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Building America's Skilled Technical Workforce (2017)

Chapter: 2 Labor Market Patterns and Trends

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Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
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Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
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Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
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Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
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Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
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Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
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Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
×
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Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
×
Page 28
Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
×
Page 29
Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
×
Page 30
Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
×
Page 31
Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
×
Page 32
Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
×
Page 33
Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
×
Page 34
Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
×
Page 35
Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
×
Page 36
Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
×
Page 37
Suggested Citation:"2 Labor Market Patterns and Trends." National Academies of Sciences, Engineering, and Medicine. 2017. Building America's Skilled Technical Workforce. Washington, DC: The National Academies Press. doi: 10.17226/23472.
×
Page 38

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2 Labor Market Patterns and Trends In its most recent employment projections for 2014-2024, the Bureau of Labor Statistics (BLS) reports that 5 of the 15 fastest-growing occupations will require some level of postsecondary education but will not require a bachelor’s degree (BLS, 2015, Table 3). Occupations that typically require postsecondary education for entry are expected, on average, to grow faster than occupations that require a high school diploma or less. However, growth rates can be misleading because some fast-growing occupations employ very few workers. For example, one of the fastest-growing occupations is biochemical engineer, but the expected increase in the number of these jobs is among the smallest of all occupations. Some analysts argue that the trend is for a “hollowing-out” of the workforce, in which high-skill occupations requiring a minimum of a 4-year degree and low-skill occupations requiring a high school diploma or less continue to grow, but skilled technical occupations shrink (see, for example, Acemoglu and Autor, 2010; Autor, 2010; Autor and Dorn, 2013; Autor and Price, 2013; Autor et al., 2003; Levy and Murnane, 2013). This chapter turns to the question of whether the U.S. supply of skilled technical workers adequately meets demand now and in the foreseeable future. The first section looks at evidence of possible gaps and imbalances in specific skilled technical occupations, industries, and locations. The second section examines local and sectoral trends in the demand for and supply of technical skills. To understand better the policy issues affecting skilled technical labor markets, the next two sections review the dynamics in two sectors with high numbers of skilled technical occupations—health care and manufacturing. These sectors also serve as examples of how advances in science and technology can affect skilled technical labor markets. Providing an international perspective, the chapter then addresses how information and communication technologies are changing how work is organized and performed in Organisation for Economic Co-operation and Development (OECD) and partner countries. The Survey of Adult Skills conducted by OECD’s Programme for the International Assessment of Adult Competencies (PIAAC) reveals that shortages of and gaps or mismatches in skills are common across the countries studied, suggesting the 21

22 BUILDING AMERICA’S SKILLED TECHNICAL WORKFORCE need for a more comprehensive analysis of the demand for and use of skills. The final section presents conclusions. 2.1 THE SUPPLY OF AND DEMAND FOR SKILLED TECHNICAL WORKERS Recent surveys show that the demand for higher levels of workforce skills has increased over time and is likely to continue to do so. As Figure 2-1 shows, some analysts estimate that the demand for nonroutine skills in the United States rose during the period 1960-2009, while the demand for routine skills fell. However, these estimates include the demand for a wide range of skills—from those that require some postsecondary preparation but less than a baccalaureate credential to those that require doctoral and postdoctoral education and training. An increasing demand for higher-skilled workers does not necessarily provide evidence of the need for skilled technical workers. Citing a 2010 study by Carnevale and colleagues of Georgetown University that looks specifically at the demand for skilled technical workers, FIGURE 2-1 Change in demand for skills: Trends in routine and nonroutine tasks in occupations, United States, 1960-2009. NOTE: The authors assigned task scores to each worker on the basis of his or her reported Census Occupation Category. SOURCE: Autor and Price, 2013, p. 5.

