Elites Push the Skills Gap Myth


The Great American Jobs Machine,” as the New York Times once famously christened U.S. capitalism, has been seriously sputtering even in the post-“recovery” period for working people.

On one hand, corporate profits have more than recovered and have hit stratospheric records, nearly $2 trillion for 2012 (NYT, 11/29/12). On the other, the working class and poor have continued to face wrenching unemployment levels and wretched pay as corporate CEOs strive to ratchet down pay even further, causing wages to hit a record low 43.5 percent of GDP in 2012 (CNN, 12/4/12). The percentage of unemployed Americans—including those so discouraged that they have given up the search for work—still amounts to 16.2 percent (as measured by the “U-6” rate rather than the 8.8 percent figure more widely used), nearly 4 years into the economic “recovery.” While there are no longer 7.3 applicants for every available job, as at the trough of the recession in 2009, there are still 3 times as many jobless people as open positions. The shortfall in the supply of family-sustaining jobs remains at a crisis level.

Moreover, the quality of the jobs being supplied poses an obvious problem to American workers facing only low-wage opportunities: 58 percent of new jobs pay between $7.69 and $13.83 an hour (NY Times, 8/31/12). The hope that the vaunted U.S. job machine will generate a rising share of increased productivity has become increasingly remote, as the richest 1 percent vacuumed up 93 percent of increased income in 2010, as UC-Berkeley economist Emanuel Saez has documented. Ominously, trend-setting giants like General Electric and Caterpillar are celebrating their record profits by launching campaigns to drive down wages and benefits, likely setting off a wider battle to further squeeze down wages levels (see “War on Wages,” Z, December  2012).

Small wonder, then, that public-opinion surveys have shown a corresponding loss of faith in the ability of “free enterprise” to meet their needs. Thus, the polling firm Globescan found a sharp drop in the level of support for “free enterprise”: “When GlobeScan began tracking views in 2002, 4 in 5 Americans (80 percent) saw the free market as the best economic system for the future—the highest level of support among tracking countries. Support started to fall away in the following years and recovered slightly after the financial crisis in 2007/8, but has plummeted since 2009, falling 15 points in a year so that fewer than 3 in 5 (59 percent) now see free market capitalism as the best system for the future. Americans with incomes below $20,000 were particularly likely to have lost faith in the free market over the past year, with their support dropping from 76 percent to 44 percent between 2009 and 2010.” Follow-up Globescan studies suggest a continuing slide in the level of support for the “free market” among U.S. citizens (Financial Times, 10/11/13).

But the continuing distress confronting working families has been increasingly crowded out in media coverage by an elite-promoted skills gap narrative. The skills gap version of reality shifts the spotlight from the deficiencies of U.S. capitalism in generating jobs with family-sustaining wages and benefits, to the alleged skill deficiencies of the workers themselves.

Not only does the skills gap story displace media coverage of the daunting problems faced by working Americans, it also activates a self-blaming reflex among workers conditioned their entire lives to ascribe structural failures to their personal shortcomings.

In reality, the evidence behind the skills gap claims—shredded by a variety of economists and experts, most recently Professor Marc Levine of the University of Wisconsin-Milwaukee in a comprehensive study—have been largely ignored by corporate, political, and media elites as this mythical account of our economic problems fulfills a vital role in explaining away a central failing of American capitalism. Levine exploded the assumptions underlying the skills-gap myth in “The Skills Gap and Unemployment in Wisconsin: Separating Fact from Fiction.” In the report released in February, Levine focuses on Wisconsin, but his data-based conclusions apply on a national basis:

  • Job seekers far outstrip the number of job openings by a 3-1 margin.
  • If a skills gap truly existed, wages and overtime hours would rise in response to a genuine shortage of skilled workers. Neither has occurred.
  • A massive over-supply of skilled and educated labor exists, rather than the shortage proclaimed by skills gap alarmists.
  • The greatest projected growth in occupations will occur overwhelmingly in low-wage occupations requiring a high school diploma or less.
  • A broad consensus of prestigious economists, think tanks, and workforce experts reject the skills gap as baseless, diverting attention from the real shortage of good jobs.
  • Up until now, CEOs and prominent public officials of both parties—including President Obama, despite the populist overtones of his 2012 campaign—have been actively spreading this alternate skills gap narrative about continuing high unemployment. The real problem is not principally a shortage of jobs, but an under-supply of qualified job applicants, according to this view.
  • The skills gap narrative has served to significantly displace public discourse that had been focused on the insufficient quantity and quality of jobs, to the discomfort of corporate leaders. During the fall presidential campaign, for example, President Obama repeatedly made the case for increased funding for public education— certainly a socially-essential goal—by relying on this purported skills gap. “Throughout the campaign, President Obama lamented the so-called skills gap and referenced a study claiming that nearly 80 percent of manufacturers have jobs they can’t fill,” noted Adam Davidson (NYT, 11/20/12).

