How the Private Sector Can Reduce Unemployment
About 13 million Americans are looking for work. An additional 8 million have settled for part-time jobs. Yet almost half of U.S. employers have said they have difficulty filling positions.
There is a skills gap in the U.S., and it is expected to widen over the next decade. Addressing it will take the concerted efforts of both government and -- especially given strained federal and state budgets -- private industry.
A paper issued last week by the National Bureau of Economic Research attributes roughly one-third of the recent rise in the unemployment rate to a mismatch between vacant jobs and unemployed workers. Those who bore the brunt of job losses -- including construction and manufacturing workers -- are either not looking for jobs in sectors that are hiring (such as health care) or are unqualified to get those jobs because they lack the necessary skills. Left unaddressed, this “sectoral mismatch” could result in worsening long-term unemployment.
The federal government spent about $18 billion in 2009 on 47 separate job training programs, although there is some question about their effectiveness. President Barack Obama’s 2013 budget proposal allots $8 billion for a Community College to Career Fund, which will provide money to establish community college partnerships with employers and expand job training programs for skilled careers.
The private sector should take a more active role in training the workers it needs, particularly in skilled trades, information technology and health care. The health-care industry successfully addressed last decade’s nursing shortage in part by offering scholarships and tuition reimbursement programs to encourage people to enter the profession. It is expected to face another nursing shortage after 2020.
As competition for skilled workers intensifies as the gap grows, employers will need to take advantage of “upskilling” --the practice of training their existing workforce for more highly skilled labor. Upskilling benefits employers by boosting productivity, and it allows workers to reap the wage premium that comes with greater skills.
Employers may even find that it pays to train workers for jobs in other industries. Amazon.com Inc., for example, announced last month it will pay as much as 95 percent of the cost for some employees to pursue training in vocations that pay well and are in high demand, such as aircraft mechanics, nursing and computer-aided design. Amazon is betting that the program will attract motivated employees and help to retain them until they complete their studies.
But U.S. training programs should be more than ad hoc. In Germany, for example, the vocational education training is funded by public and private sources and trains apprentices for a wide range of occupations, helping them to adapt to a dynamic labor market. Germany lost a smaller share of its knowledge-intensive manufacturing jobs from the 1970s to 2007 than the U.S. did, according to a McKinsey & Co. report released in June.
State budget cuts have left students with a larger share of the bill for higher education, keeping many out of school. Decreased access to higher education widens the skills gap, which is too large for the market alone to close.
The magnitude of the skills gap requires an all-hands-on-deck approach. Community colleges need support from government, private industry and retraining organizations to build a globally competitive workforce. Using community colleges to train workers isn’t a radical idea: They emerged in the early 20th century to build a skilled workforce, and they tend to know the local labor market well.
With unemployment still above 8 percent, these programs can make workers competitive for skilled jobs that are unfilled, which often carry significant wage premiums. Increasing workers’ skills benefits not only the workers and their employers, it’s also good for less-skilled workers, the economy and -- click on the link, it’s true! -- democracy itself.
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