LABOR MARKET PATTERNS AND TRENDS 23 the National Governors Association (NGA) Center for Best Practices warned that of the 48 million job openings projected through 2018, 63 percent will require some postsecondary education, while only 42 percent of the current workforce has an associate’s or higher degree (Hoffman and Reindl, 2011). The NGA estimated that the nation will need to increase the current number of skilled technical workers by 3 million by 2018. Analyzing and projecting the demand for skills in the U.S. economy is important because these estimates are critical inputs for a wide range of workforce development decisions, including choices to pursue education and training, the design of education and training programs and infrastructure, teacher preparation, employer investments in production and innovation, and policy making with respect to economic development. However, there is considerable controversy about the nature of U.S. labor market shortages, skills gaps or mismatches, and the analytical approaches used to develop these estimates. 1 To address questions about patterns and trends in the demand for and supply of technical skills, the committee sought data and analyses on the current supply of and demand for workers, labor market projections, and the forces likely to affect supply and demand conditions over time. As discussed in more detail in Chapters 3 and 5, the limitations of the current U.S. labor market information system make it very difficult to measure change in the skilled technical workforce precisely. Looking at recent trends and future projections across a variety of measures, however, the committee was able to develop a collage of evidence that can be used to detect broad changes in the direction of the skills gap. For example, recent trends in job vacancies, employment, and wages can be used to suggest current labor market conditions and highlight areas in which potential imbalances may exist. In the short term, these data include persistent high vacancy rates coupled with strong employment growth and rising wages within specific occupations or regional labor markets. 2 Similarly, future projections of demographic changes and employment growth can indicate where future gaps may arise. Long-term changes in the size and composition of the available workforce can affect the cost of labor and the need for workforce development. Changes in the workforce can have important implications for the ways in which employers organize, operate, and compete: if labor is too costly in one location, employers may move jobs to another location or automate tasks that would otherwise be performed by human workers. The committee’s pattern and trend analysis suggests that there may be gaps and imbalances in specific 1 For additional background on the debate, see Kimmel and Martin (2015), Faberman and Mazumder (2012), and Fichen and Pellizzari (2014). 2 Even this type of evidence can be seen as consistent with temporary imbalances due to cyclical forces. One would need to observe these trends over a period longer than the business cycle to conclude that structural forces are indeed at work.

24 BUILDING AMERICA’S SKILLED TECHNICAL WORKFORCE skilled technical occupations, industries, and locations. These issues are explored at the national, local, and sectoral levels in the sections that follow. 2.1.1 National Trends in the Demand for and Supply of Skilled Technical Workers Monitoring and measuring change in the types of skills possessed by the skilled technical workforce and the size of this workforce at the national level is difficult. 3 To derive the number of skilled technical workers in the labor force, economists typically categorize the skill level of a worker based on the person’s reported educational attainment. However, these data have significant limitations (Reamer, 2015; Rothwell, 2015). Until very recently, for example, nationally representative demographic surveys of work and education experience did not ask about or draw careful distinctions between traditional formal education and other types of education and training or skills acquisition, such as alternative credentials or education and training that do not confer credit toward a credential. Thus, the use of education as an indicator of skill level can mask variation in skill levels within educational categories (Lemieux, 2006). The National Science Board reports that data accumulated over decades reveal that in the United States, “degree is not destiny,” and that only a very loose association exists between degrees and jobs at all education levels and in all degree fields (NSB, 2015). It finds that, compared with those of other nations, U.S. graduates are generally less constrained by their degree field in pursuing career options. Moreover, sorting into education and training programs is based primarily on student choices. In some nations in Europe and Asia, it is more common than in the United States to require certification for jobs and more difficult for businesses or other types of organizations to redesign jobs. By contrast, U.S. employers can be quite fluid and can acquire and use employees’ skills in differing ways. 2.1.2 Exploring Imbalances across the Skilled Technical Workforce in the United States With the foregoing caveats in mind, the committee explored imbalances in the skilled technical workforce at the national level. In a commissioned paper, Alicia Sasser Modestino of Northeastern University examines job vacancy 3 Monitoring and measurement difficulties are identified in most of the papers commissioned for this study. For discussion of the issues regarding measurement of the entire skilled technical workforce, see Rothwell (2015), Modestino (2015), and Reamer (2015). For discussion of the issues regarding analysis of local labor markets, see GAO (2013). For discussion of the need for innovation in labor market measurement and research, see Reamer (2015).

