12 Dec 2015 17:36 IST

Low wages to blame for lack of skilled work force

Employers are unwilling to offer higher wages to suitably skilled workers, study reveals

The lack of work force with skills in science, maths, engineering and technology (STEM) and ‘soft’ communications skills is not due to problems with the education system, but because employers are unwilling to offer higher wages to suitably skilled workers, according to a research paper titled The Skills Gap: Is It a Myth? published by the University of Warwick. The research was conducted by Thijs van Rens, Associate Professor in the Department of Economics at Warwick.

“It is often taken for granted that the skills gap and skills mismatch is a supply problem and appropriate training is not available to workers. However the US data shows that market wages do not reflect the relative demand for different types of skills," said Rens.

“Businesses complain about the lack of workers with STEM skills but are unwilling to raise wages for these workers – or reduce wages for workers with skills that are less in demand.”

Method

In his research Rens used data on job finding rates, earnings and profits across States, industries and occupations to measure the extent of skills mismatch or gap on the US labour market, and the underlying frictions that gave rise to it.

Rens suggests that the labour market can adjust to a skills mismatch in two ways. The workforce may adapt to the demand for skills, for instance by acquiring training or changing occupation, or firms may adapt to the supply of skills.

However for one or both of these to happen, wages must reflect the relative supply and demand for various skills.

He sets out three reasons why skills mismatch exists: workers don’t adjust to changes in skills demand; firms don’t adjust to changes in skill supply, or wages do not reflect skills shortages.

Rens also argues that reforms in the education system are not an answer to the perceived lack of appropriately skilled workers. As long as wages do not reward certain skills, workers will be less likely to acquire them. Even if they do, they will find employment in higher-paid occupations that do not utilise these skills.

Read the whole report here.