Posted tagged ‘Skills gap’

What Do Help Wanted Ads Say About the “Skills Gap”?

April 18, 2013

It has been quite a while since I wrote about some of my favorite topics, the “skills gap” and occupational supply and demand.  But since there are recent media reports about the issue and more and new or renewed groups in NH looking to influence the debates and discussions on the issue, let me once again add my $.02.

I’ve made the plea for empirical rather than anecdotal or ideological evidence on the issue and produced a little evidence myself that both points to a skills gap as a contributor to slower than desired employment growth as well as evidence that suggests the issue may not be as prominent an explanation for slower job growth as some believe.  I’ve also noted the larger economic policy debate that engulfs the skills gap issue.  The data I’ve presented in this blog only hints at  answers to the fundamental question of whether slower job growth is more of a problem of labor supply (the number and/or quality available workers with the education, skills and training desitred by employers), or one more of labor demand (not enough employers looking to hire qualified, educated and skilled workers in NH).  I think the charts below  again provide some clues to labor supply and demand trends in NH and also illustrate some bigger trends in the NH economy.

The first chart most directly addresses the skills gap issue.  It shows that in terms of broad occupational groupings, professional and technical job openings are the largest component of on-line help wanted advertisements in NH.  Because these tend to be among the most-skilled and highest-paying jobs we assume that if there were a sufficient supply of labor then job growth in the industries that most employee these occupations would be relatively strong.  In fact, one  industry grouping – business and professional services  – employs a lot of professional and technical occupations and it is growing almost twice as fast as is overall private sector employment in NH.

The crux of the skills gap issue is this: “would a larger or better qualified supply of individuals in these occupations result in faster job growth in NH, or are there other or complimentary factors that also need to contribute to faster growth?”   How you define the problem of slower job growth also largely defines the range of your solutions. Increasingly, and I think somewhat disappointingly,  it also seems to define your ideology (if you have one).

March 2013 HW

The chart  below is less sanguine.  It shows that compared to the same month in 2012, March 2013 help wanted ads in NH for professional and technical ads declined by more than 10 percent.  One month isn’t a trend but recent months have shown more weakness than strength in this indicator.  The chart also shows that the largest improvements in labor demand are not among the most skilled occupations, although changes in the occupational make-up of manufacturing industries makes it increasingly likely that production workers will  have higher levels of education, training and skills.

Pct Change in HW in March

 

It Seems You Can’t Turn White Collars Blue

January 8, 2013

Two contradictory trends are occurring in NH’s labor market and as Ricky Ricardo would say “somebody’s got some splaining to do”.   I see no other hands up in the room so I will take a brief stab at it.  The chart below shows that help wanted ads in NH rose modestly this year but the rate of employment growth in the state has been declining.

Help wanted and Emp Growth iin NH

It is easy to rest things on, and to take things off, the top of a flat head so here are a few off the top of mine that could be influencing these trends: 1) It could be that more jobs are being advertised in NH but are for companies with multiple locations – including NH and nearby states (I think this is not likely to be having much affect), 2) advertised jobs are not being filled because there are not enough applicants companies want to hire – “the skills gap” again (I think this is significant based on conversations I’ve had with companies), 3) the job growth numbers in NH could be revised upward with the upcoming benchmark revisions (I think this is likely but it may not be as significant as I thought a few months ago).

Regular readers know I write too often about the skills gap.  I like the issue because it gets at so many issues of fundamental importance to the future of NH’s and the nation’s economy – education and training, k-12 and post-secondary education, young people and their guidance and direction etc.  The skills gap is most often associated with very skilled scientific and technical occupations but in NH at least, any skills gap may be more pronounced in production and skilled “blue collar” occupations.  Based on the volume of  help wanted advertising in the state since the recession, the demand for those occupations has increased significantly compared to management, financial, business, technical and scientific occupations.

Help Wanted by Occup Since Recession

Despite the large percentage increase in help wanted ads in production and skilled blue collar occupations, employment in industries that employ those occupations has grown little.  It may be that there is a lot of ‘churning” in those industries (some businesses hiring and some contracting) resulting in little net employment gain but the anecdotal evidence (I am reluctant to rely on such evidence but it is the best we have at the moment) is that many businesses who would hire production and skilled, blue collar workers are unable to find individuals to fill their positions.

It has been a relatively recent (over the last several decades) transition for NH to a more technology intensive economy that relies less on production and skilled, blue collar labor.  Once the core of the NH economy it has been a long while since NH was seen a a land of opportunity for those who worked with machines and tools (other than just  computers) and once you have moved on  it can be very hard to go back – even when there is a reward for doing so.