LABOR MARKET PATTERNS AND TRENDS 25 measures to determine which major occupation groups experienced the tightest labor market conditions as of the peak of the most recent business cycle (2006), and whether these conditions persisted through the economic recovery (2012) (Modestino, 2015, 2016). She then delves more deeply into the data to examine recent wage growth (2012-2014) and future employment projections (2012- 2022) by specific occupations within these major occupation groups. Modestino finds that major occupation groups with persistently high vacancy rates employ a relatively high share of both skilled technical and higher-skilled workers (Modestino, 2015, Table 1.1). Occupation groups with critical vacancy levels include management, business, computer and mathematical science, architecture and engineering, and health care practitioners and technical occupations. 4 These occupation groups also have low unemployment relative to the number of vacancies—less than one unemployed worker per job opening—suggesting particularly tight labor markets. Many of these occupations include a significant percentage of skilled technical jobs. 5 For example, within the health care practitioner and technical occupation group, critical vacancies exist in occupations that employ a high percentage of workers with only some college or an associate’s degree, such as medical and clinical laboratory technicians, surgical technologists, licensed practical and licensed vocational nurses, and medical records and health information technicians (Modestino, 2015, Table 1.2). In addition, most of the occupations that require technical skills offer high and rising wages, as well as significant projected employment growth through 2022. Among all occupations with critical vacancy levels, those that employed a larger share of skilled workers had higher job vacancy rates both before and after the recession. Modestino also analyzed aggregate data for the supply of and demand for skilled workers by education level through 2022. She argues that the supply of skilled technical workers is likely to hold steady, but the composition of supply is not likely to keep pace with demand in the near future. Among individuals with skilled technical credentials, the percentage of those with some college is projected to increase, while the percentage of those with an associate’s degree is not expected to change. Modestino attributes this forecast to low degree- 4 Occupations with critical vacancy levels are defined as those having both a higher-than- average vacancy rate (number of vacancies as a percentage of total employment) and a higher-than-average vacancy share (number of vacancies as a percentage of total vacancies). 5 In fact, skilled technical jobs are distributed throughout the broad occupation categories, suggesting that such workers are not concentrated in just a few easily identifiable sectors. Moreover, many of the jobs held by skilled technical workers appear to be complementary to those held by high-skill workers. For example, hospitals need both physicians and nursing and other support staff—jobs not easily automated or outsourced. Likewise, engineering firms need both engineers and technicians, while businesses need both systems analysts and computer support specialists.

26 BUILDING AMERICA’S SKILLED TECHNICAL WORKFORCE completion rates in the nation’s community colleges. She notes that these projections may overestimate the supply of technically skilled workers given that labor force participation has been declining, particularly for individuals with less than a 4-year degree. Modestino’s projections indicate that by 2022, the percentage of skilled technical job openings is likely to exceed the percentage of skilled technical workers in the labor force by roughly 1.3 percentage points, representing a shortage of about 3.4 million skilled technical workers. As the men and women of the baby boom generation continue to retire over the next decade, the absolute number of skilled technical workers will likely fall short of demand. Modestino states that her projections probably underestimate future skill imbalances because they are based on current educational requirements for jobs, which tend to increase over time. Although Modestino’s projections of future labor supply and demand may indicate where future investments in human capital may be warranted, it is important to note that future employment will be determined not only by the demands of employers and the skills of existing workers but also by future innovations that cannot fully be anticipated. For example, there is a wide- ranging debate about the impact of developments in artificial intelligence and computerization on employment and workforce development (see, for example, Arntz et al. [2016] and Frey and Osborne [2013] 6). Thus, forecasts of future labor demand are used only to place bounds on the problem and provide context rather than to pinpoint the exact number of workers that will be demanded in the future. Employers and workers are likely to adjust their behavior over the next decade if they have the incentive to do so. Workers could adjust by obtaining additional education or training or by applying their current skills in existing jobs in expanding occupations. Similarly, depending upon the structure of their incentives and the availability of skilled workers in the United States, employers could adjust by adopting new technologies, outsourcing, or restructuring jobs. As mentioned in Chapter 1, certain conditions can create persistent labor market imbalances if demand changes rapidly and the incentives for adjustment on the supply side are weak. On the demand side, structural changes associated with advances in science and technology and competitive forces have been shown to accelerate the creation and destruction of skilled technical jobs over the course of the business cycle (Jaimovich and Siu, 2012). On the supply side, inadequate early academic preparation and weak incentives can slow the response on the part of individuals seeking to acquire technical credentials. These types of conditions could create mismatches in some specific occupational and industry sectors, such as health care. However, uncovering 6 Whereas Frey and Osborne (2013) estimate that 47 percent of existing U.S. jobs are at risk, Arntz and colleagues (2016) estimate that this is the case for only 9 percent of existing U.S. jobs.

