Having surveyed the landscape of skills training in Michigan, this report will consider what these survey results might suggest for potentially improving and expanding access to workforce development programs, should this be needed. The following analysis is organized as if following a potential skilled worker through the pipeline of available skills training starting in high school, through to college or other postsecondary training options, and then finally to the labor market. Where there are missed opportunities earlier in the pipeline, it might be most effective and resource efficient to address those rather than their later-stage consequences.
The basic intuition used to identify labor market or skills gap challenges in Michigan is rooted in economic first principles. Again, basic economic theory and a large body of empirical evidence indicate that in competitive labor markets, labor shortages of any type should be relatively short-lived and self-correcting. Markets that operate based on profit and loss and that facilitate exchange through prices determined by the forces of supply and demand will tend toward market-clearing, i.e., no persistent shortage or surplus. Where skilled labor shortages or skill mismatches exist, wages would increase for occupations with excess demand or deficient supply, attracting appropriately skilled workers to move to the area or local workers to obtain the requisite skills.
If a firm is struggling to find trained welders, for example, an immediate and impactful response to this problem would be for the firm to increase the wage of trained welders. This will draw greater interest in the job from a wider selection of potential employees, and should, if this type of skill shortage persists throughout an entire market or industry, encourage more people to get trained as a welder, because their prospects of getting a good-paying job by completing this training will be increased.
To the extent that labor markets in Michigan today are not moving toward market-clearing, two possibilities should be considered. First, what is undermining the competitive forces in the labor market? For example, are there rationing mechanisms being applied to labor instead of or on top of wages, and thereby, artificially limiting supply? Are businesses not competing in usual ways for the workers they need because they see a more effective and profit-maximizing political solution? Second, are the markets for skilled labor, education and training actually well-functioning markets? In other words, are prices informative, providing both insight and incentives to potential workers, trainers and employers, or are they not effective in this way for some reason or another?
This section considers these questions and outlines some of the obstacles to workforce development in Michigan. Specific policy recommendations follow from these analyses and these also are discussed below.