The Growing Skills Shortage: A Real Problem or A Politically Expedient Invention


Employers have long complained that graduates do not have the skills they need.

A study released in November by Eurofound, the research arm of the European Union, showed that despite the recession, almost 40 percent of companies reported difficulty in finding workers with the right skills, compared with 37 percent in 2008 and 35 percent in 2005.

The issue peaked last summer, when PayPal’s chief executive in Ireland, Louise Phelan, stoked controversy by acknowledging that the company had recruited from 19 other countries for 500 positions in its operations center in Dundalk because of a lack of foreign-language skills among Irish nationals. This summer, Fujitsu, which employs 800 people in Ireland, revealed that it had had to hire most of its Ph.D.-level experts from abroad.

Liz Alderman, Unemployed in Europe Stymied by Lack of Technology Skills, New York Times, January 3, 2014.


What is the right wage for a business facing stiff global competition: the lowest wage, of course!  Note the last paragraph above.  Apparently, PayPal and Fujitsu did get the workers they needed.

Let’s try another interpretation.  The high tech jobs are created mostly in very large corporations.  Those corporations recruit workers globally, regardless of where their operations are located.  Note this paragraph from the same story:

“Multinational technology and social media companies kept investing, lured by Ireland’s ultralow 12.5 percent corporate tax rate and an English-speaking work force.”

It’s a possibility that corporate CEO’s are extremely unlikely to say to a host country like Ireland, “We like your low taxes here, but we can import cheaper workers from other countries — and we will.”  Isn’t it very likely that the real issue for corporate leaders is that the hourly wages of educated workers in more affluent countries are not the lowest wages they can pay and still be successful?

My bet is that CEOs present the issue as a labor supply problem (skills shortage) as political cover and to shift the cause of high unemployment (even for well educated workers) onto the workers themselves and away from the corporations that are making the actual hiring and firing decisions.   My bet is that the world economy actually has plenty of well educated and skilled workers, but the world’s corporations are producing too few jobs to employ them all.  They just won’t ‘fess up.

What is really in short supply are jobs that pay decent wages by North American and Western European standards.   Too much supply (of skilled workers) in a world of too little demand = falling wages.  (Note the concessions the Boeing workers in Seattle, WA just made to keep their jobs!)