It is no secret that we are in the midst of a labor shortage, but as I have written recently, how exactly the shortage is accounted for is contested. I had the pleasure of speaking with Ron Hetrick, a leading labor economist at Emsi Burning Glass, whose new report gives important insight into our current labor market predicament, how we got here, and where we might be going. You can find a short-form Q&A from our conversation below.

Orrell: How would you characterize the labor market right now? Are
the higher wages we’ve been hearing about drawing people back to the workforce?

Hetrick: The
labor market right now is just musical chairs. No one is coming off of the
sidelines. The labor force participation rate still hasn’t changed. And we’re
missing over four million people, even if we employ all of the currently
unemployed people. Unemployment is not the problem right now.

As far as the
churn, it’s just people leaving one job to get a raise in another. The people
who have dropped out of the labor force are not being enticed by pay increases.
Higher wages are not drawing people back in.

How do we get people off the sidelines?

There are about 2 million to 3 million people who are currently on the sidelines, who probably will come back to work at some point. The report breaks down the factors including COVID fears and childcare. There is going to be a portion of our population that’s on the sidelines, that’s waiting for these things to be resolved before they re-engage.

For women,
part of it is childcare. Our report dives into the cost issue with childcare.
The labor force participation rate for women 25 to 54 years old is still way
off. The rate peaked at 76.9 percent before the pandemic. It’s now at 75.8
percent. The good news is the rate is improving, but the bad news is it’s still
a full percentage point below where it was.

We also need
to encourage companies to go to people rather than people to companies. All of
the creative and flexible ideas that companies have often end up in job
descriptions that only those seeking jobs will see. The secret will be getting
that message to people who may be out of the labor force because they believe
that working would not be possible with their current life circumstances. Ask
your current employees if they know people who aren’t working and whether could
talk to them about what circumstances would need to be in play to make work a
possibility. Greatly reduced or flexible hours? Onsite childcare or adult care?
Companies need to be creative.

Are we facing the skills mismatch between what employers need and
job seekers have to offer?

It is not so
much a skills mismatch in the way we are used to discussing the problem. We are
actually over-skilled for so many of the service job openings we are creating.
We are missing people with a high school degree or less.

For many,
their problem is that they need lower-skilled people or even people with
mechanical certifications and maintenance skills, and we don’t have many of
those people anymore.

Of our 11.3
million job openings, 6.5 million or more don’t require any kind of college
degree. These jobs are retail, restaurants, basic manufacturing, and
construction laborers. We only have 2.0 million unemployed people in total who
don’t have a post-secondary degree of some kind that would fill these low-skill
jobs.

In 2015, we had three times as many lower-skilled people per lower-skilled job opening than we have now. So, in six years, our economy has changed dramatically. In part, this is because early boomers who had lower levels of education have now retired. But the other problem is that we have utilized most people who were actively seeking work. A lot of people are saying, “We need to upskill people.” And I’m saying, at this point, we need people. Period. Once we have them, upskilling, cross-skilling, whatever needs to happen, can be done.

The post ‘We need people. Period.’ My Q&A with Ron Hetrick, part I appeared first on American Enterprise Institute – AEI.