“Jobs And Skills And Zombies”: Skills Gap, An Idea That Should Have Been Killed By Evidence But Refuses To Die
A few months ago, Jamie Dimon, the chief executive of JPMorgan Chase, and Marlene Seltzer, the chief executive of Jobs for the Future, published an article in Politico titled “Closing the Skills Gap.” They began portentously: “Today, nearly 11 million Americans are unemployed. Yet, at the same time, 4 million jobs sit unfilled” — supposedly demonstrating “the gulf between the skills job seekers currently have and the skills employers need.”
Actually, in an ever-changing economy there are always some positions unfilled even while some workers are unemployed, and the current ratio of vacancies to unemployed workers is far below normal. Meanwhile, multiple careful studies have found no support for claims that inadequate worker skills explain high unemployment.
But the belief that America suffers from a severe “skills gap” is one of those things that everyone important knows must be true, because everyone they know says it’s true. It’s a prime example of a zombie idea — an idea that should have been killed by evidence, but refuses to die.
And it does a lot of harm. Before we get there, however, what do we actually know about skills and jobs?
Think about what we would expect to find if there really were a skills shortage. Above all, we should see workers with the right skills doing well, while only those without those skills are doing badly. We don’t.
Yes, workers with a lot of formal education have lower unemployment than those with less, but that’s always true, in good times and bad. The crucial point is that unemployment remains much higher among workers at all education levels than it was before the financial crisis. The same is true across occupations: workers in every major category are doing worse than they were in 2007.
Some employers do complain that they’re finding it hard to find workers with the skills they need. But show us the money: If employers are really crying out for certain skills, they should be willing to offer higher wages to attract workers with those skills. In reality, however, it’s very hard to find groups of workers getting big wage increases, and the cases you can find don’t fit the conventional wisdom at all. It’s good, for example, that workers who know how to operate a sewing machine are seeing significant raises in wages, but I very much doubt that these are the skills people who make a lot of noise about the alleged gap have in mind.
And it’s not just the evidence on unemployment and wages that refutes the skills-gap story. Careful surveys of employers — like those recently conducted by researchers at both M.I.T. and the Boston Consulting Group — similarly find, as the consulting group declared, that “worries of a skills gap crisis are overblown.”
The one piece of evidence you might cite in favor of the skills-gap story is the sharp rise in long-term unemployment, which could be evidence that many workers don’t have what employers want. But it isn’t. At this point, we know a lot about the long-term unemployed, and they’re pretty much indistinguishable in skills from laid-off workers who quickly find new jobs. So what’s their problem? It’s the very fact of being out of work, which makes employers unwilling even to look at their qualifications.
So how does the myth of a skills shortage not only persist, but remain part of what “everyone knows”? Well, there was a nice illustration of the process last fall, when some news media reported that 92 percent of top executives said that there was, indeed, a skills gap. The basis for this claim? A telephone survey in which executives were asked, “Which of the following do you feel best describes the ‘gap’ in the U.S. workforce skills gap?” followed by a list of alternatives. Given the loaded question, it’s actually amazing that 8 percent of the respondents were willing to declare that there was no gap.
The point is that influential people move in circles in which repeating the skills-gap story — or, better yet, writing about skill gaps in media outlets like Politico — is a badge of seriousness, an assertion of tribal identity. And the zombie shambles on.
Unfortunately, the skills myth — like the myth of a looming debt crisis — is having dire effects on real-world policy. Instead of focusing on the way disastrously wrongheaded fiscal policy and inadequate action by the Federal Reserve have crippled the economy and demanding action, important people piously wring their hands about the failings of American workers.
Moreover, by blaming workers for their own plight, the skills myth shifts attention away from the spectacle of soaring profits and bonuses even as employment and wages stagnate. Of course, that may be another reason corporate executives like the myth so much.
So we need to kill this zombie, if we can, and stop making excuses for an economy that punishes workers.
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 30, 2014
“Blowing Away The Smoke”: A Democrat-Sponsored Tax Cut Calls The GOP’s Anti-Poverty Bluff
For months now, as congressional Republicans have blocked repeated attempts to extend benefits to the long-term unemployed, as they’ve fought to deny low-income Americans access to health insurance, as they’ve advocated to cut tens of billions from the food stamp program, as they’ve resisted proposals to raise the minimum wage, they have simultaneously professed their commitment to American workers and the poor.