LABOR MARKET PATTERNS AND TRENDS 27 these conditions requires more detailed information and analyses at the organization, industry, and geographic levels. This evidence is examined in the next section. 2.2 LOCAL AND SECTORAL TRENDS IN THE DEMAND FOR AND SUPPLY OF TECHNICAL SKILLS Many participants in the 2015 symposium convened by the committee (see Chapter 1) expressed the belief that certain regions and sectors are impeded in their ability to grow and compete because they cannot consistently meet the demand for skills. 7 Panel discussions on the current labor market (Panel 2); high school, community college, and health care pathways (Panels 3, 4, and 8); apprenticeships (Panel 6); and even federally funded programs (Panel 7) all pointed to the local and sectoral nature of skilled technical labor markets. In their keynote remarks, Senator Tim Kaine and U.S. Chamber of Commerce Foundation Senior Adviser John McKernan reinforced these comments by reflecting on their experience with and understanding of local differences. The National Science Board argues that science, technology, engineering, and mathematics (STEM) workforces, like the skilled technical workforce, are quite heterogeneous; they consist of many different subworkforces based on degree field, occupational field, required education level, or some combination of these factors (NSB, 2015). The demand for, supply of, and career prospects for each subworkforce can vary significantly by employment sector, industry, or geographic region. The National Science Board warns that aggregate analyses and overgeneralizations that apply particular issues or challenges for a specific subworkforce to the entire workforce often lead to incorrect conclusions about the condition of the workforce. The Board argues that exploration of important questions about the STEM workforces requires a focus on disaggregated data associated with the specific subworkforce of interest. 2.2.1 Exploring the Evidence at the Local Level A 2013 study by the Government Accountability Office (GAO) of the implementation of the federal Workforce Investment Act captures early evidence on the local and sectoral differences in skilled technical labor markets. GAO (2013) found that employers in 80 percent of the local areas surveyed in calendar year 2012 claimed some difficulty in filling skilled technical jobs and that employers’ needs in some local areas were clearly not being met. Certain jobs, such as welders, machinists, and truck drivers, as well as those in health care and computer occupations, were particularly difficult to fill. Other skilled 7 See the agenda for the symposium in Appendix A.

28 BUILDING AMERICA’S SKILLED TECHNICAL WORKFORCE technical jobs that were difficult to fill and considered to be high-growth were in the construction and extraction and the installation, maintenance, and repair occupational groups. The 2013 GAO study draws attention to the fact that workforce development is a local as well as a national issue. The study finds that 90 percent of local areas use state job banks and occupational projections to estimate labor market requirements. Moreover, the study highlights evidence of imbalances that arise from unique features of local labor markets, which means that a one-size-fits-all approach will not be efficient or effective. The demand for technical skills is even more likely to be specific to a given location if workers are unlikely to migrate to new jobs. Thus, workforce development activities that are guided by national trends are destined to miss their targets, and better data-driven matching and planning of current and future job openings and current and future job seekers at the local level would appear wise. Some analysts, for example, assume that workers can and will move to obtain a job and that mobility is costless. However, a wide range of factors can affect mobility, including housing costs, the quality of education and training options, family responsibilities, social networks, and occupationally related regulation. For instance, many skilled technical jobs require occupational licensing, which imposes costs that can affect mobility. A key finding of a 2015 White House report is that licensing restricts the mobility of workers across states (The White House, 2015). Figure 2-2 illustrates the substantial differences in movement across state lines between workers in highly licensed occupations and other workers. The figure also shows that interstate migration rates for workers in the most-licensed occupations are lower by nearly 14 percent of the average migration rate compared with those in the least-licensed occupations. 2.2.2 Exploring the Evidence at the Sectoral Level In addition to local concerns, many symposium participants in the pathways and pipelines panels (Panels 3, 4, and 8) expressed the view that workforce development efforts should focus on a more sectoral approach to address mismatches within specific industries or occupations. This concern stemmed directly from the observation that employers in certain sectors that rely on skilled technical workers often report that American workers are not adequately prepared for current and future job requirements in their industry. It is difficult, however, to disentangle local and sectoral effects with aggregate-level analyses. For example, many information technology (IT) jobs are skilled technical positions. There is widespread consensus that the United States has a nationwide need to train many more people in the IT sector. However, recent data on the IT job market show that cities in Pennsylvania, Illinois, Oklahoma, and Alabama had higher demand for IT workers relative to their existing IT workforce compared with several other cities in other states (see Figure 2-3).

