“Today, too few workers have the skills needed to meet the demands of employers in the new economy. […] Michigan companies report feeling the effects of a talent disconnect. The widespread retirement of baby boomers is leading to a loss of talent in the workplace and an increasingly technology-driven economy requires advanced skills that many of our workers do not have.” -Gov. Rick Snyder, Dec. 1, 2011 “The skills gap poses a serious economic challenge for us. And part of the problem is we have failed to prioritize talent and ensure everyone has a path to skills. The vast majority of today’s jobs require some form of postsecondary education, whether it’s a degree or a skills certification. But, as of 2016, only 44 percent of our workforce has such a credential. Simply put, that’s not good enough for Michigan to compete.” -Gov. Gretchen Whitmer, Feb. 12, 2019 |
As Gov. Rick Snyder rounded out his first year in office, unemployment in Michigan was 10.6%, according to the Bureau of Labor Statistics. When unemployment is high, as it was following the Great Recession, the productivity loss has clear, negative implications for individuals and families and also affects the state budget — decreasing tax revenue and increasing state benefit liabilities. But unemployment is not the most pressing workforce related issue in Michigan today. When Gov. Gretchen Whitmer took office, state unemployment was 4.0% (where it remains at the time of this writing), which is at the low-end of economists’ estimates for the natural rate of unemployment. In her first "State of the State" address, she made no mention of unemployment but emphasized the need for skills, especially those resulting in credentials.[1] While state involvement in workforce development is by no means new, calls for more and better workforce development, including job training and connecting jobs and workers, have intensified.
As indicated in the quote above from Gov. Snyder, demographic changes — particularly the aging baby boomer population — and rapidly changing market dynamics are sources of concern for employers. Bearing this out, a fall 2018 survey of corporate real estate executives indicates that first among the “most important location criteria” is workforce skills and third is workforce development, up from seventh in 2017.[2] This uncertainty about the future provides an impetus for retooling the skills of Michigan workers and leaves some advocating for advanced coordination efforts facilitated by the state.
Basic economics, however, should temper these concerns and raise some skepticism about the general tenor of calls for a significant political response. In a labor market where multiple firms compete for a supply of workers, wages will increase and potential employees will respond accordingly by investing in the skills needed to qualify for those higher-paying jobs. Moreover, even among those who support a political response to the perceived labor shortages, the general consensus is that many of the open jobs require much less than a four-year degree, even as little as a six-month certificate. In a competitive labor market, labor shortages should be short-run phenomena that dissipate through common, self-interested responses by employers and workers.
Where labor markets are not competitive, it behooves citizens and policymakers to consider the detrimental effects of licensing requirements and other artificial restrictions on labor supply. But where labor markets are functioning normally — firms offer higher wages where labor markets are tight, skilled employees respond and unskilled workers seek training — we should allow them to work, even if this process takes more time than some would prefer. Market mechanisms, such as prices and wages, have a distinct advantage over top-down efforts by state-run talent boards or workforce development agencies in gauging and adjusting to changing conditions.
This report, though largely a survey of existing workforce development efforts in Michigan, concludes with a general skepticism about the ability of state actors, or even a collection of business interests, to foresee future labor market changes and intervene in such a way as to make everyone better off. This skepticism is largely rooted in a number of observations suggesting that government efforts and influence in training and education actually may contribute to the current challenges in the skilled labor market. In other words, government-led efforts to mitigate perceived labor market problems may be more of a hindrance than a help.
This report will not attempt to predict where skill gaps might appear or even argue whether or not shortages, in a persistent form, are a current problem in need of government action.[*] The political reality is that workforce development policy is a popular issue, and so this report aims to increase the understanding of the main efforts toward job training in Michigan.
[*] For a solid understanding of the doubts about a real, persistent skills gap, see: Peter H. Cappelli, “Skill Gaps, Skill Shortages, and Skill Mismatches: Evidence and Arguments for the United States,” ILR Review 68, no. 2 (2015): 251–290, https://perma.cc/DG22-CZHM.