“Skills Don’t Pay the Bills”

I came across an interesting article in the NY Times about manufacturing industry wages.

NY Times: Skills Don’t Pay the Bills

The manufacturing industry has seen a drastic decline in demanded labor force in the past decade.  Author Adam Davidson states, “Nearly six million factory jobs, almost a third of the entire manufacturing industry, have disappeared since 2000 (1).”  Despite drastic cut-back, however, 80% of factories are currently claiming that they are unable to fill open positions.  This is because factories are eliminating unskilled positions and demanding highly-skill laborers trained/educated in metallurgy, physics, chemistry, pneumatics, electrical wiring and computer code.  There appears to be a skills gap and manufacturers are simply unable to find qualified applicants.  However, Davidson claims that is isn’t a skills gap as much as an education gap.  The so-called skills gap only exists because employers refuse to raise wages.  Current wage levels are not far off from unskilled wage levels (Davidson equates levels to that of a new McDonalds shift manager earning $14/hr) yet employment requires extensive (and expensive!) education. Up-and-coming workers are unlikely to pursue necessary education simply because the payoff isn’t high enough.

If manufacturers don’t comply with fundamental economic principles and raise wages to incentivise individuals to obtain needed qualifications/education, they risk creating a “real” skills gap which will compromise the manufacturing industry’s ability to compete with international manufacturers. Davidson asserts that “Now workers and manufacturers “need to recreate a system” — a new social contract — in which their incentives are aligned (2).”

 

One thought on ““Skills Don’t Pay the Bills”

  1. It seems like this could be a negative feedback loop. U.S. manufacturers are struggling recently due to increased competition abroad, decreasing their profits, but for them to attract and retain the best talent, they need to increase wages for skilled positions. It will certainly be interesting to see how this plays out and whether government policy will seek to further address the long-term trend of a decline in U.S. manufacturing.

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