LABOR MARKET PATTERNS AND TRENDS 29 FIGURE 2-2 Difference in migration rates of workers in most- and least-licensed occupations. NOTE: Numbers were calculated from an ordinary least squares (OLS) regression controlling for race, citizenship, sex, number of children, marital status, education, income, year, and state. Ages 25 to 65 were included. SOURCE: The White House, 2015. Adapted from Census Bureau, American Community Survey 2010-2013; CEA calculations. Recent employer surveys provide additional insight into the relationship between sectoral and local trends in skilled technical labor markets. In a survey of more than 800 human resources executives in February 2014, more than half of respondents reported that jobs requiring technical skills are difficult to fill, with finance, insurance, and health care companies reporting the greatest challenges (Accenture et al., 2014). Approximately 70 percent of respondent firms indicated that their inability to attract and retain individuals with technical skills frequently affected their operating performance. “Over one-third of respondents believed that inadequate availability of technically skilled workers had undermined their productivity, with manufacturing and health care the hardest hit” (Accenture et al., 2014, p. 6). A review of Bureau of Economic Analysis (BEA) data on the sectors that contribute to growth in state economies reveals that some states and communities have larger concentrations of employers in the industries that employ high levels of skilled technical workers relative to others. 8 These 8 BEA’s most recent analysis of the value of the goods and services produced by states can be found in BEA (2015).

30 BUILDING AMERICA’S SKILLED TECHNICAL WORKFORCE FIGURE 2-3 Cities with higher information technology (IT) demand than IT supply. NOTE: These metropolitan areas were selected based on a “material” supply shortage. Material is defined as greater than or equal to 10 percent IT job openings as a percentage of total workforce. High vacancies can mean high turnover because jobs or employers are undesirable. SOURCE: The White House, 2014. Adapted from CEB TalentNeuron Data. differences are difficult to discern with analyses based on aggregate-level data. Intelligent policy responses require local labor market analyses that current labor market information systems do not adequately support. Survey data and the preceding analysis of national occupational data on vacancies, employment, and wages suggest that certain skilled technical labor markets are experiencing tighter-than-average conditions. At the aggregate level, it does not appear that existing labor markets are currently failing to consistently provide an adequate supply of skilled technical workers. However, there may be persistent sources of imbalance in specific communities and in specific occupations and industry sectors. To understand better the policy issues affecting skilled technical labor markets, the committee looked closely at the dynamics in two sectors with high numbers of skilled technical occupations— health care and manufacturing. These sectors also serve as examples of how advances in science and technology can affect skilled technical labor markets. 2.3 TRENDS IN SUPPLY AND DEMAND IN HEALTH CARE BLS estimates that there were about 17 million jobs in health care and social assistance in the United States in 2012 (or about 11.7 percent of total U.S.

LABOR MARKET PATTERNS AND TRENDS 31 jobs) (BLS, 2013, Table 3). Health care has been identified as an engine of job growth in the U.S. economy because of an increasing demand for health care by an aging population, as well as changes mandated by the Patient Protection and Affordable Care Act of 2010. Bianca Frogner and Susan Skillman of the University of Washington provided the committee with an overview of labor market dynamics for health care jobs (Frogner and Skillman, 2015, 2016). They observe that many skilled technical occupations in the health care field fall within the “allied health” workforce, and while this group is not synonymous with the skilled technical workforce, there is considerable overlap. 9 Using the Occupation Finder in the BLS Occupational Outlook Handbook, the authors identified approximately 40 health care occupations that have prebaccalaureate entry-level requirements. They estimate that the health care field will add 3-4 million jobs over the next decade, and about 40 percent of this growth will be driven by the allied health professions, which closely resemble the committee’s definition of skilled technical jobs. 10 Echoing earlier concerns, however, Frogner and Skillman argue that analyses of U.S. labor markets are very difficult to perform because models cannot predict market and population needs at the local level, and oversupply in urban areas can mask workforce gaps in rural areas. Frogner and Skillman found several imbalances that prevent skilled technical labor markets from operating smoothly in the health care field, including the following: • Information deficits. Data on the size, distribution, demographics, and work characteristics of the skilled technical workforce remain difficult to collect. Other challenges to data collection center on 9 Frogner and Skillman (2016) discuss the definitional issues in the allied health field and the relationship of the workforce to the way they define skilled technical occupations. They argue that the allied health occupations are understudied, and workforce development in these occupations presents many issues similar to those identified with respect to other skilled technical occupations, such as improving data tracking and projections, understanding demand and supply, building ties between educators and employers, and identifying career trajectories. For additional background on the allied health field and related issues, see Wood (2011), Frogner et al. (2015), Ross et al. (2014), and IOM (1989, 2011). 10 Frogner and Skillman (2015) note that although there is no single list of “allied health” occupations, it is generally accepted that allied health professions do not include physicians, dentists, or nurses. The authors further note that the Patient Protection and Affordable Care Act defines an allied health professional as “an individual who graduated with an allied health profession degree or certificate, and is employed as an allied health professional in a health care setting.” Their analysis considers occupations requiring a high school degree or an associate’s degree for entry, including an associate’s degree for registered nursing (Frogner and Skillman, 2015, Table 1).

