Best of the Week
Most Popular
1.Putin’s World: Why Russia’s Showdown with the West Will Worsen - John_Mauldin
2. Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - Nadeem_Walayat
3. Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - Austin_Galt
4.Gold Price Golden Bottom? - Toby_Connor
5.Gold Price and Miners Soar on Huge Volume - P_Radomski_CFA
6.Stock Market and the Jaws of Life or Death? - Rambus_Chartology
7.Gold Price 2015 - EWI
8.Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - Nadeem_Walayat
9.Gold, Silver, Crude and S&P Ending Wedge Patterns - DeviantInvestor
10.Is the Gold And Silver Golden Rule Broken? - Michael_Noonan
Last 5 days
Gold Stocks to Shine in 2015 - 19th Dec 14
Why Alibaba Stock Shares Are a Screaming Buy - 19th Dec 14
China, Dollar, Japan, Europe Burning Questions for 2015 - 19th Dec 14
U.S. Economy is in a Sweet Spot! - 19th Dec 14
US Dollar and the Gold Fairy Tale - 19th Dec 14
Show Me The Money (Flow)! Tracking Money-Flow Through Value Shifts In Stock Markets - 19th Dec 14
The Commodities Market Is Not Dying, It’s Just Hibernating - 19th Dec 14
The Price Of Gold And The Art Of War - 18th Dec 14
Euro Succumbs to ECB QE Expectations and FOMC - 18th Dec 14
John Williams: A Downhill Run for the U.S. Dollar in 2015 - 18th Dec 14
Outrage at Taliban Islamic Fundamentalists Massacre of 132 Pakistani School Children in the Name of God - 18th Dec 14
How Inflation Changes Retirement Benefit Choices - 17th Dec 14
The Real Reason It's Tough to Beat the Stock Market - 17th Dec 14
Russian Currency Crisis and Debt Defaults Could Create Contagion in West - 17th Dec 14
How to Profit From Russia's Stock Market Crash - 17th Dec 14
Russia Crisis - If You Put Your Money in the Bank Will You Get it Back? - 17th Dec 14
Crude Oil Price Crash, U.S. Employment and Economic Growth - 17th Dec 14
Opposing Forces At Play In Gold and Silver Precious Metals Complex - 17th Dec 14
Wall Street Will Always Find An Excuse For Not Raising U.S. Interest Rates - 17th Dec 14
Torture, Terror And Elite Schizophrenia In The UK - 16th Dec 14
Eurozone Conflict Will Bring a Major Stocks Buying Opportunity - 16th Dec 14
Viewing Russia From the Inside - 16th Dec 14
Gold and Silver Stocks Bottom - Are We There Yet? - 16th Dec 14
The Financial Industry Pigmen Win Again - 16th Dec 14
Crude Oil Price Epic Blowout - 16th Dec 14
Asian Stocks Markets: Sand In The Gears Of The Bull Market - 16th Dec 14
U.S. Dollar Trend Forecast 2015 - Video - 16th Dec 14
Silver Price Bottom? - 15th Dec 14
Gold Price Base Building Bullish Pattern - 15th Dec 14
Stock Market Probable Pop-n-Crash Today - 15th Dec 14
Stock Market Time for a Bounce - 15th Dec 14
Stock Market Euphoria: The Mother of All Ponzi Schemes - 15th Dec 14
Gold - The Weight of Time as Trend - 15th Dec 14
U.S. Dollar Collapse? USD Index Trend Forecast 2015 - 14th Dec 14
The Rushing Stocks Bear Market and How to Prepare - 14th Dec 14
Gold and Silver Dreaming of a White Christmas - 14th Dec 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Dramatic Stock Market Selloff

Why is the U.S. Middle Class Shrinking?

Politics / Social Issues Nov 28, 2012 - 03:25 AM GMT

By: Mike_Shedlock

Politics

President Obama says there is a "skills gap". A quick search says that many misguided souls believe the president.

For example Forbes writer Rich Karlgaard says The Skills Gap Exists.

Karlgaard believes the "gap is sure to grow as the population ages and industries from health care to manufacturing are altered by technology. Outsourcing to China won’t be the answer, either. Its population is aging the fastest of all the major economies."



Vicki Needham writing for The Hill says Skills gap is hampering labor market.

Needham, citing a report by Deloitte says "job creation in the United States is hampered by a lack of highly skilled and adaptable workers whose talents don't match current job openings".

The Atlantic comments on Solving the Manufacturing Skills Gap.
Eighty percent of the manufacturing companies in the United States say they cannot find enough workers with the proper skills to fill open positions at their facilities. That's the number President Barack Obama cited, as he announced the Military-to-Civilian Skills Certification Program, in June 2012.

"If you can maintain the most advanced weapons in the world, if you're an electrician on a Navy ship, well, you can manufacture the next generation of advanced technology in our factories like this one," Obama said, speaking from the floor of a Honeywell plant in Minnesota.

But the problem is that veterans have had trouble getting hired, as Obama said, "simply because they don't have the civilian licenses or certifications that a lot of companies require."
Skills Don't Pay the Bills

The above columnists express widely believed economic hooey.

In contrast, Adam Davidson, in his New York Times column, Skills Don’t Pay the Bills, precisely summarizes the problem in four deep thoughts.

Deep Thoughts


  1. There is no skills gap.
  2. Who will operate a highly sophisticated machine for $10 an hour?
  3. Not a lot of people.
  4. As a result, there is going to be a skills gap.

Davidson visited the engineering technology program at Queensborough Community College in New York City led by instructor Joseph Goldenberg whose manufacturing classroom consisted of "nothing but computers".

