by Jerry O’Driscoll
The Weekend Wall Street Journal has a front-page article on labor mismatch: “Help Wanted: In Unexpected Twist, Some Skilled Jobs Go Begging.” It focuses on the problems that the Union Pacific Railroad is experiencing trying to hire skilled workers to keep the trains rolling. These include electricians who work on diesel engines.
It is a widespread problem: the article reports survey results showing that 83 percent of manufacturers reported a moderate or severe shortage of skilled production workers. The shortages include such categories as machinists. Wages for skilled labor are rising, in some cases at double-digit rates.
Unskilled labor is complementary to skilled labor. If skilled labor cannot be hired, there is no demand for unskilled labor. Some firms report that the inability to hire needed workers is their greatest impediment to growing their business.
Malinvestment in labor markets is the counterpart to malinvestment in capital goods. Higher education is a bubble, and colleges churn out graduates with degrees that have no application in the workplace. Student borrowing to acquire such degrees is malinvestment in the same way that constructions loans to build homes in Las Vegas was malinvestment.
There is no mechanism by which lowering interest rates (“monetary stimulus”) or spending money on public workers (“fiscal stimulus”) is going to cure the problem. Labor mismatch is a manifestation of a coordination failure, just as malinvestment in capital goods is a manifestation of a coordination failure. It is a microeconomic problem.