Senator Patty Murray put forth a new test of that commitment on Wednesday, by introducing legislation to expand the Earned Income Tax Credit. The EITC is already one of the largest and most effective anti-poverty programs, rewarding low-wage earners for their work and lightening their tax burden. It’s also one of the very few specific anti-poverty policies Republicans have praised in recent months.
Murray’s bill, the “21st Century Worker Tax Cut Act,” would increase the maximum credit for childless adults and create a new tax deduction for families with two working parents. It’s intended to complement the Democrats’ campaign for a higher minimum wage, and to force Republicans to take a real stand on help for American workers. Given their recent nods towards the EITC, one might reasonably expect Republicans to consider Murray’s proposal seriously. (President Obama also proposed an EITC expansion in his budget for 2015.) Even the tax loopholes Murray proposes closing in order to pay for the expansion have already been singled out for elimination by the Republican chairman of the House Ways and Means Committee, Robert Camp. But these are not reasonable times.
The Republican’s recent expressions of support for expanding the EITC have always seemed more opportunistic than sincere. Rather than actively working to extend the credit to more Americans, the GOP instead uses the EITC as “a protective shield against populist attacks,” as Jonathan Chait put it; specifically, as a counterpoint to calls from the left to raise the minimum wage.
“The minimum wage makes it more expensive for employers to hire low-skilled workers, but the EITC, on the other hand, gives workers a boost—without hurting their prospects,” Representative Paul Ryan said of the EITC in a January speech at the Brookings Institution. “It gives families flexibility—it helps them take ownership of their lives.”
Conservative pundits and academics have taken a similar line. Two economists at the American Enterprise Institute argued last year that “expanding the earned income tax credit is a much more efficient way to fight poverty than increasing the minimum wage.” Steve Moore of the Heritage Foundation argued in favor of a higher EITC in January, as did former Bush advisor Glenn Hubbard. Another former Bush advisor, Harvard economist Gregory Mankiw, wrote recently that the EITC was “distinctly better” than raising the minimum wage because the costs are born by taxpayers rather than employers.
In his own much-hyped poverty speech in January, Senator Marco Rubio advocated for replacing the EITC with a “federal wage enhancement” subsidy. The vague contours of the alternative he proposed suggested that what he had in mind was nearly identical to the EITC, but with more support for people without kids.
Rubio was right to point out that one of the major shortcomings of the current EITC is that it offers minimal assistance to childless workers. As the program operates now, people without children who are under 25 are ineligible, and the maximum credit for those between 25 and 64 is $487. Families with children receive more substantial benefits. In 2011, their average credit was $2,905.
Murray’s bill addresses Rubio’s professed concern for childless workers by lowering the eligibility age to 21 and raising the maximum credit for childless workers to about $1,400. Those changes would benefit thirteen million people, according to a Treasury Department estimate. The legislation also increases support for families with two working parents by allowing a secondary earner to deduct twenty percent of their income from their federal taxes. This could offset childcare, transportation, and other costs associated with entering the workforce, thus encouraging more stay-at-home parents to find jobs. More than seven million families would benefit from this new deduction, according to the Joint Committee on Taxation.
The bill also doubles the penalties for tax payers who fail to comply with the Internal Revenue Service’s “due diligence” requirement, a reform that addresses Republican concerns about the costs of improper claims.
If Republicans really wanted to use the EITC as a vehicle for boosting low wages, this legislation provides an excellent starting point for negotiation. But they’re unlikely to engage with it seriously, because their lauding of the EITC was never serious to begin with. For example, Rubio’s proposal to expand the credit for childless workers would have been accomplished by taking money away from workers with kids, instead of by increasing the size of the program overall.
Republicans will face a tricky situation if Harry Reid brings Murray’s bill up for a vote in the Senate. “If Republicans aren’t interested in supporting this bill, they’ll need to explain why they are rejecting the alternative that they have often pointed to in order to justify opposing raising the minimum wage,” a senior Democratic aide told The Nation.
If recent votes on unemployment insurance are any indication, Republicans are far more likely to risk hypocrisy and find reasons to kill the bill than do any real governing, even on policies they profess to support. If a vote doesn’t accomplish much for low-wage workers, it may at least blow away some of the smoke from the GOP’s show.