With that introduction, inquiring minds tune in a bit closer to some snips from Davidson.

Nearly six million factory jobs, almost a third of the entire manufacturing industry, have disappeared since 2000. And while many of these jobs were lost to competition with low-wage countries, even more vanished because of computer-driven machinery that can do the work of 10, or in some cases, 100 workers. Those jobs are not coming back, but many believe that the industry’s future (and, to some extent, the future of the American economy) lies in training a new generation for highly skilled manufacturing jobs — the ones that require people who know how to run the computer that runs the machine.

Running these machines requires a basic understanding of metallurgy, physics, chemistry, pneumatics, electrical wiring and computer code. It also requires a worker with the ability to figure out what’s going on when the machine isn’t working properly. And aspiring workers often need to spend a considerable amount of time and money taking classes like Goldenberg’s to even be considered. Every one of Goldenberg’s students, he says, will probably have a job for as long as he or she wants one.

And yet, even as classes like Goldenberg’s are filled to capacity all over America, hundreds of thousands of U.S. factories are starving for skilled workers. Throughout the campaign, President Obama lamented the so-called skills gap and referenced a study claiming that nearly 80 percent of manufacturers have jobs they can’t fill. Mitt Romney made similar claims. The National Association of Manufacturers estimates that there are roughly 600,000 jobs available for whoever has the right set of advanced skills.

The secret behind this skills gap is that it’s not a skills gap at all. I spoke to several other factory managers who also confessed that they had a hard time recruiting in-demand workers for $10-an-hour jobs. “It’s hard not to break out laughing,” says Mark Price, a labor economist at the Keystone Research Center, referring to manufacturers complaining about the shortage of skilled workers. “If there’s a skill shortage, there has to be rises in wages,” he says. “It’s basic economics.” After all, according to supply and demand, a shortage of workers with valuable skills should push wages up. Yet according to the Bureau of Labor Statistics, the number of skilled jobs has fallen and so have their wages.

Goldenberg, who has taught for more than 20 years, is already seeing it up close. Few of his top students want to work in factories for current wages.

It’s easy to understand every perspective in this drama. Manufacturers, who face increasing competition from low-wage countries, feel they can’t afford to pay higher wages. Potential workers choose more promising career paths. “It’s individually rational,” says Howard Wial, an economist at the Brookings Institution who specializes in manufacturing employment.

Situation in a Nutshell

  • Companies cannot afford to pay so much that they lose money.
  • Companies would rather invest in technology and robots to reduce the need for labor, than to pay workers more money
  • A shift manager at McDonald's can make $14 an hour, comparable to what manufacturing jobs pay
  • Union wages and benefits are a major problem

High Cost of Education

The problem is actually quite a bit deeper. Given the preposterously high cost of education in the US, students graduate from college with an expectation they need to make more than they can to pay off student debt.

The same holds true (and even more so) for those going back to school as well as those attending for profit colleges such as the University of Phoenix.

Here are a few eye openers:

Education Bubble: Student Loan Debt Passes Credit Card Debt, Expected to Hit $1 Trillion

Debt for Diploma Schemes: Debt for Diploma Schemes and the Cookie Monster Principle

Off-Balance-Sheet Budget Fraud: Budget Deficit Accounting Fraud and the Off-Balance-Sheet Student Loan Scam; Time to Scrap Entire Student Loan Program

Pell Grant Debt Zombies: For Profit Schools Turn Students Into Debt Zombies; It's Time To Kill The Entire Pell Grant Program

Buried in Debt: Subprime Goes to College; Students Buried in Debt; Who is to Blame?

Living Wage Nonsense

Keynesian and Monetarist clowns conclude that wages are not high enough. The masses lament for "living wages".

The problem is not that wages are too low, but rather costs are too high. Ben Bernanke, president Obama, union sympathizers and other misguided fools seek to drive wages up.

The results are what any rational person should expect: loss of jobs to Asia, loss of jobs to technology, prices rising faster than wages, and overall debt soaring to the moon.

Reflections on Affordable Housing, Education, Medicine

There are hundreds of "affordable housing" programs. Every damn one of them drove costs higher by artificially creating demand right up until the pool of greater fools ran out. Then, as soon as housing crashed, government and the Fed made a concerted effort to drive back up prices.

In effect, no one really wanted affordable housing. Rather they all wanted "affordable housing slush funds".

The same holds true for education and health care.

Why is the Middle Class Shrinking?

The simple fact of the matter is there is absolutely nothing wrong with falling prices. Indeed the average guy on the street would welcome falling prices. The Fed, however, says no.

The first result of Fed policy (coupled of course with Fractional Reserve Lending) is rising prices of essential goods and services coupled with falling real wages.

The second result of Fed policy was a real estate and financial asset crash.

The third result of Fed policy is reduced demand for credit (which constitutes deflation in my book).

Since the Fed never learns, we have seen reckless rounds of QE following reckless rounds of QE hoping to stimulate jobs and lending. Yet, people actually wonder "Why the middle class is shrinking"

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2012 Mike Shedlock, All Rights Reserved.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Mike Shedlock Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

JamesGinn
28 Nov 12, 23:19
Skilled Workers ? Really?

What these companies really want are low wage workers not skilled workers for their company specific technology. They say they can't find skilled workers so are we to believe they will find more skilled workers in third world countries than in America ? No this is simply a continuation of what started in the eighties of maintaining low wages no matter what the long term cost. Perhaps what we truly need is a return to the free market system worldwide and with it a return to true valuations.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014