Labor Shortage: Fact or Fiction?

November 21, 2006

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The battle cry on one side of the debate of a purported oncoming labor shortage has consistently revolved around retaining jobs in the U.S. Conversely, others say the notion of a labor shortage is ridiculous, for the exact same reasons the aforementioned group use to argue their case. A forthcoming labor shortage: fact or fiction?

The ringleader of the labor shortage debate is none other than the Bureau of Labor Statistics, which released some pretty eye-opening statistics just last year that caught the attention of, well, pretty much every industry in existence. Around that time, HR Magazine highlighted the BLS numbers in a very balanced manner, going so far as to correct BLS misconceptions, as the following excerpt conveys:

Doomsayers rely on such demographic data, as well as employment projections from the U.S. Bureau of Labor Statistics (BLS), to determine that as early as 2010 there won't be enough workers available to staff the nation's jobs. But such predictions often are flawed or fail to take into account a full view of the facts.

Perhaps more intriguing:

…by 2012, there will be 3.3 million fewer workers than jobs. But there are numerous flaws with that math. Most significantly, the two data sets involved, both of which are supplied by BLS, are derived from different sources and cannot be compared accurately. To subtract one from the other is to make an apples-and-oranges comparison that is invalid and misleading.

There are a slew of other examples in the cover story debunking the BLS, but even without all these mitigating factors, the number of available workers still will exceed the number of jobs, according to the HR Magazine analysis.

Then again, a piece from The Seattle Times earlier this month has the ability to send the labor shortage debate into a tailspin once again, with immigration as the catalyst.

Stephen Anthony, president of the Fort Worth Building and Construction Trades Council, a network of union groups, said illegal immigrant welders have kept wages down for U.S. workers. Union welders earn on average $23 an hour, while nonunion welders generally earn about $12 an hour in the Fort Worth area, he said. Yet Steven Camarota, director of research for the Center for Immigration Studies, a Washington, D.C.-based group that opposes illegal immigration, is skeptical. "Any industry you care to name, you will generally find that the employer says, 'We can't find anybody,'" he said. "What they really mean is, 'Given what we want to pay, we can't find anybody.' And that's the kicker."

Are select employers and the BLS full of, ahem, BS? Are they creating a false sense of panic as it relates to labor shortages in order to acquire workers willing to work for income less than they're worth? Well, perhaps we should toss in some more statistics to complicate the debate further. This month, the Small Business Times had the lowdown on some figures released by the National Federation of Independent Business (NFIB) based on a survey of small businesses.

"An historically high 63.3 percent of the adult population has a job, and the unemployment rate [was] 4.4 percent in October," said NFIB chief economist William Dunkelberg. "This does not sound like a labor market with deficient labor demand, but it's showing clear signs of a mismatch between supply and demand, with clear shortages of qualified workers."

That's qualified workers. Hmm, so, 1) highly skilled/qualified workers 2) willing to work for less than their worth? Sounds just like the problems IMT hears from engineers on a fairly frequent basis. One of our readers recently touched on both factors:

What does exist is a shortage of educated, skilled, motivated people who are willing to work for small dollars, few or no benefits, in positions offering little advancement potential. Employers want to get by very cheaply, so instead of hiring an experienced individual who knows the technology, they'll haul a guy off the plant floor and make do with him, paying him very small dollars. I've seen this done repeatedly in corporations whose names you would recognize.

According to The Associated Press (via Leading the Charge), the purported shortage is felt the greatest in the energy and power sector, where there may soon be a shortage of workers who operate power plant equipment and repair power lines. A handful of schools aim to correct the problem by offering power industry training, and utility companies have started "aggressively seeking out colleges to create more."

"Every day we delay hiring people, another 40-year veteran is retiring and won't be there to pass along valuable experience," said Jim Hunter, director of the International Brotherhood of Electrical Workers utility department.

While labor shortages in the utilities sector might appear more sincere, there is still plenty of other compelling information out there claiming that the labor shortage debate carries little merit and is even a hoax. The news and comments posted at the Inside Recruiting blog, for instance, perpetuate these beliefs; meanwhile, the blog even serves up a recent reader poll, the results of which indicate that not everyone is on board with the labor shortage estimates currently circulating.

The most critical piece that has come across our desks on the labor shortage scare is derived from The American Economic Alert in an article entitled "The Labor Shortage Hoax," by Alan Tonelson, a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of "The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards."

In his analysis, Tonelson tears into recent labor shortage stats and studies with the ferocity of a pit bull, even taking on the likes of Deloitte regarding a study the company did for the National Association of Manufacturers (NAM):

To put it mildly, NAM should ask for its money back. Only 10 percent of the 8,000 companies contacted by Deloitte replied, and as Wall Street Journal columnist David Wessel noted, lots of self-selection surely was at work. Specifically, employers not perceiving any shortages probably were much less likely to bother responding than those that did.

But that's only the beginning of Tonelson's criticism:

Deloitte ignored a major irony that practically shouts out from the results: Although the consulting firm recommended that companies spend at least three percent of their payrolls on employee training, it found that fully three-quarters of all respondents fell short of this threshold. Does this sound like the behavior of firms that value trained workers and are desperate to secure them?

Clearly, the validity and accuracy of labor shortage data is questionable. And the myriad of factors that play into the debate, whether retiring baby boomers, illegal or even legal immigrants, offshore outsourcing or fewer upcoming engineers all seem to feed the flames of this hot-button topic from different and seemingly unrelated angles. It's a debate that will surely continue — but so long as outspoken pundits and everyday workers continue to voice their displeasure with sloppy data and unnecessary panic, a labor shortage capable of bringing the U.S. economy to its knees is about as likely as John Kerry becoming a successful stand-up comic.


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The Truth About the Coming Labor Shortage by Robert J. Grossman HR Magazine, March 2005

Is the labor shortage in U.S. for real? by Patrick McGee The Seattle Times, Nov. 12, 2006

Small business survey confirms labor shortage Small Business Times, Nov. 21, 2006

Power firms look to stem labor shortage by Lisa Cornwell The Associated Press, October 2006

Labor Shortage: Is the Sky Falling? by ERE Insider Recruiting, Sept. 5, 2006

The Labor Shortage Hoax by Alan Tonelson The American Economic Alert, Jan. 27, 2006

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