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Inadequate demand driving unemployment in U.S. manufacturing: study

Persistent unemployment in the manufacturing sector is more likely driven by inadequate demand, not by a shortage of skilled workers, a new Economic Policy Institute report finds.

In Why Claims of Skills Shortages in Manufacturing Are Overblown, Paul Osterman (professor, MIT Sloan School of Management) and Andrew Weaver (Ph.D. candidate, MIT Sloan School of Management) examine whether high unemployment in the U.S. manufacturing industry is due to a shortage of skilled workers, as is commonly held to be the case. Using an original, nationally representative survey of manufacturing establishments that directly and concretely measures skills needs as well as the level of employee vacancies, they show the reality is considerably more complex. In fact, while the skills required of the manufacturing workforce have increased over time, they are well within the reach of most Americans.

“The claim that a shortage of skilled workers is exacerbating inequality and high unemployment is a stock talking point, but it’s not supported by the data,” said Osterman. “Similar to the broader U.S. economy, the manufacturing industry is experiencing a shortfall of demand for workers; as such, available workers far outnumber job openings.”

While skills requirements are real, the skills manufacturers seek are well within the reach of the vast majority of Americans, the report said. For instance, while 38 per cent of manufacturing firms require math beyond simple addition, subtraction and multiplication, the level of extended math that is expected is at the level of a good high school or at most community college education.

Further, only a minority of manufacturers report difficulty recruiting the employees they need. Nearly 65 per cent of establishments report they have no vacancies whatsoever, and 76.3 per cent report they have no long-term vacancies (in which jobs have remained unfilled for three months or more). Only 16.1 per cent of survey respondents — typically plant managers — responded affirmatively when asked whether lack of access to skilled workers is a major obstacle to increasing financial success.

To see this report, click here.