32 BUILDING AMERICA’S SKILLED TECHNICAL WORKFORCE identifying the education and training pipeline and understanding which occupations can fill which roles. These information deficits impede policy makers’ ability to estimate changes in supply and demand in skilled technical labor markets when considering workforce development policy. In addition, information deficits make it difficult and costly for labor market intermediaries, such as career centers, college placement offices, and community-based organizations, to match qualified workers with appropriate jobs. • Degree creep. Occupational requirements are not always clear in the health care labor markets. For example, many health care occupations do not require a certificate or degree that is directly linked to a health care occupation. In addition, Frogner and Skillman (2015) found evidence of “degree creep,” which entails setting increasingly higher educational and training requirements for practice. 11 Increasing these requirements can reduce the short-term supply of workers by delaying time of entry into the workforce, or they can reduce the long-term supply by putting education and training out of the financial reach of many workers and their employers. However, the reasons for and interpretation of “degree creep” remain unclear. • Accreditation and credentialing costs. Many health care jobs require a degree from an accredited program or a specific credential, continuing education, license, or registration to practice. These requirements can provide incentives for workers to continually upgrade their skills. However, they also increase costs to invest in, prepare for, and sustain workers’ qualifications. Moreover, requirements vary across states, increasing the cost of transferring from one location to another to alleviate geographic mismatches. • Changing needs. The skills and training required for U.S. health care workers are changing because of shifts in the health care needs of the population; legislative changes that reshape the health care delivery system; increases in consumer safety and protection regulations; and advances in science, technology, and care modalities. These developments impose a variety of coordination costs related to education, training, and hiring of workers with the skills to meet these changing needs. 12 11 Participants in the 2015 symposium indicated that “degree creep” or “up-skilling” is a concern in many labor markets. Also see Burning Glass (2014). 12 For a discussion of the challenges of developing training networks to support the growth of the health care workforce, see Chapter 5.

LABOR MARKET PATTERNS AND TRENDS 33 2.4 TRENDS IN SUPPLY AND DEMAND IN MANUFACTURING BLS estimates that in 2012, the U.S. manufacturing workforce included approximately 11.9 million workers, or 8.2 percent of the total workforce (BLS, 2013, Table 3). More than 50 percent of the total manufacturing workforce involves skilled production occupations that meet the committee’s definition of skilled technical jobs (Giffi et al., 2015). Many observers have decried the loss of manufacturing jobs in the United States. A recent study by the National Academy of Engineering found that while U.S.-based companies have led high-tech manufacturing markets, they face growing competition from emerging corporations around the world (NAE, 2015). A 2014 National Academies study identified new opportunities for U.S. businesses in flexible electronics manufacturing (NRC, 2014b). As observers consistently note, however, if the United States wishes to attract and retain manufacturing facilities and compete against aggressive new competitors in developing countries, it needs to ensure that it has a qualified workforce. Robert Lerman of the Urban Institute, American University, and IZA argues in his commissioned paper that if employers cannot find the skills they need in the workforce, they may not invest or innovate (Lerman, 2015). However, the evidence with respect to this perspective is ambiguous. For example, a 2012 survey by the Massachusetts Institute of Technology found that manufacturing jobs that had moved offshore were returning to the United States (Simchi-Levi, 2012). Yet a recent A. T. Kearney (2015) report provides data that dispute this finding. At the same time, the National Manufacturing Institute (NMI) has documented what it describes as a persistent skills gap in manufacturing. 13 Its 2015 report, prepared in collaboration with Deloitte, estimates that over the next decade, 1.5 million manufacturing jobs will go unfilled because of a skills gap in the supply of workers. According to the report, 7 of 10 manufacturing executives surveyed reported shortages of workers with adequate technology, computer, and technical training skills who can successfully pass basic screening (Giffi et al., 2015). Most of the executives surveyed indicated that the skills gap will affect their firms’ ability to meet customer demand, implement new technologies, and increase productivity. Executives also reported challenges to providing effective customer service, innovating, developing new products, and expanding internationally. On the other hand, having analyzed a nationally representative sample of manufacturing firms, Osterman and Weaver (2014b) argue that the demand for high-level skills is modest, and 75 percent of firms show no signs of hiring 13 For a discussion of why manufacturing companies are not able to recruit and retain workers with the necessary skills, see Chapter 5.

