Is West Virginia's "Skills Gap" Really a Wage Gap?
We often hear that one of the state's biggest economic problems is a skills mismatch. More specifically, we are told that manufacturing firms in the state cannot find enough qualified workers and that this is holding up our state's economic recovery. The problem with this argument, as we've pointed out before, is that it is largely a myth. While West Virginia certainly has a very low share of workers with an associate and bachelor's degree, there is little evidence that this is why the state's manufacturing firms cannot find skilled workers.
As economist Mark Price at the Keystone Research Center pointed out last week in the New York Times, if there was a skills gap in manufacturing we would expect to see a corresponding rise in wages as a employers compete for fewer skilled workers. As New York Times reporter Adam Davidson notes in the same article:
In a recent study by the Boston Consulting Group, "outside a few small cities that rely on the oil industry, there weren't many places where manufacturing wages were going up and employers still couldn't find enough workers. "Trying to hire high-skilled workers at rock-bottom rates," the Boston Group study asserted, "is not a skills gap." The study's conclusion, however, was scarier. Many skilled workers have simply chosen to apply their skills elsewhere rather than work for less, and few young people choose to invest in training for jobs that pay fast-food wages. As a result, the United States may soon have a hard time competing in the global economy.
So, are we seeing a rise in manufacturing wages in West Virginia? As the graph below highlights, the short answer is no. The average hourly earnings of manufacturing production workers has declined since the recession began in 2008, while the average hourly wage for all private sector production workers has has grown over this period.
While under-education is a major long-term problem in the state's labor market, its doubtful that the recession fundamentally changed the structure of the economy in terms of supply and demand for skills and education. As of June 2012, there were nearly four jobless West Virginians for every new job opening and the unemployed rate for those with an associate or bachelor's degree remains elevated. While some manufacturing firms in the state may feel squeezed by global competition to offer lower wages, until they start paying higher wages and offering more job security it is unlikely that they will ever find the skilled workers they need.