By: Zoe Carpenter, The Nation, March 26, 2014
“The GOP Is Trying To Repeal The 20th Century”: The Right’s Crusade Against Overtime Pay, Why They Despise Worker Rights
Silly me: President Obama’s executive order to expand opportunities for overtime pay Thursday seemed like a win-win. Currently, if you make more than $23,000, you can’t necessarily receive overtime; the president’s order would raise that cap, and also make it harder for employers to classify people with almost no supervisory duties as “supervisors” and thus exempt.
Where’s the downside? Newly qualified workers currently being forced to work overtime without pay will now get higher wages. Or, if their employer doesn’t want to spring for the overtime pay (traditionally time and a half), they will have to expand their workforce to get the work done. Higher wages and/or more jobs: Sounds good, right?
Not to Republicans, of course. The backlash to the president’s overtime-pay expansion just makes clear what we’ve known for a long time: They oppose every attempt by government to reward hard work and protect the rights of workers – unless it applies to the very wealthy.
Speaker John Boehner sounded unusually befuddled opposing Obama’s move. “If you don’t have a job, you don’t qualify for overtime. So what do you get out of it? You get nothing,” he told the Washington Post. “The president’s policies are making it difficult for employers to expand employment. And until the president’s policies get out of the way, employers are going to continue to sit on their hands.”
The president’s policies are in fact making it harder for employers to exploit their workers. That’s all. As Jared Bernstein told the New York Times. “I think a potential side effect is that you may see more hiring in order to avoid overtime costs, which would be an awfully good thing right about now.”
Or you’ll see higher wages, which would also be an awfully good thing. One of the major causes of rising income inequality is that back in the 1970s, rising productivity suddenly became detached from rising wages. For decades — since the labor-rights reforms and social welfare advances of the ’30s and ’40s — the two lines climbed in tandem, with higher productivity translating into higher paychecks. The two came apart, in what’s become known as “the great divergence,” at the same time as income inequality began to climb. There are many reasons for the productivity-wage split, including a stagnant minimum wage, declining union membership, and weaker labor rights overall – including less compensated overtime.
Republicans no longer accept that it was government intervention in the economy, first in the Progressive era and then, more forcefully, after the Great Depression, that created the greatest economic boom and the biggest middle class in history. The 40-hour work week. The weekend. Vacations. Child labor laws. The minimum wage. Social Security. Health and safety protection. All of these represented government intervention on the side of working people, to balance the playing field with exploitive employers, and to carve out a realm of family and personal life that could be protected from ceaseless labor. Progressive public policy essentially created childhood, as a time when kids who weren’t wealthy might be educated and protected from labor abuse.
These became bipartisan values, with some debating around the margins, through Richard Nixon’s administration. But then a pro-business backlash put all of those gains back on the table. Republicans are now trying to repeal the 20th century.
“The federal government, in particular, shouldn’t be involved in labor markets in any way, shape or form,” says Jeffrey Miron, economic studies director at the Cato Institute. Cato is a libertarian think tank, but Miron’s once-radical point of view is now the GOP mainstream.
We’ve seen Republicans, like friend-of-the-poor Paul Ryan, fiercely oppose even modest increases in the minimum wage – even though earlier hikes always had a decent amount of bipartisan support. In fact, more Republicans today are openly insisting there shouldn’t even be a minimum wage, from formerly sensible Tennessee Sen. Lamar Alexander to Texas Gov. Rick Perry and his home state ally Rep. Joe Barton. GOP Senate candidates in North Carolina and Iowa have made abolishing the minimum wage a pillar of their campaigns.
We already know Republicans hate unions, whether public or private sector. One of the hottest CPAC sessions last week focused on “the Wisconsin model” of public sector union busting, but we also saw how hard GOP elected officials in Tennessee fought a union drive among Volkswagen workers there.
Some on the right have even clamored to bring back child labor. Newt Gingrich suggested poor kids should work as janitors to earn their school lunches, in order to fight the “culture” of poverty. (Like Paul Ryan, he doesn’t seem to see that food is the best answer for hunger.) Utah’s Tea Party Sen. Mike Lee has declared federal child labor laws “unconstitutional,” while up in Maine, wingnut Gov. Paul LePage would like to lower the legal working age from 16 to 12.
