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How to Help Low-Skilled Workers Find Jobs

Photo credit Dan A’vard

The U.S. economy is adding jobs–but employment prospects aren’t improving for everyone. As AIER economists Steven Cunningham and Zinnia Mukherjee write in “Labor Market Recovers Unevenly,” much of the current job growth is being driven by fields like health care, accounting, information, and professional and business services–all of which are dominated by high-skilled workers. That leaves low-skilled workers in the lurch. They explain:

Higher rates of unemployment tend to occur in industries dominated by low-skilled workers, whereas lower rates occur in industries dominated by high-skilled workers. The unemployment rate for those 25 years and older who have at least a bachelor’s degree is currently 3.8 percent. Most economists would refer to a rate that low as essentially full employment.

This suggests a potential problem that could limit growth and shorter-term improvements to the unemployment rate. If the industries critical to growth have used up their labor pools, they are going to hit hard constraints to growth. If industries that employ low-skilled workers are not growing, those workers are likely to stay unemployed.

This is almost the definition of a structural unemployment problem. It also helps to explain why U.S. firms are hiring so many high-skill foreigners while Americans go unemployed and overall unemployment rates remain high.

If there’s a skills mismatch between jobs and workers, the question is: What should we do about it? I asked Mukherjee for her recommendations about how to help low-skilled workers find jobs.

In the short term, Mukherjee says there are several things low-skilled workers can do to navigate a lackluster economy:

1. Pick up multiple skills. “Not all low-skilled occupations are equally affected in a recession,” Mukherjee explains. “But if you only have one skill–you know how to mow a lawn–then when people want to take care of lawns themselves, you’ll no longer be needed. Having multiple skills is a way of insuring yourself against income loss, though not necessarily job loss.” Mukherjee says this was one of Henry Ford’s guiding principles when he founded his trade school in 1916. “His vision was to empower students with a range of skills so that they could easily find jobs and be useful to their employers,” she says. Today’s training programs would do well to adopt the same policy.

While having a range of abilities may not protect low-skilled workers from cutbacks, Mukherjee says it certainly can’t hurt.  “Even within the same company,” Mukherjee says, “if your boss knows you can play multiple roles, you’ll be one of the last people to get laid off.”

2. Stay informed, and be prepared. Mukherjee notes that some industries dominated by low-skilled workers, such as construction, tend to be more vulnerable to employment shocks than others. Workers who know their industries often suffer from periodic layoffs and higher-than-average unemployment rates can prepare themselves for the worst by building up emergency savings and incorporating that knowledge into their financial decisions.

These recommendations won’t just help low-skilled workers protect themselves–they can also provide schools, employers, and training programs with ideas about how to improve low-skilled workers’ financial futures. But in the long term, Mukherjee says, the solution to the skills mismatch is all about education.

“A good quality education will give you higher earnings and protection from job loss, or at least a lower probability of losing your job,” Mukherjee says. But she adds that right now, higher education isn’t a viable option for everyone, or else more than 30 percent of Americans would have a college degree. That brings Mukherjee to the big-picture solution:

Create an education system that encourages more people to get a college degree. Mukherjee says that high tuition rates and the prospect of being saddled with long-term student loans can deter high school graduates from pursuing higher education. “Easy availability of college funds, with few or no strings attached, may encourage students to go for higher degrees,” Mukherjee says. “That will give them higher earnings and more job security during hard economic times.”

Unfortunately, there’s a hitch to this plan: Mukherjee says that even if more low-skilled workers pursue higher education, it will take a long time for the skills mismatch to even out. For one thing, many American employers have found that hiring high-skilled foreign workers is more affordable. For that reason, Mukherjee says, “we cannot expect demand and supply of high-skilled American workers to even out in the near future–the next two decades–since the wage difference across countries remains significant.”

With that in mind, I’m opening the floor up to you, Daily Economy readers. What can we do to fix the skills mismatch–and how can we help the low-skilled workers who’ve been affected by it?

3 Comments Post a comment
  1. John B #

    Now let’s think about this. “Easy availability of college funds, with few or no strings attached, may encourage students to go for higher degrees”. So this is a call for bigger subsidies in order to increase demand for education. Given that the supply of colleges is relatively fixes, this only serves to increase tuition and fees, the very problem that you are trying to address.

    IF THE GOAL is to reduce the unemployment rate among low skilled workers relative to higher skilled workers, it seems to me a more rational policy would be to reduce the price of labor relative to that of capital. If I am an employer I can produce my widget with 5 unskilled workers or with 1 skilled worker and 1 machine . By imposing a minimum wage it becomes relatively more attractive for me to pursue the second option. Perhaps the most direct means of reducing this disparity would be to reduce or eliminate the minimum wage. Incredibly, there are calls to increase it.

    Like

    April 25, 2013
    • A. Jones #

      If a full time worker earning minimum wage already has a hard enough time making ends meet, what value does lowering the minimum wage have? If someone is unemployed and gets a job in your ideal world, working full time will have little value if they can’t afford to pay for housing, food and clothing. A livable wage, in most markets, is beyond $10/hr. In order to make a livable amount of money in your world, a worker would need to work 1.5 jobs. If a worker is constantly worried about surviving they would make terrible employees. If an employee is working more than one job they have added stress as well as less sleep and time with family. Employees don’t exist in a vacuum, they bring everything to work with them. Research has shown that this type of employee is less productive in the long run.
      You’ve obviously never met or dealt with the low wage unskilled employees. Often times, they have collectors calling them all times of the day, and not because of credit (more often than not, they’ve never had a loan or credit card) but because in the extremes of the seasons, their utility bills went sky high or because in an effort to save money every month they chose a cell phone plan that wouldn’t meet their real needs resulting in huge and unexpected overage charges.
      Lowering and/or eliminating the minimum wage is not a benefit to these workers or to the potential employers. Employers already don’t pay benefits to these low skilled employees in most situations. So not enough money to take care of their needs and no benefits to help with health care costs leaves a stressed employee who is also not able to fully take care of their health needs and the needs of their family. That will not make for a very productive employee nor a very loyal one.

      Like

      April 3, 2014
  2. glady canbe #

    If you were a vocational counselor, you would not recommend eliminating the minimum wage. I work with hundreds of people everyday who not only can’t qualify for higher level jobs, but don’t have the “capacity” to learn jobs at a higher level or enter into higher level education. You would be shocked to learn how many people there are in this country functioning at a borderline level of intellectual capacity who were perfectly happy and productive when their job involved only a few steps in manufacturing, but when you expect that low intellectually functioning worker who is over 50 to go out and learn how to operate a computer, learn to type or perform some other job that requires some intellectual and cognitive capacity, what then do you do? What do you say to that worker…go to school and learn something that will pay you enough money to support your family? I don’t get what world people are living in. Has anyone who writes about these problems and proposed solutions really met the low skilled unemployed, or are they just a statistic to them? My advice to you if you really want to understand the REAL problem with unemployment is to go to the government agencies at the front lines and sit with the people who serve them (UI, Welfare, Worksource, and other vocational programs working with unemployed and disenfranchised workers). Once you meet the real low skilled unemployed, your lofty ideas will sound as hollow as the labor market is for these folks.

    Like

    September 18, 2013

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