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Wednesday, Feb. 27, 2013

Is the Skills Gap a Myth?

New research shows Milwaukee needs jobs, not different workers

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Milwaukee’s alleged skills gap problem has been discussed so often that it’s been accepted as an article of faith.

But a new UW-Milwaukee analysis of the local labor market casts doubt on the argument that the city lacks skilled workers equipped for the challenges of the 21st century economy. What the city lacks, instead, are enough high-paying jobs to employ its educated workforce.

That jobs-gap argument contradicts conventional wisdom promoted by local business leaders, including former Bucyrus International CEO Tim Sullivan, who say the city’s workers don’t have the right skills for the jobs that are available and employers have no choice but to launch or expand their businesses in other states—or countries—where workers have the right skills to match their needs.

The skills-gap argument is so powerful that job-training programs have been altered and Gov. Scott Walker has included almost $30 million in his proposed budget for programs to close the gap. In addition, Walker wants a separate piece of legislation to include another $15 million for worker training grants as well as to create a Labor Market Information System to track job vacancies and link unemployed workers to job openings.

On the surface, Walker’s support for enhanced job training programs seems like a positive step to close the skills gap and meet employers’ needs.

But does Wisconsin—and its major city, Milwaukee—actually have a skills gap?

 

Levine: A Jobs Gap, Not a Skills Gap

Marc Levine of the UW-Milwaukee Center for Economic Development says the skills gap is a myth—a convenient myth for employers who want the government to pay for training programs but don’t want to pay the higher wages that would attract workers to their hard-to-fill jobs.

In his just-released report, The Skills Gap and Unemployment in Wisconsin: Separating Fact from Fiction, Levine found that there’s no evidence of a skilled labor shortage locally or nationally.

If there were a skilled labor shortage, Levine wrote, wages would rise and employers would add hours to the workweek. Instead, wages and hours worked have been declining since 2000, including those of highly skilled workers.

In fact, Levine found that Milwaukee doesn’t suffer from a skills gap but from a jobs gap, since workers are likely to be overqualified and underpaid for the jobs that are available now and those that will be created in the future.

An estimated 70% of projected job openings through 2020 are for positions requiring a high school diploma or less, Levine found. Those in-demand jobs include retail salesperson, home health aide, office clerk, food prep and servers, cashiers, janitors and laborers. In comparison, the highly skilled jobs mentioned by skills-gap promoters like Sullivan comprise a far smaller segment of the labor market. And these highly skilled and in-demand workers aren’t seeing their wages increase, Levine found, as they should if there were a local labor shortage.

“When we look at the data, we find the educational attainment of the labor force is increasing and the number of skilled workers is increasing,” Levine said in an interview with the Shepherd last week. “The problem is we don’t have enough jobs.”

Levine said the high unemployment rate couldn’t be attributed to skill-lacking workers, since these workers were employed just before the Great Recession and had enough skills to satisfy employers as recently as one or two years ago.

Instead, Levine argued that employers are hiring in low-wage areas, such as Texas or Mexico, where workers are less skilled simply to save money.

He noted that Bucyrus’ Sullivan generated headlines in 2008 when he complained of a shortage of skilled welders in Milwaukee. Bucyrus then set up a new factory in Kilgore, Texas, where welders are less skilled and earn less than they do in Milwaukee.

“If you just look at the data of the two places and ask which one is likelier to have a skills shortage, it’s going to be Texas,” Levine said.

Bucyrus also received state subsidies for setting up its plant and training workers in Kilgore.

John Dipko, communications director for the state Department of Workforce Development (DWD), wrote in an email to the Shepherd that other reports, including one written by Tim Sullivan, document a skills gap problem in some occupations, such as CNC machinists. Dipko said the DWD’s focus “is not on debating whether a skills gap exists, but what we can do to equip workers with the skills they need to find jobs in the modern workforce.”

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