Despite the overwhelming evidence that job creation is imperative before retraining can become useful, “Retraining has emerged as a mantra for the Obama White House,” noted ProPublica’s Amy Goldstein in a report on the fate of workers first displaced by the General Motors’ plant closing in Janesville, Wisconsin and then ignored by the unconditional bailout of GM, which permitted the corporation to nearly double the numbers of vehicles from low-wage nations such as Mexico and China (Progressive online, 10/25/12).

Of course, Obama was not the first Democratic president to argue that fundamental economic problems could be traced back to the insufficient education and training of America’s workforce. In 1999, President Clinton blamed inequality on inadequate skills among U.S. workers, declaring in his State of the Union address, “Today’s income gap is largely a skills gap.”

Under Clinton, “re-training” to obtain new skills gained prominence as a “solution” to the massive job loss among U.S. manufacturing workers whose jobs were relocated to low-wage Mexico following Clinton’s unrelenting campaign to win passage of the North American Free Trade Agreement. The clear evidence—documented by Gordon Lafer of the University of Oregon in The Job Training Charade and NY Times journalist Louis Uchitelle in The Disposable American—exposes the failure of such re-training programs to help discarded workers to regain even a faint semblance of their lost economic security, but attracted little attention from major media.

This time around, commensurate with the much larger jobs crisis facing America at the present moment, the current campaign warning of the “skills gap” is much more massive and pervasive than the 1990s crusade in seeking to persuade the public that they are themselves responsible for the economic damage inflicted on “U.S. competiveness.” For CEOs, the talk about workers’ supposed inadequacies is especially timely, serving to deflect public discussion from their corporations’ highly unpopular “off-shoring” of jobs, a major explanation for America’s economic troubles accepted by 86 percent of the public (Wall Street Journal, 10/2/10).

As Professor Levine and others have noted, the skills gap thesis is being advanced on the basis of flimsy evidence consisting of anecdotes from corporate executives and surveys reflecting their difficulties in hiring skilled workers at the wages the CEOs seek to impose. Journalist Barbara Kiviat of the Atlantic underscored the self-interested nature of these surveys by employers: “When firms post job openings at a certain wage and no one comes forward, we thus have skills mismatch. In a different universe, we might call it a pay mismatch.”

From the coverage uncritically touting the skills gap, there is no doubt about which universe most media outlets occupy. Thus, a study by Deloitte & Touche and The Manufacturing Institute on the perils posed by the “skill gap” gained broad coverage in the media. It warned alarmingly: “American manufacturing companies cannot fill up to 600,000 skilled positions, even as unemployment numbers hover at historic levels.”

New York Times columnist Thomas Friedman has long specialized in defending the export of U.S. jobs to repressive low-wage nations while urging Americans to acquire more education and training for future jobs. The new flurry of concern about the skills gap prompted Friedman to interview the CEO of Caterpillar (9/13/12) about the dangers of inadequate education in what Friedman calls “The Age of Austerity”: Doug Oberhelman, the CEO of Caterpillar, which is based in Illinois, was quoted in Crain’s Chicago Business on September 13 as saying: “We cannot find qualified hourly production people and, for that matter, many technical, engineering service technicians, and even welders, and it is hurting our manufacturing base in the United States. The education system in the United States basically has failed them and we have to retrain every person we hire.”

The highly influential Fareed Zakaria, columnist, TV host, and “apostle of globalization” (see Extra!, July 2008), now reluctantly admits that the benefits of corporate globalization have been unequally allocated between the wealthy and the working class. Nonetheless, Zakaria blames the declining prospects of American workers due on their lack of education and training. Clyde Prestowitz, himself a former globalization enthusiast, remarked on Zacharias’ eagerness to attribute rising inequality to workers’ own failures to be better-equipped for available jobs: “Astoundingly, Zakaria says this is because the U.S. workforce is not well enough educated.” He quotes Pimco bond fund founder Bill Gross as saying that: “Our labor force is too expensive and poorly educated for today’s market place.”

This skills gap explanation for unemployment has found an especially warm welcome in Wisconsin where Republican Governor Scott Walker’s pledge of creating 250,000 jobs in his first term in office increasingly looms as a political liability. With Wisconsin ranking 42nd in job creation and Walker only able to face a “job deficit” of 243,000, according to the Center on Wisconsin Strategies, a progressive think tank, the rising profile of the skills gap narrative helps Walker in trying to explain away his failures.

