The Paradox of Worker Shortages at a Time of High National Unemployment

At a time of high national unemployment, it has become a truism that there are few worker shortages and employers have numerous applicants for every available slot. After all, that is the very definition of joblessness. High unemployment results when there are many more workers seeking positions than available jobs.

Yet the paradox of the contemporary situation is that in this time of stubbornly high unemployment, a number of fields report a shortage of American workers and problems filling key positions. For example, even as the country as a whole experiences high unemployment, the Bureau of Labor has found that there are over 3.5 million open jobs – openings across the country and across sectors. In some specialized sectors, such as high-tech, advanced manufacturing, and medical specialties, unemployment rates are as low as three, four, or five percent. And on the labor-intensive side of the economy, agricultural companies report difficulty finding workers to pick vegetables and fruits, and hotels and restaurants indicate they have problems filling key positions.

The ripple effects of job vacancies spread throughout the economy. Companies that have been unable to fill key positions have closed down, moved entire operations abroad or delayed expansion plans. Conversely, filling worker shortages allows companies to better compete, grow, and create more jobs for American workers.

This report aims to provide a roadmap for where worker vacancies exist, and how they can most effectively be filled to help companies grow and expand. Labor shortages are identified through analysis of job outlook surveys, government reports, and interviews with business and labor leaders. To estimate the impact of filling these shortages in specific industries across the economy, interviews were conducted with business and labor leaders in the accommodation, agriculture, food service, health care, manufacturing, technology, and life sciences sectors.

The data and interviews confirm that worker shortages exist in each of the sectors, and that these shortages cannot be filled by available American workers, even with high unemployment across the nation, due to retirements, demographic gaps, geographic differentials, and the failure of educational institutions to deliver employees in key sectors. Examples of the costs of shortages in various industries include:

  • Agriculture: Lack of access to workers has led to (1) food processing operations for frozen broccoli and cauliflower moving to Mexico, (2) some of the nation’s most productive farms closing down, and farmers from states like Wisconsin, North Carolina, Maryland, Louisiana, and Washington delaying expansion plans.
  • Health Care: At a time where increased retirements and new mandatory health insurance promise to dramatically increase the demand for medical care, 30 percent of hospitals are already reporting shortages in specialty services. The shortages of nurses alone are estimated to top 115,000. 80 percent of hospital CEOs are currently making efforts to increase the number of primary care physicians.
  • Manufacturing: Employers in the manufacturing sector report difficulty filling available high-skilled positions. Even at the height of the Great Recession in 2010, companies reported 227,000 open jobs. Factory owners note that is difficult to bring manufacturing jobs back when they cannot find the talent they need to expand.
  • Technology: Microsoft has 200 employees in its software center in Vancouver because it couldn’t get engineers into the US. Google developed its news aggregator outside the US for similar reasons, and companies like ON Semiconductor in Phoenix are revving up their overseas hiring because they cannot find workers in the US. The problem is especially acute at the governmental level, where more than half of state governments (54.8 percent) report difficulty filling vacant IT positions.

There are two potential ways to fill these gaps, and both should play an important part in the country’s economic recovery. The first is to retrain American workers to ensure that their skill sets match the needed requirements. The second is to take advantage of foreign workers with the skill set and mobility to fill the existing gaps.

These two solutions to worker shortages—training American workers and bringing in foreign-born workers—need not be in opposition. There are two competing theories on the role of immigrant labor in America – do they compete with or complement American workers? In the framework of compete, the American economy and labor force are seen as a zero-sum game and every job taken by an immigrant workers is one less job for an American worker. But economies are more complex than that, growing and generating new jobs as companies innovate and expand, creating new jobs, or in some cases, new industries and sectors of the economy. In this context, immigrant workers can be seen as complementing American workers. Immigrants tend to have different skill sets and different education levels than American workers.

They are more likely to have a PhD and less likely to have finished high-school. As a result, immigrant workers can complement American workers by filling in specialized roles at both ends of the economy.

The findings presented in this paper are consistent with prior research in this area. For example, research by the World Economic Forum and the Boston Consulting Group projects that within the decade there could be as many as “20 million vacant U.S. jobs unless the current education-to-employment system undergoes significant changes.” The takeaways from these findings are clear. Addressing worker shortages — whether through job retraining or immigration—is a necessary part of our economic recovery that will create more American jobs.

When skill and labor shortages aren’t met, the economy suffers. A smart immigration system can help prevent this by filling needs so companies can expand operations in the U.S. and don’t have to move them overseas. But America’s immigration system is not designed for today’s economy, and remains largely unchanged since 1965. In fact, of the approximately one million green cards given out by the U.S. in 2011, around 139,000 (or 13 percent) were given out for economic reasons, a number far too small to meet the needs of the world’s largest economy. By comparison, Canada provides a much higher percentage of employment-based visas than the U.S. even though it has a much smaller population. America’s immigration system must always help families reunite and provide a safe harbor for refugees and asylum-seekers. But as America rethinks its immigration system, there is a unique opportunity to secure growth and prosperity by ensuring that it meets the needs of a 21st century economy.

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