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When it Comes to the Skills Gap, Perceptions Matter

April 10, 2013

This is the second post in a series this week discussing different perspectives on the results of NLC’s 2013 Local Economic Conditions Survey.

With the recent release of the March jobs numbers, we are quickly reminded that what may finally seem like recovery must be viewed with cautious optimism. Our first blog post in this series dug deeper into the realities of what appears to be a strong and growing real estate market, one in which residential property improvements have largely overshadowed lingering and detrimental challenges in the commercial property market.

This post examines city officials’ perceptions about the labor market as well as skills challenges that may be posing structural barriers to sustained local and national recovery.

Concerns Over Skills Gap

The changing nature and composition of the economy has highlighted the necessity of a local workforce with skills that are appropriately aligned and matched with employer demand.

Unfortunately, more than one in two city officials (53%) report that current local workforce skills are posing a problem for the economic health of their communities. Nearly nine in 10 city officials (88%) note that workforce alignment has not improved over the past year.

Percent of City Officials Reporting Change in Workforce Skills Match to Demand of Local Employers, source: Local Economic Conditions 2013

Perception vs. Reality

We know that a so-called “skills gap” is not the only driver of challenges in the labor market. A skills gap is often the perception, or face, of a much more complex and tangled web of trends relating to a shrinking labor force, long term unemployment, underemployment and divergent hiring patterns.

The facts are stark: the labor market is shrinking, the economy is not creating enough jobs, and those dropping out appear to be in the prime of their working years, ages 25-54. The longer this continues, the more likely this pool will become unemployed in the longer-term, with deterioration of skills, networks and trust in the market to provide opportunity for them.

As reported in the Atlantic, “We increasingly have a bifurcated labor market…the job market looks normal for people who have been out of work for less than 6 months, and horribly dysfunctional for people who have been out of work longer than that.”

In addition to a shrinking labor market and longer-term unemployment, we are also facing an under-employment problem.  A Wall Street Journal analysis of recent U.S. Labor Department data shows that “284,000 graduates—those with at least a bachelor’s degree—are working minimum-wage jobs in 2012, including 37,000 holders of advanced degrees. That’s down from a peak of 327,000 in 2010, but double the number in 2007 and up 70% from a decade earlier.”

This is a problem in and of itself, with increasing college debt burdens and decreasing wages, but more so, because many with higher skills are taking middle and lower skill jobs, crowding those at the low end of the skills ladder out of the job market.

This rings particularly true given that we are seeing less job creation at the higher-end of the skills spectrum.  Brookings recently released a study finding that employers are indeed hiring more readily across the U.S., but that this is driven by industries such as construction, hospitality and healthcare.

A middle-skills gap appears to be a reality, particularly in the industrial trades, which have received decreased attention in high schools over the years from parents and guidance counselors as viable career options.  But even in these sectors, claims of uncompetitive wages, undesirable locations and work shifts, and poor hiring practices and systems are also at play.

Perceptions Matter

So, at the end of the day, a skills gap is but one of a host of challenges undergirding potential structural issues in the labor and jobs markets. Regardless, local officials, apparently nearly 90 percent of them, have been confronted with the reality of businesses telling them that they cannot find qualified workers.  This threat of employers picking up and moving, or choosing to hire or locate elsewhere, means that businesses are not happy and are not or will not be job creators for the community.

Cities across the country, from Avondale, Ariz. to St. Paul, Minn., are exploring ways to be both responsive to their business community while also tackling the heart of these complex problems in order to open pathways to employment for their residents.

They are partnering with businesses, workforce systems, economic development organizations, educational institutions and other stakeholders to examine the depth and scope of labor market issues and to educate residents for available employment. They are also placing greater responsibility on the business community to provide training opportunities for potential and current employees and engage in more sensible hiring practices.

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