Walker has named a key proponent of the skills gap thesis—Tim Sullivan, the former CEO of Bucyrus International, a mining and heavy-equipment manufacturer now owned by Caterpillar—as a special advisor on workforce development. Sullivan, the author of a report on Wisconsin’s needs for enhanced skills among its workers that was widely praised in state media, is fond of statements like: “We don’t have a jobs crisis in Milwaukee, we have an education crisis.”

The state—like the nation—is plagued by “structural unemployment,” a “skills mismatch” between the needs of employers and an under-qualified workforce, declares Sullivan and his allies. This combination, they say, yields both persistent, high unemployment and significant numbers of unfilled job openings.

The perspective of leaders like Walker and Sullivan are echoed in the state’s dominant newspaper, the Milwaukee Journal Sentinel, and reports compiled by elite think tanks. A report from the U.S. Chamber of Commerce National Chamber Foundation and Wisconsin Manufacturers & Commerce, which received prominent play in the Milwaukee Journal Sentinel, warned of the predicted shortage of skilled workers looming soon in Wisconsin’s future: “The report also warns that the state’s workforce is aging, an ominous sign for a labor market that faces an ongoing shortage of skilled workers.”

But, as noted, the entire superstructure of the “skills gap” has been built almost entirely on the anecdotes of employers, and these self-interested accounts by bosses are torpedoed by the vast array of Levine’s evidence. The skills gap trope is founded on a set of assumptions which are easily punctured:

The skills of the workforce somehow dropped sharply between 2007 and 2009. Numerous studies by Nobel laureates, highly regarded economics institutes, and two former chairs of presidential councils of economic advisers all conclude that a sudden dropoff in workers’ skills over two years is utterly implausible as an explanation for massive unemployment. In the words of economist Heidi Shierholz of the Economic Policy Institute, “It is not the right workers we are lacking, it is work.”

There is a vast pool of high-skilled jobs waiting to be filled. As Levine commented in the report, “Even if every unemployed person were perfectly matched to existing jobs, over 2/3 of all jobless would still be out of work.”

Employers are trying in vain to attract skilled workers. If a “skills shortage” truly existed, employers would raise wages to attract workers with the special skills they seek. Instead, Levine points out, wages have fallen in Wisconsin since 2000, including in occupations like welding, where there is a supposed shortage of workers.

Understaffed employers must make do with the skilled workers they have. A shortage of sought-after workers would lead employers to increase these workers’ hours. However, the report says, “average weekly hours worked in manufacturing have remained unchanged since 2000, while the average weekly overtime hours have actually declined by 12.8 percent since 2000.”

New high-skill jobs have been created. As mentioned above, Wisconsin retains a jobs deficit of 243,000, based on job losses since the Great Recession plus new positions needed for entrants into the labor market, according to a study by the Center on Wisconsin Strategy. The “jobs of the future,” for which workers have been urged to seek more education and training, have failed to materialize.

Workers with advanced degrees are more highly sought after. A pervasive skills gap would raise the demand for workers with higher skills, measured in indicators like college degrees. Instead, the percentage of college-educated workers in jobs where they are obviously overqualified—as bartenders and retail clerks, for example—has risen sharply. “College graduates comprise 25 percent of retail salespersons and 21.6 percent of bartenders in the Milwaukee metro area—both jobs classified as requiring less than a high school diploma,” the report stated. Fully 60 percent of retail clerks have at least some college education.

The American job market will increasingly demand higher-skilled workers. Forecasts of future workforce needs show not an increased demand for high education and skills, but for occupations that require a high school degree or less, according to the report: “Of the 25 jobs projected by the Wisconsin Department  of Workforce Development to provide the largest number of job openings in the state between 2010-2020, 22 of them require a high school degree or less and almost all require short-term, on-the-job training.”

Skill-Based Technical Changes

Despite the evident flaws documented by Levine, some variant of the skills gap thesis has taken a wide hold in America. The notion that the vast majority of working Americans are inadequately educated and incapable of doing skilled work is widely held. Adam Davidson explains, “The rise of networked laptops and smartphones and their countless iterations and spawn have helped highly educated professionals create more and more value just as they have created barriers to entry and rendered irrelevant millions of less-educated workers, in places like factory production lines and typing pools. This explanation, known as skill-biased technical change, is so common that economists just call it SBTC. They use it to explain why everyone from the extremely rich to the just-kind-of rich are doing so much better than everyone else.”