I’ve never understood why Republicans believe rich people need more money to ensure they’ll work harder, but the non-rich don’t deserve such incentives. From skyrocketing CEO pay to lower tax rates, the GOP defends putting more money in the hands of rich folks as a good thing. Giving more money to working people, by contrast, only encourages slackers and moochers. The president can’t wait for Republicans to join the 21st century while they’re busy repealing the 20th. He’s right to do whatever he can to boost workers’ wages on his own.
By: Joan Walsh, Editor at Large, Salon, March 14, 2014
“Raising The Minimum Is The Bare Minimum”: What America Needs Is To Shift Income From Capital To Labor
In 1995, when John Sweeney ran the first and as-yet-only insurgent campaign for the presidency of the AFL-CIO, his platform took the form of a book entitled America Needs a Raise. If that title rang true in 1995, it clangs with deafening authority today.
Which leads us to the only problem with the current campaigns to raise the minimum wage: It’s not just workers at the low end of the wage scale who need a raise. It’s not just the work of the bottom 9 percent of labor force that is undervalued. It’s the work of the bottom 90 percent.
Conservatives who oppose raising the minimum wage argue that we need to address the decline of the family and the failure of the schools if we are to arrest the income decline at the bottom of the economic ladder. But how then to explain the income stagnation of those who are, say, on the 85th rung of a 100-rung ladder? How does the decline of the family explain why all gains in productivity now go to the richest 10 percent of Americans only? And are teachers unions really to blame for the fact that wages now constitute the lowest share of Gross Domestic Product since the government started measuring shares, and that corporate profits now constitute the highest share?
We need to raise the minimum wage, but that’s only the start. Even more fundamentally, we must reverse the deeper and more profound redistribution of wealth that has now plagued the nation for several decades: that from capital to labor.
For as income from work declines for the nation as a whole—inflation-adjusted median hourly wages are now more than $1.50 lower than they were in 1972—income from investment soars. The stock markets are hitting record highs, and major corporations are using the $1.5 trillion they have lying around to raise not wages but dividends. They are also using some of that cash to buy back their own stock, which raises the value of the outstanding shares, to which, happily, most CEO’s compensation packages are linked.
The institutions that once ensured that American workers actually got their share of the pie—unions—have been so thoroughly battered down that they can no longer effectively bargain for raises. That leaves that other instrument of the popular will— the state—as the sole remaining institution that can bargain for workers. That’s why the minimum wage, the living wage and the Earned Income Tax Credit have taken on a greater significance than they previously held: They not only raise the incomes of the poor, but are the last remaining vehicles for raising wages.
That’s why just stopping with raising the minimum, important though that be to the nation’s economic and moral health, is nowhere near enough. Making it safe again for workers to try to join unions is a necessity, too, but that’s a fight that labor has been waging for half-a-century with nothing to show for it. The left needs to battle on other fronts as well.
We could begin by shifting the tax burden from labor to capital—after all, income in America has long been shifted from labor to capital. We could abolish the payroll tax on the first $25,000 that people make, substituting for it a higher threshold on taxable income. We could raise the tax rates on capital gains and dividends not just to the same levels as income derived from work but higher still. And we could explicitly designate some of the revenue from capital income to go to a much expanded Earned Income Tax Credit—expanded not just by making the payments more generous, but also by raising the criterion for eligibility well above the government’s poverty threshold.
By explicitly taking back from capital some of the wealth it has taken from labor, government would begin to address the root causes of economic inequality. Not all of them, to be sure: The stratospheric salaries that top corporate executives and Wall Street traders command aren’t capital income as such. One way to rein in executive pay might be to set corporate tax rates by the size of the gap between top executives’ and median workers’ pay, the data on which the Securities and Exchange Commission is supposed to make public under the terms of Dodd-Frank. Or it might be to set corporate tax rates based whether the corporation has a stakeholder or a shareholder board. In Germany, corporations are required to have equal numbers of employee and management representatives on their boards, which has effectively reduced CEO pay at most German companies to a multiple of 10 or 12 times that of its median employee, not the 200 or 300 times that’s the norm in the U.S.
