*Photo Credit: Andrew Burton Getty Images
The good news is that L (not her real initial) got a job.
The bad news is that it’s as a paraprofessional when she is a licensed professional with excellent qualifications. That’s not surprising in these (hopefully) last and lingering days of the lesser depression when it’s not unusual for people to take any employment that’s available.
The United States underemployment rate, defined as “Total unemployed, plus all marginally attached workers, plus total employed part-time for economic reasons, as a percentage of the civilian labor force” and is at about 14.7%. Subtracting the unemployment rate of 6.2% and you’ve got 8.5% of the labor force still looking for a full time job.
There are no specific statistics for people like L who are working below their qualifications, but L is employed as a paraprofessional by a firm that doesn’t have a professional on staff.
When they made up their budget, it was evidently with the assumption that they could find a qualified professional who would work for assistant’s wages. In the past, over qualified workers would be rejected because they would leave as soon as a job calling for their qualifications opened up. This seems to be particularly true in the field of law, where lawyers are taking jobs as paralegals and firms are glad to have them because they can now get two lawyers for the price of one.
While the Bureau of Labor Statistics reported that there are now more jobs available than there were at the start of the Lesser Depression, companies are still hiring fewer people.
Mike Konczal of the Roosevelt Institute wrote, “Why is unemployment so bad in this recession? There are two theories at work. The first is a story of aggregate demand. The second theory is one of a mismatch in skills.”
Right now the aggregate demand theory seems to carry more weight.
Aggregate demand simply implies that there isn’t enough money in circulation to revive the economy. Confirmation can be found in the New York Times August 9, 2014 under the headline “The Trucking Industry Needs More Drivers. Maybe It Needs to Pay More.”
By the law of supply and demand, shortages lead to increased prices – but the salaries haven’t increased. Training to drive a large truck can be completed in about 3 months of full time education, starting from scratch– but once completed, the job is exceptionally demanding, the pay is inadequate, the job itself is demanding both physically and emotionally, and turnover is high.
The American Trucking Association estimated that there was a turnover rate of 97% for companies with over $30 million in annual revenue. That implies there are a pool of qualified drivers who could be lured back to the job if the price were right – but the Times report indicates that the people doing the hiring are used to paying low salaries and haven’t gotten over the habit.
The concept of a skills gap is covered in Peter Cappelli’s “Why Good People Can’t Get Jobs: The Skills Gap and What Companies Can Do About It”. In it, Prof. Cappelli deals largely with the employer claims that there are skills shortages in the job market.
In 2011, he wrote for the Wall Street Journal in an op-ed, “Manpower Group, for instance, reports that 52% of U.S. employers surveyed say they have difficulty filling positions because of talent shortages.”
A sidebar to his op-ed reports that:
“47% of employers blame prospects’ lack of ‘hard’ job skills or technical skills…28% of companies are increasing staff training and development….There are plenty of people out there who could step into jobs with just a bit of training—even recent graduates who don’t have much job experience. Despite employer’s complaints about the education system, college students are pursuing more vocationally oriented course work than ever before, with degrees in highly specialized fields like pharmaceutical marketing and retail logistics.”
Complaints that there are shortages of skilled people may be valid, at least at the lower end of the skills level, and Prof. Capelli seems to be right – in part. There is a true skills gap, but that would imply there is competition to hire qualified people.
The apparel industry, long subject to offshoring, has been trying to return to the United States, but has been hampered by a lack of sewing machine operators. This is the type of skill that would normally be learned either by on-the-job training, or in a program supported by trade unions.
When the jobs were exported and unions were cut down by anti-union legislation, responsibility for job training should have fallen to those companies who realized that reductions in shipping costs, relative price stability, and the marketing benefits of a “made in USA” label had real benefits. There is a demand, at least as reflected by the ads in Monster, but the jobs have been gone too long and yet the ads expect a history of work experience.
Instead, according to Google, “A sewing machine operator makes an average of $8 to $11 per hour, or around $16,600 to $22,800 per year. Operators in a supervisory position are able to make more, but the job itself is typically at or near minimum wage.”
Conservative economists have predicted that stimulus programs, which inject more money into the economy, would lead to inflation, but it hasn’t because the money hasn’t been equitably distributed.
On March 9, 2009 the Dow Jones Industrial Average stood at 6,547. On August 15, 2014 it closed at 16,662. These were impressive gains, for people who were holding equities, but increased wealth doesn’t translate into increased consumption, and certainly not when it applies to the already wealthy.
While the GDP has increased, the benefits have been restricted to people with investments in equities and corporate CEOs whose compensation has increased 127 times faster than workers’ pay, according to the Economic Policy Institute.
Even when there is a clear shortage of personnel, employers have refused to respond with improved salaries. Neil Irwin in the New York Times wrote:
“Sentier Research, a firm led by former census officials, used census data to tabulate an estimate of the median household income — how much is earned by families at the exact middle of the nation’s income distribution. In June 2014, it found in a report issued Wednesday, the median household income was $53,891, down from $55,589 in inflation-adjusted dollars when the economic expansion began in June 2009.”
Maybe the worm is about to turn. A larger number of vacancies might lead to higher pay for qualified applicants, which in turn, would increase demand and start a virtuous cycle – but it has been a long time coming.
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