Where the Manufacturing Skills Gap Might Be for Real

Is the skills gap for real? Most industry associations and corporate executives say yes. Many economists and journalists who cover the economy say balderdash.

The skills gap debate resurfaced last week in the wake of President Trump’s executive order to expand apprenticeship programs. The New York Times summarized the latest skills gap research and perspectives in this piece, and our friend Brian Kelsey provided some good thoughts in a series of tweets.

And therefore unfilled “jobs” based on postings and vacancies do not necessarily indicate skills shortage. https://t.co/65UukClsSY

— Brian Kelsey (@civicanalytics) June 16, 2017

This back-and-forth came just after Area Development magazine published our piece on the best ways to spot a local workforce shortage—if it’s indeed a skills gap and not a wage, information, or training gap. We presented research in the article on cities where it could be tough to find manufacturing talent based on increased earnings (perhaps the best way to spot a potential labor shortage) and low unemployment.

In Raleigh, manufacturing earnings rose 33.4% from 2012-2016, nearly three times faster than all private-sector earnings. Trenton, New Jersey; Corpus Christi, Texas; Columbia, South Carolina; and San Jose experienced the next-highest increases in manufacturing compensation among the largest 150 metros.

What about manufacturing unemployment in these cities?

Emsi estimates that Raleigh had 1,350 unemployed manufacturing workers in January—5% of the metro’s total unemployed. Nationally, 8% of the unemployed have previously worked in manufacturing. In Trenton, there were just 254 unemployed in manufacturing, 4% of the regional total.

Meanwhile in San Jose, 15% of unemployed (over 5,400) were in manufacturing. This higher-than-average manufacturing unemployment could mean San Jose has excess manufacturing talent. One hypothesis: These workers might not have the tech-oriented manufacturing skills that are so prevalent in Silicon Valley.

Whatever the case, it would be wise for policymakers to look at local data when debating the merits of skills gaps and how to orient training programs. Why? Here’s how we put it in Area Development:

The U.S. economy is composed of hundreds of metro area economies, some of which are similar or larger than the economies of major nations (e.g., the Los Angeles metro’s gross metro product at purchasing power parity almost equals Australia’s GDP). These MSAs, along with micropolitan and rural areas, combine to form an incredibly complex American economy.

Next time you read or hear a bold proclamation on the truth or fiction of a national skills shortage, think about the complexity of our economy.

Read the full Area Development piece here. For more on wages over time by metro, see our analysis and interactive map. Find out more about Emsi data here. Questions? Contact Josh Wright ([email protected]).

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