic math and reading skills would be a good place to start. Public schools won’t be able to devote appropriate attention to the sciences, social studies, cooperative learning, creativity, the arts and music, citizenship education, emotional health, and physical fitness—in short, a well-rounded education— until teachers and schools are no longer terrified of punishment in the event they spend too little time drilling students to develop test-taking proficiency in math and reading.


For more on the “skills gap” myth, see the following pieces: