Is the “Skills Gap” a Myth?

In the discussions about the sluggish economic recovery, one explanation offered quite often is that there is a mismatch between the skills required in the new economy and those available from current workers. According to this line of thinking, this so-called skills gap is dampening the US economic recovery.  In yesterday’s New York Times, Paul Krugman took exception to this assertion.  He cited an analysis by Heidi Shierholz at the Economic Policy Institute that makes a detailed case that there is little evidence to support this notion:

There is a sizeable literature on whether a skills mismatch is a driver of today’s weak jobs recovery, and the strong consensus is that the weak labor market recovery is not due to skills mismatch (or any other structural factors). Instead, it is due to weakness in aggregate demand. For example, a 2012 paper by Edward Lazear (chief economist for George W. Bush) and James Spletzer states:

“An analysis of labor market data suggests that there are no structural changes that can explain movements in unemployment rates over recent years. Neither industrial nor demographic shifts nor a mismatch of skills with job vacancies is behind the increased rates of unemployment. … The patterns observed are consistent with unemployment being caused by cyclic phenomena that are more pronounced during the current recession than in prior recessions.”. . . .

Her full analysis is here.

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