 For the media, which plays a central role in propagating the notion, the SBTC story is a simple and relatively non-controversial way of explaining the vast changes which have uprooted the lives of tens of millions of working people and their communities. Instead of discussing the profit-maximizing forces driving U.S. corporations to abandon long-time workers and devastate the communities which nurtured them to prosperity, reporters and their editors have a clear and coherent way of accounting for wrenching changes in workers’ lives and stunning new levels of inequality.

The failings of the media are especially obvious when skills gap proponents adopt policies which conflict with their purported goal of creating a more highly-skilled, better-educated workforce, by raising higher financial barriers to gaining access to advanced schooling. For example, even as Governor Walker has cited the need for a more highly-skilled workforce in Wisconsin, he cut deeply into the budgets of two-year technical schools.

“Last year [2011], Gov. Walker persuaded the Wisconsin legislature to cut the state’s share of technical colleges’ funding by 30 percent, and to forbid local governments, which contribute a larger share, to increase their tax levies for the colleges,” reported ProPublica’s Goldstein. The hypocrisy evident in the conflict between Walker’s call for a more highly-skilled workforce and his cutbacks in technical education have inspired virtually no comment from the state’s major media.

Walker also cut back state funding for the distinguished University of Wisconsin system, long a source of pride in the Badger State. Walker’s slashing of $250 million over two years for UW—along with $66 million in other cutbacks—has resulted in a new set of tuition increases for UW students. The cutback in state assistance—reinforcing the trend toward greater dependence on corporate grants and a consequent “neo-liberal” reshaping of university priorities—has been particularly hard on poor and working class students. A recent study showed, “The gap in retention and graduation rates between students who qualify for federal Pell grant financial aid and those who don’t has been widening, as the cost of a UW System education continues to rise faster than the rate of inflation. Meanwhile, total financial aid to students and state funding to universities lag,” the Journal Sentinel reported.

The combination of plummeting state support for the UW system and rising tuition has severely hampered working families’ ability to support their children’s higher education. “A family could have sent three children to UW- Madison in 1980 for what they now pay to send just one, adjusted for inflation” (MJS, 2/7/13).

Justifying Shifting Jobs out of Wisconsin

The possibility that the complaints about the skills gap conceal another agenda—a desire for cheap but skilled non-union workforce—seems to have escaped journalists who have shown a stunning degree of credulity—with exceptions like Davidson. The discrepancy between the rhetoric of skills gap adherents and their policies shows up in corporate decisions over the location of their facilities. The purveyors of the skills gap myth don’t just sidestep corporate responsibility for the shortage of well-paying jobs, they use the alleged deficiency in the workforce to justify shifting jobs out of Wisconsin. But their claims lack credibility: Despite their emphatic complaints over a shortage of well-educated and skilled workers in Wisconsin, some prominent CEOs opted for relocating jobs to sites with far lower levels of educational attainment.

Two cases stand out glaringly: (1) Badger Meter’s move to Mexico: “Badger Meter Inc. is a committed Wisconsin business, but it’s expanding elsewhere,” reported the Milwaukee Business Journal (2/27/12).“Why build new facilities in Mexico rather than near its Brown Deer headquarters? ‘It is easier to hire people,’ said Richard Meeusen, chairman, president, and chief executive officer.” (2) Bucyrus International’s new plant in Texas: In 2008, while still CEO of Bucyrus International (now part of Caterpillar), Tim Sullivan—Wisconsin’s leading alarmist on the skills gap—decried a shortage of “qualified, factory-grade” welders in Milwaukee. Sullivan proceeded to move about 80 welding jobs to Kilgore, Texas.

However, Sullivan’s rationale doesn’t hold up under scrutiny. To quote the report, “Around the time Bucyrus was opening its Kilgore plant, there were 635 unemployed welders in metro Milwaukee, and 1,935 unemployed welders in Wisconsin.” The real attraction of Kilgore was likely not skills, but savings. Workers in Kilgore make lower salaries—31 percent of welders make less than $25,000, compared to only 22 percent in Milwaukee—and, significantly, are not unionized like those at Bucyrus in Milwaukee.

Badger Meter and Bucyrus represent a broader trend aimed at re-shaping U.S. manufacturing by transforming a long-time bastion of unionism, high skills, and high wages into a low-wage, low-skill industry. General Electric, which evokes images of highly-skilled technicians in its massive TV advertising campaigns, nonetheless, in 2010,  chose Batesville, Mississippi for a low-wage, non-union plant making parts for aerospace engines in 2010. Contrary to its carefully-cultivated image of relying upon highly-trained technicians with intricate skills, GE selected a site in Panola County where only 15 percent of the residents are college graduates, compared with 35.2 percent in metro Milwaukee, where GE had long housed its medical equipment headquarters before sending it to China. Helping to hold down wages is Batesville’s pervasive poverty with 28.7 percent of the population below the poverty line—nearly double the national average of 14.3 percent.

