Morning Must Reads: The Jobs Shortage

You hear us say it a lot. The number one problem in the economy is a lack of job openings, not a mismatch between the skills workers have and the skills employers need. For sure, there is always some skill mismatch in the economy, but there is no evidence that the mismatch today is greater than in the past. There is, however, lots of evidence that there are not enough job openings. 

Professor Peter Cappelli at the Wharton School of Business has a new book out where he tackles this issue. At the link below, there is an insightful discussion of the hiring process that you don't hear often enough in discussions of the labor market. This is an important must read.

Knowledge@Wharton: You cover a lot of ground in this book, but one of your themes is that, given the weak economy and bleak job market, companies have a bigger pool of job applicants to choose from, and therefore can be much more selective in hiring. Yet these companies still claim they can’t find candidates with the requisite skills. Can you talk about that?

Peter Cappelli: I think it’s important to remember that employers control everything about the process. They define the job, they create the requirements for the job, then they decide how the word gets out to people, recruiting-wise. They set the rate of pay, which helps determine how attractive the job is, and then they handle the selection part where they look at the applicants and sort them out.

The obvious point is that there just aren’t enough jobs to go around right now, so employers can certainly be picky. But we’re not really talking about being picky here. It’s not surprising that employers might actually search more, and it might take them longer to hire now, because there are so many candidates to look at. Why grab the first one when you have this long queue that you could look at? But the unusual thing, and certainly the negative thing, from everybody’s perspective are those employers who say, “Look, we’re just not hiring, or we’re waiting a very long time to hire, because we can’t find what we want.” I think the place we have to begin to answer that question is back with the employers who are making all those decisions about the process. Are they doing anything wrong?...

K@W: You also say part of the problem is that companies aren’t paying market wages. They’re trying to low-ball the job market. But why should they pay market wages when they can get employees cheaply?

Cappelli: Well, the thing is they can’t—that’s what they’re claiming, right? There’s a survey done by Manpower that asks employers if they’re having trouble finding people to hire. In that survey, about 11 percent say the problem they’re having is they can’t get people to accept the jobs at the wages they’re paying. So 11 percent are saying we’re not paying enough. If 11 percent admit this, my guess is the real number is probably double that. We’re not very good at identifying problems that we create ourselves. That’s certainly part of it. You know, maybe you can’t blame them for trying. But if they’re not finding [employees], don’t call it a skills gap; don’t call it a skills mismatch—you’re just being cheap.

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