A Skills Shortage? The Rumors Seem Exaggerated

Is America's competitiveness in the decade ahead threatened by a serious shortage of skilled workers? So say a number of government and private-sector analysts, who warn that ongoing occupational shifts and changing technology are raising job skill requirements just as America's educational performance is lagging.

The problem, according to several economists who have looked closely at the data, is that this disaster scenario simply isn't supported by the facts. To assess future demand in the labor market, for example, economists at A. Gary Shilling & Co. have converted their long-term economic projections for the 1990s into occupational categories. Their calculations suggest that occupations requiring at least four years of college (perhaps 20% of current jobs) will expand by as much as a 1.4% annual rate in the decade ahead, compared with a 0.9% rate of growth for total employment.

In a recent issue of Challenge, an economics magazine, Stephen L. Mangum of Ohio State University used Labor Dept. estimates of occupational growth rates and skill levels to come up with similar results. He concurs that the mix of net new jobs created in the 1990s will require more skills than 1980s' jobs did. But he points out that most labor-force entrants in the years ahead will simply fill current jobs being vacated by retiring workers. Looking at the composition of total employment in the year 2000, he says that only 23% of all jobs are likely to require a college degree. Mangum also questions the idea that technology will dramatically alter the skills content of most occupations. Computerization may raise skill levels required for some jobs, but it clearly lowers them for others, so the aggregate net change in skill requirements will be modest.

As for the supply side of the labor market equation, Shilling economist Tony Riley points out that college enrollments as a percent of the college-age population began to rise sharply in the mid-1980s (chart). "Colleges and universities aggressively pursued new students to offset the decline in college-age youths," he explains, "just as young people began to appreciate the advantages of a college education in an increasingly competitive job market." From 1980 to 1990, as the 18-to-24-year-old population shrank by 4.2 million, total enrollment in higher education rose by 1.5 million.

The upshot, says Riley, will be a substantial upgrading of the educational quality of the work force in the years ahead, as better-educated workers replace the significantly less-educated group of workers who are retiring. Thus, "higher demand for educated workers in the 1990s will be matched by a substantial increase in the supply of college-trained personnel." Indeed, Riley's calculations suggest that there will be an oversupply of college-trained workers relative to job demands in the 1990s, while unskilled labor will actually be in short supply.

That doesn't mean that college-educated workers will remain unemployed while uneducated workers have jobs. "Because employers will fill even unskilled jobs with the highest-quality workers available," says Riley, "as always, it will be the least-educated workers who will be left out in the cold when unemployment rises."

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