Small business experts testified before a congressional hearing Thursday that the skills gap is among the most significant issues impacting smaller employers.
The labor market has improved significantly over the past two years following an unusually long economic recovery. But some issues have lingered since the recession a decade ago. The House Small Business Committee found during its hearing that the labor skills gap is one of the more significant issues small businesses are facing.
“Many businesses are struggling to find and hire qualified employees,” Virginia Rep. Dave Brat, a Republican, said during the hearing. “Last month, I heard this in person when I was traveling around my district, dozens of business leaders tell me all too often that they can’t find a qualified skilled workforce to fill job vacancies.”
Brat convened the hearing to explore labor market challenges facing small businesses. He also highlighted factors like welfare and immigration as posing potential challenges. Todos President Carlos Castro, for instance, focused on the regulatory burden during the hearing. He testified on behalf of the National Grocers Association.
The skills gap, however, remained the primary focus. The skills gap is especially a threat to small businesses who lack the resources to withstand or overcome it, which large corporations are often able to do. Some larger companies have turned to new forms of automation as high tech solutions to address the problem.
“The best way to address social problems from an economic perspective is to reduce the cost of the social value, or to increase the cost of the social problem,” Mercatus Center research fellow Michael Farren said during the hearing. “In the case of training, if we have a skills gap and job applicants applying to businesses, then we should reduce the cost, or find ways to reduce the cost, of acquiring new skills.”
Farren shared two possible policy solutions to address the skills gap issue. He suggests reforming the tax code to better support businesses that invest in training programs. He also suggests that lawmakers should do more to address fraud in the social safety net programs to get people who can work back into the labor market.
“Since the end of the last recession manufacturing companies have added over one million jobs,” Gardner Carrick, the vice president of strategic initiatives at The Manufacturing Institute, testified. “While times are good for manufacturing in the U.S., there is a present and growing challenge for manufacturing companies. They are unable to find people with the skills for their open positions.”
Carrick notes that many companies have already instituted programs to train people for the skills they actually need. Many act like apprenticeship programs so people can earn a wage while they learn. Some of the programs even try to expose kids to modern manufacturing to show what the industry is really like.
“Electrical contractors, like the rest of the construction industry, continue to struggle to find qualified candidates to fill openings,” Bruce Seilhammer, a group manager for the electrical and construction service SECCO, testified. “According to recent research from the Associated General Contractors among the trade electricians were at the second hardest position for their members to fill.”
Seilhammer adds that a major part of the problem is that young adults are often pushed to get a four-year college degree. Careers that require a four-year college degree are often viewed as having a higher status in society. The reality is that careers in technical fields can often be better paid and more stable.
The Bureau of Labor Statistics (BLS) recently reported that job openings had increased to six million. At the same time, new hires decreased. The BLS also found in a 2015 report that the country is projected to produce one million fewer technical workers than are needed over the next decade.
Economists have approached the problem in a number of ways. Some believe the skills gap is occurring because people are not being provided needed skills through school and training. Others assert the issue is the result of certain industries not paying adequate wages to attract skilled talent.
President Donald Trump has looked towards apprenticeships as a potential solution. He signed an executive order June 15 aimed at increasing the number of apprenticeship programs by making it easier to create them. Trump has also received criticism for supposedly undercutting job training elsewhere.
The Government Accountability Office (GAO) found in a 2011 report that the federal government spends about $18 billion annually on these programs. Former President Barack Obama, for instance, invested $90 million into a federal program focused exclusively on apprenticeships.