Employers Cannot Fill Jobs And There Is No Easy Solution
For much of the current eight and a-half year-long recovery we have heard from employers that they cannot fill all their vacant jobs. We have heard about skills mismatches and problems passing drug tests. We have wondered why, if the jobs are going unfilled, employers are not raising wages until workers materialize. Immigration has nosed into the conversation more than once. Even video games and whether young men would rather play them than work has figured prominently in the debate. In reality, nobody knows what the right answer is, or even if there is an answer.
As the Federal Reserve continues to raise interest rates and discuss how tight the labor market may or may not be, this conundrum of the unfilled job has survived a surprisingly long time. The reason economists, employers, and policy makers have been unable to answer this question is there really isn't any simple or single answer. Let's go through some possible explanations in turn.
The problem of skills mismatches definitely is raised by a number of employers, particularly in manufacturing or specialized professions (e.g., nursing). Certainly, for some jobs and some locations, this holds true. As the economy becomes more specialized and more jobs require particular and precise skill sets, skills mismatches might become more common. Employers don't need people willing to work, they need trained people willing to work. Whether more employers will adopt more of a Japanese approach of training their own employees we shall see, but without an (now less true even in Japan) tradition of long-term employment, employers may be rightly hesitant to train workers who can leave them at any time.
However, any skill mismatch cannot explain all the unfilled jobs we see. As reported by Sophie Quinton in The Fiscal Times, there is evidence from employer surveys that while skills mismatch are a problem, many other factors figure in, as well. In particular, location. There may be plenty of workers with the right skills, but if they don't want to live where the jobs are, employers have a problem. With younger people more inclined to choose a preferred location and then search for a job and the hangover from the bursting real estate bubble still limiting some people's mobility, convincing people to move for a job is not as easy as you might think.
This takes us nicely to wages. Advocates for workers argue that employers simply aren't offering enough money to attract workers. Offer better wages and it will convince people to move, and in the longer run, signal to people what skills to acquire.
However, as Patti Zarling reports for the USA Today Network, places and employers have tried raising wages, often with little success. In Manitowoc County, Wisconsin, wages have risen $4-6 per hour in the past year (about a 25% bump) and local manufacturers are offering $20 per hour for new employees. Yet, there are still several thousand open jobs in the county. West Texas is looking for several thousand truck drivers to drive oil tankers from wells to pipelines, with wages that hover around $100,000 per year and is still having trouble filling them as fast as drillers want to expand production. This suggests that low wages are not a sufficient answer to explain the current difficulty in hiring either.
Labor force participation usually enters the discussion about here. It has been falling, with ups and downs along the way, for thirty years since the end of the twenty-year upward rise as women entered the workforce. Reasons for the downtrend include the above mentioned young men choosing the play video games instead of working, more people pursuing higher education, opioid addiction, and people exploiting the Social Security disability fund. All of these may well be playing a role, but, as documented by Scott Winship, none can provide a single answer to our hiring dilemma. Worse, none of these has an easy policy solution.
Making this even more perplexing is that this problem is not a new one at all. The New York Times reported on how teenagers weren't taking summer jobs in 1986, over a generation okay. Many of the same suggested problems were raised although opioids and video games were not yet on the horizon. In some locations wages double the minimum wage were being offered, teen unemployment rates were well into double digits, yet jobs still went unfilled.
The best answer we have right now comes in two parts. First, all the suspects listed above are likely playing a role: skills mismatch, wages, the resistance people have to moving even in order to find a job, and a host of factors lowering labor force participation all explain a share of the difficulty employers are having filling jobs. Second, economists, employers, and policy makers all need to remember there is no such thing as a labor market. Rather, there are hundreds of employment regions (or laborsheds) and within each one there are hundreds of different labor markets for specific jobs or sets of jobs. It should surprise nobody that at any particular moment in time a fair number of the tens of thousands of labor markets are out of equilibrium. So even if we don't know the exact causes for sure, we can have some confidence that the problem won't be solved anytime soon.
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