Best of the Week
Most Popular
1.Stock Market in DANGER of Strangling the Bears to Death - Nadeem_Walayat
2. Germany Pivoting East, Exit US Dollar, Enter Gold Standard - Jim_Willie_CB
3.Flight MH17 – Kiev Flash Mob's Last False Flag? - Andrew_McKillop
4.Stock Market Crash Nightmare! - Nadeem_Walayat
5.Gold - The Million DOLLAR Question... - Rambus_Chartology
6.Gold And Silver – BRICS And Germany Will Pave The Way - Michael_Noonan
7.The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - Nadeem_Walayat
8.The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - Felicity Arbuthnot
9.Which Way is Inflation Blowing? Watch Commodities - Gary_Dorsch
10.U.S. Economy Quarterly Review and Implications for 2014-2015 - Lacy Hunt
Last 5 days
What It Means - Paradigm Collapse And Culture Crisis - 27th July 14
Wall Street Shadow Banking: You Can’t Taper a Ponzi Scheme: “Time to Reboot” - 27th July 14
6 Tips for Picking Winning Gold Mining Stocks - 27th July 14
Israel's War on Children, Exterminating the Palestinians Future - 27th July 14
Guilt By Insinuation - How American Propaganda Works - 26th July 14
Surprise Nuclear Attack On Russia To Liberate Ukraine - 26th July 14
Use "Magic" Of Gold/Silver Ratio To Greatly Increase Your Physical Holdings - 26th July 14
Derivatives Market Species Origins - Abuse, Props and Risks - 26th July 14
Stock Market Manipulation and Technical Analysis - 26th July 14
China’s Stock Market Finally Looks Like A Buy - 26th July 14
Ed Milliband Fears Israel Jewish Fundamentalist Gaza War Massacres Backlash - 26th July 14
The Big Energy = Power Battle Is Coming - 25th July 14
USrael - Zionists in Control of America's Goyim Brainwashed Second Coming Slaves - 25th July 14
More Weakness Ahead for Gold Miners - 25th July 14
Gold Price Strong Season Starts - 25th July 14
Geopolitics and Markets Red Flags Raised by the Fed and the BIS on Risk-taking - 25th July 14
Gold Lockdown Until Options Expiry - New Singapore Gold Contract Threatens Price Manipulation - 25th July 14
The Bond Markets, Black Swans, and the Tiny Spirit of Santo - 25th July 14
No Road Map For Avoiding The Future - 25th July 14
Israeli War Machine Concentrating Women and Children into UN Schools Before Killing Them - C4News - 25th July 14
Israeli Government Paying Jewish Fundamentalist Students to Post Facebook Gaza War Propaganda - 25th July 14
Why the Stock Market Is Heading For A Fall - This Time Is Not Different - 25th July 14
An Economic “Nuclear Strike” on Moscow, A “War of Degrees” - 25th July 14
BBC, Western Media Working for Israeli Agenda of Perpetual War to Steal Arab Land - 25th July 14
Ukraine: What To Do When Economic Growth Is Gone - 24th July 14
Stock Market Clear and Present Danger Zone - 24th July 14
The Five Elements to Creating a Something-for-Nothing Society - 24th July 14
Instability is the New Normal? - 24th July 14
Israel's Suicide Bombers Over Gaza - 24th July 14
EUR-AUD Heads Into The Danger Zone - 24th July 14
Tesco Supermarket Death Spiral Accelerates as Customers HATE the Mega Brand - 24th July 14
Ukraine MH17 Crisis - Best Remember Who Your Friends Are - 24th July 14
Three Reasons Why Gold Price and Gold Stocks Will Rise - 24th July 14
HUI Gold Bugs Fighting To Break Downtrend - 23rd July 14
What Putin Knows About Flight MH17 - 23rd July 14
Why Microsoft Will Continue to Rebound, Huge Upside Potential - 23rd July 14
Will Putin Survive? - 23rd July 14
MH17 Crash Next Phase Economic Warfare - 22nd July 14
The TRUTH about China’s Massive Gold Hoard - 22nd July 14
Forex Multi-week Consolidation in EUR/USD Ended - 22nd July 14
Bitcoin Price Medium-term Trend Being Tested - 22nd July 14
Beware Of The Flash Mob - 22nd July 14
Can Putin Survive? - 22nd July 14
Israel Assault on Gaza: A Historic Crime, Nazi Like Final Solution - 22nd July 14
Zionist Israel an International Pariah - 22nd July 14
Reflections on the Global Misery Index - 22nd July 14
GDP Economic Statistic : A Brief But Affectionate History - 22nd July 14
TransTech Digest: Super Battery Bio-Power vs. Dirty CleanTech - 21st July 14
How to Find Trading Opportunities in the Currency Markets - 21st July 14
Stock Market One More Pull Back - 21st July 14
The Conquest Of Real - Degenerate Philosophies of the Book - 21st July 14
A Clear Way to Profit from a Graying Population - 21st July 14
Last Chance Critical Financial Market Forecasts Special Total Access - 21st July 14
Stock Market Crash Nightmare! - 21st July 14
Why the Stock Market Is STILL Cheap - 21st July 14
From Gore-Bore To Gore-War - 21st July 14
Gold Price Looking Drab - 21st July 14
An In-Depth Look at Gold Chartology - 21st July 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Fed Impact on Stock Market Trend

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