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!)

Debt Got Us Here; More Debt Will Keep Us Here


The Federal Reserve opened a new chapter Thursday in its efforts to stimulate the economy, saying that it intends to buy large quantities of mortgage bonds, and potentially other assets, until the job market improves substantially.

Binyamin Appelbaum, Fed Ties New Aid to Jobs Recovery in Forceful Move, New York Times, September 13, 2012.


The likely outcome of the Federal Reserve’s new round of bond buying is another round of investment bubbles, another financial crisis, and another round of concentrating the world’s wealth in the hands of fewer and fewer people.

The underlying problems are 1) income growth for the majority of the world’s people and 2) downward pressure on global GDP growth from limits to the earth’s carrying capacity.

The tradeoff between job growth (which is dependent on rapid GDP growth) and high rates of inflation is a problem tied directly to the finite carrying capacity of the earth.  We started hitting those limits in the 20th century.

Debt growth in the 1970s, 1980s and 1990s worked fairly well as a way to sidestep stagnant income growth for the majority of the world’s middle class people, but it no longer works because of the carrying capacity problem.  As the world economy is currently structured, a jump in global demand from debt growth or from a radical redistribution of wealth sufficient to push job growth to acceptable levels would push prices toward the stratosphere.

The solution to the world’s employment problems is not more debt and it is not classical redistribution of wealth, its a global economic transformation that ends the tradeoff between employment and inflation.

The World Economy’s Demolition Derby of Competing and Overlapping Economic Policy Making Entities


“Why can’t that work come home? Mr. Obama asked. …Mr. Jobs’s reply was unambiguous. ‘Those jobs aren’t coming back,’ he said, according to another dinner guest. … ‘We sell iPhones in over a hundred countries,’ a current Apple executive said. ‘We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.'”

Charles Duhigg and Keith Bradsher, How U.S. Lost Out on iPhone Work, New York Times, January 21, 2012.


“… we demonstrate that an individual country’s role in crisis spreading is not only dependent on its gross macroeconomic capacities, but also on its local and global connectivity profile in the context of the world economic network. … These results suggest that there can be a potential hidden cost in the ongoing globalization movement towards establishing less-constrained, trans-regional economic links between countries, by increasing the vulnerability of global economic system to extreme crises.”

Kyu-Min Lee, Jae-Suk Yang, Gunn Kim, Jaesung Lee, Kwang-Il Goh, In-mook Kim, Impact of the topology of global macroeconomic network on the spreading of economic crises, version 2,, April 2011.


“Open feedback mechanisms ensure a supply chain’s ability to respond to a changing environment, but, in the case of financial supply chains, feedback mechanisms can amplify shocks until the whole system blows up. The Lehman Brothers collapse triggered just such an explosion … Since a complex network comprises linkages between many sub-networks, individual inefficiencies or weaknesses can have an impact on the viability of the whole.”

Andrew Sheng, Global Finance’s Supply-Chain Revolution, Project Syndicate, January 5, 2012.


“Asian economies are exposed to China. Latin America is exposed to lower commodity prices (as both China and the advanced economies slow). Central and Eastern Europe are exposed to the eurozone. And turmoil in the Middle East is causing serious economic risks – both there and elsewhere …The US … faces considerable downside risks from the eurozone crisis.”

Nouriel Roubini, Fragile and Unbalanced in 2012, Project Syndicate, December 15, 2011.


“Undoubtedly politicians should do a much better job of explaining to their constituents’ that what happens beyond the borders of their country-or city has implications for what happens inside their homes. … Despite all these problems, we have no choice: we must make local politics more attuned to global imperatives and make global finance more responsive to local needs.

Moisés Naím, The Dangerous Cocktail of Global Money and Local Politics, Financial Times, November 18, 2011, published on Carnegie Endowment for International Peace website.


On paper it all sounds good: in a system of global free markets, nations, provinces, states, cities and corporations pit their resources and their people’s skills and smarts against each other. As unfettered competition sorts out comparative strengths and weaknesses, each competing economic unit finds its proper role in the world economy, makes its economic contribution efficiently, and earns its share of global wealth.  And the winner is … everybody!

The reality is a global demolition derby of competing and overlapping national, transnational, sub-national, and corporate economic policy making that routinely litters the planet with the wreckage of businesses, communities, families and even whole nations.

Many of us get our images of global competition from the world of sports, but those images are disastrously mistaken.  In the sports world participation is voluntary and competition is highly choreographed.  The umbrella of rules under which teams and individual athletes face each other is comprehensive and well enforced.  The wholeness of the game dominates the individual interests and actions of the competing teams and their players.  As a result, certain teams and players seldom become permanent victors and the consequences of losing are relatively benign.

Teams and players do not bring their own rules to the field of competition; teams and athletes with big differences in competitive resources are not pitted against each other (heavyweight fighters are not pitted against welterweight fighters and minor league baseball teams are not pitted against major league teams); the ratio of referees to players is very high and referees have the power to ensure that the choreographed competition designed into the game is not destroyed by rule breakers; all players get paid whether they win or lose; competitive encounters don’t leave losing teams and players permanently broken and maimed.

This is not the case for competition in the world economy.  Participation is not voluntary and competition is chaotic and brutal.  A comprehensive umbrella of rules does not exist and the rules that do exist are not well enforced.  Global social and economic goals cannot dominate the interests and actions of the thousands of governmental and private sector competitors.  Certain competitors win and maintain dominance over all others for many decades; other competitors become chronic losers.  The consequences of losing are often devastating and extremely long-term.

Competitors do bring their own rules to the global fields of competition.  The more powerful governments and corporations create rules to serve their own interests, regardless of consequences for the good of the whole or consequences for the losers, and then impose them on the less powerful governments and corporations.  Referees in the world economy are vastly outnumbered by competitors and they don’t have sufficient powers of enforcement to reign in rogue competitors.

For almost all the world’s peoples who count themselves as winners, or at least survivors, a consequence of this global demolition derby is chronic and frightening employment and income insecurity.   For losing nations and communities the consequences are often profoundly devastating: high levels of infrastructure loss, permanently broken social institutions, widespread and chronic unemployment and impoverishment, and enormous losses of life to famines, wars, preventable disasters and curable diseases.

Almost certainly, the world’s people will be much better off if we actually do make global economic competition much more like competition in sports.