34 BUILDING AMERICA’S SKILLED TECHNICAL WORKFORCE difficulties, defined as long-term vacancies. Some analysts assert that there is limited upward pressure on manufacturing wages, which suggests limited evidence of a shortage of workers in these occupations. Other competitive pressures and low profit margins could explain the absence of upward wage pressure. Yet increasing skill requirements could make attracting workers more difficult unless wages rise at higher rates, creating a vicious negative spiral in manufacturing workforce development. The disagreement among analysts about the seriousness of current hiring difficulties in the manufacturing sector also highlights the need for more granular analyses of the skilled technical labor market, discussed in more detail in Chapter 4. Some analysts in the manufacturing industry argue that structural factors or imbalances in skilled technical labor markets are likely contributors to the shortage of workers perceived by some employers. On the supply side, the number of baby boomers nearing retirement exceeds the number of younger workers who can replace them. At Boeing, for example, 28 percent of the firm’s 31,000 machinists are older than 55 and eligible for retirement (Whoriskey, 2012). Yet industry leaders say that it is difficult to attract younger workers to an industry that was once considered “dying” and “dirty.” They are concerned that as a result of the shift in focus of U.S. high schools toward college preparation, students are not obtaining the skills and credentials needed to enter manufacturing. In a recent poll conducted by the Foundation of Fabricators & Manufacturers Association, roughly half of all teenagers said they had no interest in a manufacturing career, and the majority of those who expressed this view agreed that a manufacturing career entailed a “dirty, dangerous place that requires little thinking or skill from its workers and offers minimal opportunity for personal growth or career advancement” (Shankel, 2010). In addition, in NMI and Deloitte’s most recent study of U.S. public opinion on manufacturing, respondents aged 19 to 33 ranked manufacturing as their least-preferred career, and only a third indicated they would encourage their children to pursue a career in manufacturing (Giffi et al., 2015). On the demand side, advances in science and technology have transformed production processes such that many skilled technical manufacturing jobs now require higher levels of science and math skills, placing manufacturing squarely in the class of STEM occupations. The recent National Academy of Engineering report Making Value for America: Embracing the Future of Manufacturing, Technology, and Work states that production work in the United States is shifting to require more specialized skills in such areas as robotics-controlled maintenance, advanced composites, and radio-frequency identification parts (NAE, 2015). Figure 2-4 illustrates that the number of skills required for proficiency in manufacturing occupations has consistently increased over time and is projected by leading global manufacturing firms such as Siemens to continue to do so.

LABOR MARKET PATTERNS AND TRENDS 35 FIGURE 2-4 The evolution of skills required in production occupations. NOTE: IT = information technology; STEM = science, technology, engineering, and mathematics. SOURCE: Bill Boswell, Senior Director, Siemens PLM Software, Sustaining an Advanced Manufacturing Workforce presentation, September 23, 2014. 2.5 INTERNATIONAL PERSPECTIVES: OECD COUNTRIES AND PARTNERS As the global economy continues to grow and as new markets emerge across the globe, policy makers around the world are concerned about their country’s ability to trade and compete effectively (OECD, 2012a). They recognize that their workforce is a critical asset in meeting the challenges of globalization: uncompetitive firms and workers create political pressure to engage in protective measures that ultimately harm prospects for peace and prosperity at the individual, country, and global levels. Reflecting this concern, OECD’s PIAAC developed the Survey of Adult Skills to help policy makers in OECD countries assess the proficiency of adults aged 16 to 65 in key competencies that are necessary for fully integrating and participating in labor markets, education and training, and social and civic life. 14 The most recent survey identifies several trends that are influencing the development and use of technical skills in OECD and partner countries. 14 The PIAAC survey does not specifically address the skilled technical workforce; therefore, its results have only general implications for this workforce.