Hiring by Age: More Evidence of a Skills Gap?

December 10, 2012

I know its a tough labor market for young people and recent college grads, but they still represented a larger portion of new hires in NH in 2011 than would be expected based on the percentage of employment by age in the state.  The chart below shows the age distribution of  employment in NH in 2011 along with the percentage of new hires in the state by age group.   Although job growth has been slow this recovery, the chart still shows that among those who have been hired for a new job (that is the hiring that is not a “call back” of a previously laid-off worker), younger workers make up a disproportionate number of the new hires.

Emp by age

This could be more evidence of, as well as a subset of,  the “skills gap” debate.  Many employers complain that the skills that young workers and recent grads posses don’t match their needs, and this is true for many occupations, but what this data also seems to suggest is that the mismatch between the demands of employers and those seeking work among the existing workforce is even greater than that for younger workers and new entrants to the labor force.  It suggests a bigger problem than just getting kids into the right majors and training programs (although that is a big part of it).  It points to a larger problem of a fundamental change in the types of occupations in demand (or the skills required of the same occupations) as well as a “twist” in the labor market that results in differences in the occupational make-up of industries.  It is a much more difficult , slower, and likely painful process to have the existing workforce adapt to these changes in order to increase their employment prospects than it is to begin with the next generation of workers, although both will challenge future employment and economic growth for some time.

Of course it is possible that employers just prefer younger and perhaps less expensive workers and that is what accounts for their outsized share of recent new hires.  Or it could be a function of the type of industries that were hiring in 2011 (I will be examining this hypothesis).  It may be more comforting to view labor market trends from those perspectives but it won’t get us any closer to taking the personal and policy actions necessary to create greater alignment between the skills of our workforce and the skills needed for a more prosperous economy.

Job Growth May Depend on Narrowing the “Skills Gap”

November 21, 2012

A quick review:  The “skills gap” explanation for slower employment growth this recovery posits that there are large numbers of jobs waiting to be filled but hiring is sub-par after the recession because of a lack of qualified candidates to fill those positions.  Twice I have presented some evidence on the issue, here and here.  Most of the concern and evidence about the existence of a skills gap addresses very high-skill technical, scientific, computer, and engineering occupations because our nation, and by extension our state, seem to perpetually be unable to produce enough individuals in those fields to satisfy industry demand.  As  a result we “import” a lot of that talent from foreign countries (more about this – I promise – in a future post).  There is some evidence of this in NH.  As the chart below shows, professional, scientific, and technology occupations are the largest,  broad category of help wanted ads in the state.  But they have also evidenced the smallest increase (a decrease actually) since the recession.  There is still a significant demand but it may be that an inability to find qualified applicants has companies in need of those occupations from considering more hiring in the Granite State.  A quick review of data for Massachusetts shows that demand for professional, scientific and technical occupations has increased during the same time period.

But  more direct evidence of a skills gap comes from the demand for construction and production workers.  I am especially interested in the potential skills gap for production workers.  The chart above shows that demand for construction, production, and transportation workers has increased significantly since the recession.  Although still a much smaller category of help-wanted ads than professional and technical jobs, the increased demand is consistent with anecdotal evidence I heard this week at a roundtable discussion of the Seacoast economy.  At that discussion, representatives from industry, higher education, and economic development organizations cited specific examples of companies frustrated at their ability to hire skilled production workers.   Some are forming partnerships with NH’s community college system to increase the supply of needed occupations.  Those initiatives show promise and I hope the state’s four-year colleges and universities develop more partnerships to address the skills gap in professional, scientific and technical occupations as well because, increasingly, job growth in NH appears to depend on it.

The Skills Gap Part Deux: Some Evidence and Who’s Fault is it Anyway?

