Could Low Educational Attainment Be Slowing the Recovery? (Mismatch in skills employers need)

Federal Reserve Bank of Cleveland ^ | 06/25/2010 | Daniel Hartley and Beth Mowry

[SeekAndFind]

The employment numbers released by the Bureau of Labor Statistics on June 4, 2010, showed a large increase in temporary government employment due to the hiring of workers for the 2010 Census, but showed only a slight increase in private sector employment. The consensus view is that improvements in the labor market will lag the overall recovery, and the fear is that we could experience relatively anemic job growth similar to the two previous recession-recovery cycles. Could a mismatch between the skills and education of employees and the needs of employers be a contributing factor to the slow speed of the recovery in employment?

Manufacturing employment has been steadily declining since 2000 and is now down to about 75 percent of its level in 1995. Over this period, the housing boom fueled the growth of construction employment to a peak of 1.5 times its 1995 level. However, in the wake of the housing bust, construction employment has fallen back down; it is now only 1.15 times its 1995 level. In contrast, employment in the education and health industries has continued to grow through the beginning of 2010.



With respect to educational attainment, the data reveal substantial differences across industries. Workers in the education and health, professional and business services, information, and finance industries (which I will subsequently refer to as high-degree industries) are much more likely to have a bachelor’s degree than workers in the other nonfarm nongovernmental industries (which I will subsequently refer to as low-degree industries).



While the accumulation of job- or industry-specific human capital may make it hard for workers to change jobs or industries as the industry structure of the nation changes, it seems that it will be particularly hard for workers without a bachelor’s degree to move from the low-degree industries to the high-degree industries. It is possible that construction was absorbing some of the workers who lost their jobs as the manufacturing industry declined. However, once the housing market collapsed, construction began losing jobs quickly. In this way, the housing boom may have temporarily obscured the transition of the U.S. economy from low- to high-degree industries.

Consistent with this conjecture is the observation that the fraction of overall employment that is made up of the high-degree industries has increased throughout the past 15 years. The only exception is a plateau that coincides with the years of the housing boom.



While people without a bachelor’s degree have experienced higher unemployment throughout the past 15 years, their rate of unemployment has typically been only about 2 percentage points higher than those with a degree. Currently, however, it stands at more than 5 percentage points higher.



So what does the changing makeup of U.S. industry mean for the unemployment rate and the economic recovery in general? Economic research shows that displaced workers who change industries end up with lower paying jobs on average. Furthermore, if a college degree is required for an increasing number of jobs in the U.S. then it may take some time before the labor supply responds to the increased incentives for education. In the meantime, we may be in for a period of lower productivity, lower wages, and higher unemployment.

[norraad]

"How many fingers am I holding up?"

"Oh, sir, he wouldn't know that anyway......"

Micheal Fox The Mighy Ducks

[Albion Wilde]

In my last two jobs, I have found that the employers have the communist mindset at this point. They are so fearful of lawsuits that they treat everyone the same regardless of productivity or ability. So if there are tasks to be assigned, it’s almost like they draw a name out of a hat instead of promoting and grooming the best employees for the various types of activity. You can see people working side by side where one of them (often older and dead-ended from promotion) is literally doing 3 times as much as the favored-class worker beside them.

[ken21]

liberal progressives have dumbed down the california community colleges beyond belief.

i took a finance class several years ago.

i could have aced it when i was in 5th grade.

the instructor continually bad-mouthed mccain-palin and

told the class they should vote for obama.

a mexican kid returned to visit his friend the instructor;

the kid told me before class that he had flunked both exams but had gotten a “b” grade

for his classroom conversations with the instructor.

si.

[Thurston_Howell_III]

We need to remove the stigma from attending vocational schools in this country. Many of these “unemployed” could easily find well paying work as plumbers, electricians, carpenters and general handymen.

[himno hero]

....more fools writing mindless hypothesis.

Who wants to invest into a world of uncertainty? What small business owner wants to step to the plate for outlays when his probability potential demise is greater than his return via Obama policies? Marxism. And the people en masse see this failing too and it is reflected in their expectations and telegraphed in their spending... most recently we saw a report on home sales reversing....

Its nothing more than zero confidence in Obamas policies which are ruining the nation.

[I still care]

What I think is damaging this country beyond measure is the “It’s all about me” self esteem movement that invaded our schools and culture.

I have talked to numerous business owners, they cannot find young people to work who know how to invest themselves in work. They just won’t do the work (”that’s not my job!” attitude.)

[Oatka]

Economic research shows that displaced workers who change industries end up with lower paying jobs on average.

I saw that in Spades when NAFTA went through as the factories went South of the border.

[algernonpj]

Could Low Educational Attainment Be Slowing the Recovery? (Mismatch in skills employers need)

We have guest workers and illegal aliens (visa overstays) to take care of that /sarc

[MARTIAL MONK]

Burp to the top.