36 BUILDING AMERICA’S SKILLED TECHNICAL WORKFORCE First, access to computers and information and communication technologies is widespread and growing. More than 70 percent of households have access to computers and the Internet, and most workers have access to and use the Internet as part of their jobs (OECD, 2013). Moreover, the use of computers and information and communication technologies is changing the ways in which public and private services are provided and consumed. Many governments are increasingly delivering public services via the Internet. PIAAC estimates that in 2010, an average of 40 percent of citizens and 80 percent of businesses in OECD and partner countries interacted with public authorities via the Internet. In addition, the volume of e-commerce is growing rapidly in many countries. The use of information and communication technologies also is changing the structure of how work is organized and performed in OECD and partner countries. Technology is enabling structural change in workplaces and markets by increasing the reach and speed of communication and reducing costs, thus facilitating the flow of goods, capital, people, and information across units, organizations, and borders. These changes mean that workplaces frequently reorganize, which compels workers to acquire new skills to adapt. According to OECD (2013, p. 48), “In most OECD countries, more than a quarter of all workers are professionals, associate professionals, or skilled technicians. Between 1998 and 2008, the number of people employed in these categories increased more rapidly than did overall employment rates in most countries.” Although the evolution of employment shares for occupations with technical skills is more complex, as depicted in Figure 2-5, there is clear evidence of a significant and persistent evolution of employment in occupations requiring higher-than-average skills proficiency. Yet PIAAC estimates that imbalances between the supply of and demand for skills in OECD-country labor markets are widespread and coexist with high levels of unemployment. Skills shortages and gaps or mismatches are common, suggesting the need for “a more comprehensive account of the demand for and use of skills, including how work and organizational practices perpetuate or eliminate skills imbalances” (OECD, 2013, p. 52). 2.6 CONCLUSIONS In the United States, the occupations that drive human development and economic growth, such as health care and manufacturing, have high proportions of jobs requiring technical skills. Such occupations as installation, maintenance, repair, and construction that develop and sustain Americans’ way of life have similarly high proportions of job opportunities for workers with technical skills. Although the ability to analyze changes in these markets with precision is limited, the evidence accumulated to date suggests that the policies and

LABOR MARKET PATTERNS AND TRENDS 37 FIGURE 2-5 Evolution of employment in occupational groups defined by level of education: Percentage change in the share of employment over all employed people relative to 1998, by occupational groups defined by workers’ average level of education. NOTES: Only the 24 OECD countries available in the 1998 LFS database are included in the analysis. High level of education refers to the tertiary level or more than 15 years of schooling; medium level of education refers to no tertiary but at least upper-secondary education or around 12 years of schooling; low level of education refers to less than upper-secondary education or 11 years of schooling. SOURCE: OECD, 2013. Adapted from Eurostat, LFS Database. Table A1.4 in Annex A. programs governing the markets for skilled technical jobs matter. National data and industry surveys indicate a tightening of certain skilled technical labor markets. Changes in demographics, technology, and international competition create the potential for medium- and long-term mismatches in certain occupational and industry sectors. Detailed information about and analyses of how labor markets for skilled technical jobs operate at the organization, industry, sector, and local geographic levels are needed to properly understand these conditions. A review of skilled technical occupations in health care and manufacturing suggests that markets for skilled technical jobs may not be clearing as efficiently as they could, and these imbalances are likely to be exacerbated by global patterns and trends. On the demand side, skilled technical workers face increasingly higher competency requirements as a result of structural changes associated with advances in science and technology; new business models; “degree creep”; requirements for “soft skills,” including the ability to pass a drug test or meet other security-related requirements; and competitive forces. On the supply side, factors that prevent U.S. labor markets from clearing for skilled technical jobs include a dearth of workplace and workforce

38 BUILDING AMERICA’S SKILLED TECHNICAL WORKFORCE information that creates barriers and raises search costs, low or stagnant wages, inadequate investment in education and training, a lack of transferability of certifications and experience that inhibits occupational and geographic mobility, and inaccurate or outdated perceptions of certain occupations that reduce incentives for individuals to invest in training. In addition, the evidence suggests that prevailing policies often affect incentives to invest in continual education and training. These incentives, discussed in more detail in subsequent chapters, have important implications for labor market clearing, where demand matches supply, in specific locations and sectors. Developing and maintaining skills proficiency is essential to U.S. leadership in innovation, manufacturing, and competitiveness and to the creation and retention of high-wage and high-status jobs. In this report, the committee makes recommendations for how policy makers at the federal, state, and local levels can create an environment that encourages and enables adaptiveness in the skilled technical workforce. The next chapter turns to the policy landscape for workforce development.

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Skilled technical occupations—defined as occupations that require a high level of knowledge in a technical domain but do not require a bachelor’s degree for entry—are a key component of the U.S. economy. In response to globalization and advances in science and technology, American firms are demanding workers with greater proficiency in literacy and numeracy, as well as strong interpersonal, technical, and problem-solving skills. However, employer surveys and industry and government reports have raised concerns that the nation may not have an adequate supply of skilled technical workers to achieve its competitiveness and economic growth objectives.

In response to the broader need for policy information and advice, Building America’s Skilled Technical Workforce examines the coverage, effectiveness, flexibility, and coordination of the policies and various programs that prepare Americans for skilled technical jobs. This report provides action-oriented recommendations for improving the American system of technical education, training, and certification.

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