Middle-skill jobs and market wages

In a short and readable paper published through the Council on Foreign Relations’s “Renewing America” project, Thomas Hilliard makes some sensible recommendations about better training Americans for the “middle skill” jobs that the current trajectory of American industry is placing front and center, in both the manufacturing and service sectors.

Of course, whenever anyone tells you there’s a shortage of anything, if you believe in market-clearing mechanisms, you should be asking “at what price?” Companies complain they can’t find middle-skill workers, but don’t often put their money where their mouth is. Hilliard gets at this, but in an odd way. To me, the key paragraph in his essay is:

The middle-skills gap damages job creation and economic mobility. Employers are less likely to create good jobs with long-term advancement potential if the productivity of their workers does not cover their higher wages. A recent McKinsey study found that 86 percent of U.S. employers surveyed would pay more for a job candidate with the right training and hands-on-experience. . . In the absence of those skilled candidates, employers will compete on the basis of lower costs, a path that leads to outsourcing and widespread use of part-time and temporary workers.

While it’s true that productivity must support higher wages, I worry this gets the causation backwards. Maybe the issue is not the supply curve for labor but the demand curve. There’s a big gap between “would pay” in theory and “is offering cold, hard cash right now.” Actually, tracing back Hilliard’s reference, the McKinsey Center for Government goes on to say, “The actual likelihood of higher salaries clearly involves a broader range of factors, such as employer ability to pay and the degree of skills scarcity in the industry.”1

In other words, the position of American industry on what they’re willing to pay for U.S. middle-skilled employees remains incoherent and unreliable, and as long as it is — and obviously so, to any thinking American — we’ll have continued trouble attracting either young people or adult learners into education and training curricula that produce the relevant skills.

  1. See p. 47 of http://dl.njit.edu/mnj/Education-to-Employment_FINAL.pdf []

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