As James Tankersley of the Washington Post (1/16/13) has noted, “U.S. manufacturers have added a half-million new workers since the end of 2009, making the sector one of the few bright spots in an otherwise weak recovery…. On balance, all of the job gains in manufacturing have been non-union. “Manufacturing is the industry that many Americans most associate with unions, but the industry has moved away from unionization for decades…” By the end of last year, barely one in 10 U.S. manufacturing workers belonged to a union or was represented by one. Thirty years ago, that number was one in three.”

A concerted drive to crush unionism in manufacturing—largely ignored by major media, as shown in work by Christopher Martin and others—has thus paid off handsomely for CEOs. As Aaron Bernstein observed in Business Week (5/22/94), “Few American managers have ever accepted the right of unions to exist, even though that’s guaranteed by the 1935 Wagner Act. Over the past dozen years, in fact, U.S. industry has conducted one of the most successful antiunion wars ever, illegally firing thousands of workers for exercising their rights to organize.”

The intensity of the “antiunion war” has only accelerated swiftly since Bernstein’s 1994 piece, driving down union representation to new lows in manufacturing and the private sector generally. In 2005 alone, for example, no less than 31,358 workers were illegally fired because of their pro-union sympathies, according to labor journalist Philip Dine, author of State of the Unions. When workers attempted to organize unions in manufacturing, they faced threats of relocation to Mexico or other sites in 70 percent of the cases, according to Professor Kate Bronfenbrenner of Cornell.

In the past 14 months, Indiana and Michigan have passed “right-to-work” laws designed to inhibit union representation, with Republican majorities ramming the legislation through without an opportunity for debate by the legislatures or the general public. Under right-to-work laws, unions no longer serve as the independent, democratic voice of all workers as intended under the Wagner Act.

Instead, with unions prohibited from collecting dues or fees from all workers whom they are nonetheless legally bound to represent and negotiate improved pay and benefits, employers are able to erode the independence of the union by offering favors or threats to individual workers who agree to refrain from supporting the union. Unions thus are weakened both organizationally and financially, losing the dues they need to represent the workers.

The war against labor has immense consequences for workers—and payoffs for employers. The U.S “is becoming one of the lowest-cost producers of the developed world,” Harold Sirkin, a senior partner at the Boston Consulting Group pronounced in a news release.

A combination of factors—fast-falling U.S. wages in manufacturing, rising fuel costs making international shipping much more expensive, Chinese wages climbing from their previous abysmal levels due to widespread worker unrest even in the face of government repression, and increasingly cheap domestic fuel—are making the U.S. much more competitive relative to China.

Sirkin calculated that the labor cost savings of making goods in China versus the United States would be equalized by 2015 as a result of falling wages in the U.S., he told the Toronto Star (9/21/12).

While President Obama and others like Atlantic magazine writers James Fallows and Charles Fishman have confidently announced that an “insourcing” trend is already bringing back large numbers of jobs to the U.S., the actual evidence shows that the “trend” is at best a mere trickle. Moreover, the trickle is infinitely smaller than the continuing gusher of jobs leaving the U.S. for sites like China and Mexico (see “Insourcing,” Z, March 2013).

While the myth of the insourcing trend seems intended to soothe a public infuriated by the exodus of good-paying jobs to China and Mexico, the skills gap meme appears to be aimed at providing corporate America ammunition for a counter-attack against popular sentiment. As Levine noted, “There’s a strong ideological component behind the skills gap trope: it diverts attention (and policies) from the deep inequalities and market fundamentalism that created the unemployment crisis, and focuses on a fake skills gap that had nothing to do with the surge in unemployment since 2007.”

With corporate executives and many public officials insisting that the problem of ongoing unemployment is rooted in jobless workers’ lack of marketable skills, Levine points out that, “there is no need to focus on such inconvenient questions as (1) why corporate profits are at record levels while unemployment remains high and wages stagnant; (2) why U.S. manufacturers invested in less domestic capacity than competitors over the last decade; (3) how offshoring and other management strategies have devastated the employment base of cities like Milwaukee, and how Wisconsin employment is especially at risk from trade with China and Mexico.”

Z


Roger Bybee is a Milwaukee-based freelance writer and University of Illinois visitng professor. In addition to Z, his articles have appeared in Dollars and Sense and the Progressive.