November 2, 2012

A good national job growth report  was released today that showed private sector job growth was up 184,000 in October.  With government job losses at -13,000, total employment increased nationally by 171,000.   We  have to wait a few weeks to see NH’s job growth for the month but regardless of the number, the underlying causes of the state’s relatively slow recent  job growth still need to be debated .  A solid and empirically-based understanding of the  factors influencing job growth rates is the only way to formulate effective economic  policy in the state.  I am on record as saying (probably too often) that I believe NH’s job growth numbers will be revised upward at some point (probably with the annual revisions released early next year).  But even if that is true (errr, when it is conformed to be true),  by historical standards, recent job growth in NH will still have underperformed.   Whether job growth is slower now than in the past because employers are not willing to add additional workers or because they are not able to find qualified workers  (the “skills gap” argument) is among the most important issues to understand in setting both national and state-level economic policies.  If employers are unwilling to add employees that are readily available,  then the efforts to spur job growth focus more on factors affecting businesses (tax rates, regulations, costs etc.).  If job growth is constrained because employers are unable to find qualified workers to fill open positions, then the focus of efforts to spur job growth will be more effective if they look to increase the skills of the labor force, and/or better match them to the needs of employers.  In reality this is not an either or question because inadequate attention to the needs of either employers or the workforce will produce sub-optimal economic growth.  But in today’s polarized policy environment whatever light is shed on these issues is too often separated by an ideological prism that produces policy proposals aimed at either the needs of business or the needs of the workforce to the exclusion of the other.   If job growth is slowed because there are too few qualified workers to meet the needs of businesses then it is not policy maker’s  fault  but they can help alleviate the problem by adopting more “human capital” policies.  Businesses bear some of responsibility for any skills gap because studies have shown that businesses spend less time and money training workers than they did decades ago, and that more of the training that does occur is concentrated on management positions rather than mid- and lower- level positions.  In an age when job turnover has accelerated, and the tenure of workers with one businesses continues to decline, it is understandable that businesses would be less willing to invest in workers who may only be with their firm for a short while.  But who is more responsible for the decline in employer-employer loyalty and tenure?  The labor market has been signaling strong demand increases in many occupations – especially technical and scientific  occupations and increasingly skilled production occupations.  Older and experienced workers may have difficulty responding to these demands if their experience, education or training is in occupations in less demand but why are younger and new entrants to the labor market not responding  to these labor market signals by selecting the majors or training programs that would qualify them for more occupations in demand?  One reason is that regardless of whether or not the labor market is signaling many job opportunities in technical and scientific occupations (or skilled production occupations), if large numbers of the emerging workforce don’t have the intellectual and academic rigor to study these subjects the positions will increasingly go unfilled, go elsewhere, or as I will document in a later post, be filled by foreign born workers.

Ok, that was a bit of a rant, now back to the core issue.  Is there evidence of a skills gap in NH that is constraining job growth?  The answer of course, as it is with almost all economic issues,  is both yes and no and also something in-between and with a twist.  I will share this evidence across several postings, today I offer one, small bit of evidence that suggests the skills gap is playing a larger role in disappointing job growth trends.  I noted in an earlier post that help-wanted advertising has generally been on the rise in NH, while job growth has not.  Some of this will be corrected with job growth revisions, but evidence that a skills gap is playing a role comes in the form of the percentage of help-wanted ads each month that are “new ads”.  If help-wanted ads are rising and the number or percentage of new ads is rising similarly each month,  that means positions are being filled at a fairly consistent rate, but if the number of ads is increasing, but the percentage of ads that are “new ads” is declining, that suggest that positions are not being filled or taking longer to fill – perhaps suggesting employers are having a harder time filling the positions or a skills gap.  The chart below shows that indeed, the percentage of monthly help-wanted ads in NH that are :new ads” for the month has been slowly declining, providing some small bit of support for the skills gap explanation for job growth.  A lot more evidence is needed, but given the importance of the issue in policy making, it is worth the effort to find or refute it.

The Skills Gap Debate – Round 1

October 18, 2012

Two charts may tell an important story about New Hampshire’s labor market and perhaps trends in the economy.  Help-wanted advertising has been rising in NH and as I’ve written before, it suggests job growth should be higher in NH  based on the long-term relationship between help-wanted ads and employment growth in the state.  A “skills gap” is one explanation for the divergence between help-wanted and job growth in NH, but I also offered that the divergence, along with trends in aggregate wage growth in NH  may mean employment numbers will be revised upward.   My money is still on an upward revision of job growth, with the skills gap playing an important  role for some industries and occupations, because NH has more help-wanted ads per 100 individuals in the labor force than all but 10 states – job growth should be higher (chart below).

I would be more convinced of the skills gap being broadly responsible for slow growth in the state  if a high percentage  of help-wanted ads in New Hampshire were for the highest skill occupations (professional, technical, scientific and management), but as the chart below shows, NH ranks well down the list of states on the percentage of help-wanted advertising that is for the highest skill occupations.  A skills gap could still exist between available jobs and available labor for occupations requiring specialized skills and training, even if they are not in professional, technical , or managerial occupations.  Anecdotal evidence suggest many employers are having difficulty finding workers with the right skills.  The skills gap demands further investigation, right now I am more concerned about what the relatively lower demand in NH for the highest skill occupations implies about our state’s economy.


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