Does the U.S. Face a Skills Shortage?

One subject currently being disputed by economists and educational planners is whether or not the American workforce will possess the skills required for the economy of the future. I’ve been particularly interested in the subject of skills, having recently finished the manuscript for the second edition of 150 Best Jobs for Your Skills, so I have been intrigued to find so much disagreement on this question of America’s future skills readiness.

One of the leading pessimistic analyses can be found in Help Wanted: Projections of Jobs and Education Requirements Through 2018, by Anthony Carnevale (a former colleague of mine at Educational Testing Service) and others at Georgetown University. These researchers predict that “by 2018, we will need 22 million new workers with college degrees--but will fall short of that number by at least 3 million postsecondary degrees.”

In a critique of this analysis, Paul Harrington (a fellow JIST author) and Andrew M. Sum argue that this predicted skills shortage is illusory. They point out that the Georgetown researchers predict the need for college-educated workers by looking at the number of college graduates in each occupation, with the assumption that these college grads in the workforce will need to be replaced by a new cohort of college grads as the occupations expand or lose workers through turnover. Harrington and Sum prefer to look at the actual skill requirements of each occupation. They maintain that college-educated bartenders and other misplaced college graduates in low-skill occupations will not need to be replaced by similarly high-skilled workers because the nature of the occupation does not require college-level skills.

But perhaps it’s a mistake to focus only on the requirements of occupations; another factor is the rewards of occupations. Additional education produces additional pay, on average, even in low-skill occupations. For example, a bartender does not need a college degree, but survey data shows that a bartender who holds such a degree earns more. As a result, college grads will continue to be diverted from high-skill occupations as effectively as if they will actually be needed in low-skill occupations, creating the potential for skill shortages in high-skill occupations. Such is the argument in still another analysis, by three California economists, David Neumark, Hans Johnson, and Marisol Cuellar Mejia.

However, these three economists do not expect actual skill shortages in the high-skill occupations within the 2018 horizon of the current Bureau of Labor Statistics projections. Compared to the Georgetown team, they count far fewer college grads in the workforce. The California economists base their projections on data from the American Community Survey (ACS), whereas the Georgetown researchers base theirs on the Current Population Survey (CPS). As the California team point out, the CPS overstates the number of people who hold associate degrees by including everyone who gets any kind of postsecondary training short of a bachelor’s. The Georgetown researchers also base their estimates of the mix of college grads in various occupations by looking at figures from 2000 to 2008; the Californians observe that the educational mix of workers in 2008 was anomalous (because of the onset of the recession?) and use the period from 2000 to 2007 instead.

The California researchers are less sanguine about trends beyond 2018, however. By 2030, all the baby boomers will have passed 65. They predict that if high-skill occupational growth and the college graduation rate continue along their current lines, we will face a shortage of appropriately skilled workers.