If we want to address economic equality, we need to follow the money. In recent decades, as a result not just of globalization and technology but also of the decline of unions and the rising political power of the rich, the money has almost entirely gone to the rich—in the current recovery, fully 95 percent of income growth to the top 1 percent. So by all means, raise the minimum wage. But don’t stop there.
By: Harold Meyerson, The American Prospect, January 22, 2014
“The Undeserving Rich”: Capitalism As Currently Constituted Is Undermining The Foundations Of Middle-Class Society
The reality of rising American inequality is stark. Since the late 1970s real wages for the bottom half of the work force have stagnated or fallen, while the incomes of the top 1 percent have nearly quadrupled (and the incomes of the top 0.1 percent have risen even more). While we can and should have a serious debate about what to do about this situation, the simple fact — American capitalism as currently constituted is undermining the foundations of middle-class society — shouldn’t be up for argument.
But it is, of course. Partly this reflects Upton Sinclair’s famous dictum: It is difficult to get a man to understand something when his salary depends on his not understanding it. But it also, I think, reflects distaste for the implications of the numbers, which seem almost like an open invitation to class warfare — or, if you prefer, a demonstration that class warfare is already underway, with the plutocrats on offense.
The result has been a determined campaign of statistical obfuscation. At its cruder end this campaign comes close to outright falsification; at its more sophisticated end it involves using fancy footwork to propagate what I think of as the myth of the deserving rich.
For an example of de facto falsification, one need look no further than a recent column by Bret Stephens of The Wall Street Journal, which first accused President Obama (wrongly) of making a factual error, then proceeded to assert that rising inequality was no big deal, because everyone has been making big gains. Why, incomes for the bottom fifth of the U.S. population have risen 186 percent since 1979!
If this sounds wrong to you, it should: that’s a nominal number, not corrected for inflation. You can find the inflation-corrected number in the same Census Bureau table; it shows incomes for the bottom fifth actually falling. Oh, and for the record, at the time of writing this elementary error had not been corrected on The Journal’s website.
O.K., that’s what crude obfuscation looks like. What about the fancier version?
I’ve noted before that conservatives seem fixated on the notion that poverty is basically the result of character problems among the poor. This may once have had a grain of truth to it, but for the past three decades and more the main obstacle facing the poor has been the lack of jobs paying decent wages. But the myth of the undeserving poor persists, and so does a counterpart myth, that of the deserving rich.
The story goes like this: America’s affluent are affluent because they made the right lifestyle choices. They got themselves good educations, they got and stayed married, and so on. Basically, affluence is a reward for adhering to the Victorian virtues.
What’s wrong with this story? Even on its own terms, it postulates opportunities that don’t exist. For example, how are children of the poor, or even the working class, supposed to get a good education in an era of declining support for and sharply rising tuition at public universities? Even social indicators like family stability are, to an important extent, economic phenomena: nothing takes a toll on family values like lack of employment opportunities.
But the main thing about this myth is that it misidentifies the winners from growing inequality. White-collar professionals, even if married to each other, are only doing O.K. The big winners are a much smaller group. The Occupy movement popularized the concept of the “1 percent,” which is a good shorthand for the rising elite, but if anything includes too many people: most of the gains of the top 1 percent have in fact gone to an even tinier elite, the top 0.1 percent.
And who are these lucky few? Mainly they’re executives of some kind, especially, although not only, in finance. You can argue about whether these people deserve to be paid so well, but one thing is clear: They didn’t get where they are simply by being prudent, clean and sober.
So how can the myth of the deserving rich be sustained? Mainly through a strategy of distortion by dilution. You almost never see apologists for inequality willing to talk about the 1 percent, let alone the really big winners. Instead, they talk about the top 20 percent, or at best the top 5 percent. These may sound like innocent choices, but they’re not, because they involve lumping in married lawyers with the wolves of Wall Street. The DiCaprio movie of that name, by the way, is wildly popular with finance types, who cheer on the title character — another clue to the realities of our new Gilded Age.
Again, I know that these realities make some people, not all of them hired guns for the plutocracy, uncomfortable, and they’d prefer to paint a different picture. But even if the facts have a well-known populist bias, they’re still the facts — and they must be faced.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 19, 2014
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