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The Great Worker Shortage

March 31, 2015
By Steve Moore
From Forbes.com

The great conundrum of the U.S. economy today is that we have record numbers of working age people out of the labor ‎force at the same time we have businesses desperately trying to find workers. As an example, the American Transportation Research Institute estimates there are 30,000 – 35,000 trucker jobs that could be filled tomorrow if workers would take these jobs–a shortage that could rise to 240,000 by 2022.

While the jobs market overall remains weak, demand is high for in certain sectors. For skilled and reliable mechanics, welders, engineers, electricians, plumbers, computer technicians, and nurses, jobs are plentiful; one can often find a job in 48 hours. As Bob Funk, the president of Express Services, which matches almost one-half million temporary workers with emplo‎yers each year, “If you have a useful skill, we can find you a job. But too many are graduating from high school and college without any skills at all.”

The lesson, to play off of the famous Waylon Jennings song: Momma don’t let your babies grow up to be philosophy majors.

Three years ago the chronic disease of the economy was a shortage of jobs. This shortage persists in many sectors. But two other shortages are now being felt—the shortage of trained employees and of low-skilled employees willing to work. Patrick Doyle, the president of Domino’s Pizza, says that the franchises around the country are having a hard time filling delivery and clerical positions. “It’s a very tight labor market out there now.”

This shortage has an upside for workers because it allows them to bid up wages. When Wal-Mart announced last month that wages for many starter workers would rise to $9 an hour, well above the federal legal minimum, they weren’t being humanitarians. They were responding to a tightening labor market.

The idea that blue collar jobs aren’t a pathway to the middle class and higher is antiquated and wrong. Factory work today is often highly sophisticated and knowledge-based with workers using intricate scientific equipment. After several years honing their skills, welders, mechanics, carpenters, and technicians can, earn upwards of $50,000 a year–which in most years still places a household with two such income earners in the top 25 percent for income. It’s true these aren’t glitzy or cushy jobs, but they do pay a good salary.

So why aren’t workers filling these available jobs–or getting the skills necessary to fill them. I would posit four impediments to putting more Americans back to work:

First, government discourages work. Welfare consists of dozens of different and overlapping federal and state income support programs. A recent Census Bureau study found more than 100 million Americans collecting a government check or benefit each month. The spike in families on food stamps, SSI, disability, public housing, and early Social Security remains very high even 5 years into this recovery. This should come as no surprise given the combination of the scaled back welfare work requirements and the steep phase-out of benefits as a recipient begins earning income.

Economist Peter Ferrara ‎argues in his new book “Power to the People,” that if ” we simply required work for all able-bodied welfare recipients, the number on public assistance would fall dramatically. This is what happened after the work for welfare requirements in 1996.”

Second, our public school systems often fail to teach kids basic skills. Whatever happened to shop classes? We ‎have schools that now concentrate more on ethnic studies and tolerance training than teaching kids how to use a lathe or a graphic design tool. Charter schools can help remedy this. Universities are even more negligent. Kids commonly graduate from four year colleges with $100,000 of debt and little vocational training. A liberal arts education is valuable, but it should come paired with some practical skills.

Third, negative attitudes toward “blue collar” work. I’ve talked to parents who say they are disappointed if their kids want to become a craftsman–instead of going to college. This attitude discourages kids from learning how to make things, which contributes to sector-specific worker shortages. Meanwhile, too many people who want to go into the talking professions: lawyers, media, clergy, professors, and so on. Those who can’t “do,” become attorneys and sociology professors.

Fourth, a cultural bias against young adults working. The labor force participation rate is falling fastest among workers under 30 (see chart). Anytime a state tries to change laws to make it easier for teenagers to earn money, the left throws a tantrum about repealing child labor laws. The move to raise minimum wages in states and at the federal level could hardly be more destructive to young people. ‎My own research finds that the higher the minimum wage in a state, the lower the labor force participation rate among teenagers.

image of under labor participation chart

Anecdotally, I’ve always been struck by how many successful people I have met who grew up on farms and started working–milking cows, building fences, cleaning out the barn–at the age of 10 or 11. They learn a work ethic at a young age and this pays big dividends in the future. Many studies document this to be true.

Fifth, higher education has become an excuse to delay entry into the workforce. I always cringe when I talk to 22 year olds who will graduate from college and who tell me their next step is to go to graduate school. Maybe by time they are 26 or 27 they will start working. Here’s an idea: Colleges could encourage kids to have one or two years of work experience before they enroll.

Here’s an even better idea: Abolish federal student loans and replace the free government dollars with privately sponsored college work programs. For instance, schools like College of the Ozarks require kids to work 15 hours a week to pay their tuition. It’s hardly a violation of human rights if a 21 year old works to fund for their own education–and they will probably get more out of their classes if they do work. Anything easily attained is lightly valued. This would drive down tuition costs too, because students would start demanding more financial accountability and less waste. After all, federal subsidies have increased college costs.

These may seem like old-fashioned and even outmoded ideas. But the decline in work among the young bodes ill for the future. Many European nations have removed the young from the workforce and the repercussion appears to be lower lifetime earnings. A renewed focus on working would also help erode the entitlement mentality ingrained in so many millennials. Instead of more benefits and handouts, this generation needs to get a job.

Click here to read the full article on Forbes.com.

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