Job Openings Are at Record Highs. Why Can’t Middle-Class Americans Find Work?

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A man sells clothes on the street

A man sells clothes on the street because he can’t find a job — despite a high level of job vacancies. | Spencer Platt/Getty Images

Jobs, jobs, jobs — this is what we’ve been promised for years now. Job creation and economic growth were a lynch-pin topic for President Donald Trump, who has promised jobs to those in economically disadvantaged areas. Those promises helped win him the White House, despite the fact that the unemployment rate was below 5% upon his inauguration. But we know a lot of people are still struggling.

Millions of middle-class Americans are still out of work, despite the fact that we have the highest number of job vacancies on record. The latest economic reports show as of June 2017, there are more open jobs in the economy since the turn of the millennium. That means there are jobs out there, but for some reason people aren’t getting them. Why not?

There’s a complicated mix of reasons. Some people have grown so despondent that they’re permanently out of the workforce. Others aren’t qualified for jobs in the new growth industries, such as tech or health care. And some people did the math and found they’d be better off on government assistance than working a job that pays peanuts. Plus, some employers — many of which are complaining about a lack of qualified, dependable workers — aren’t willing to put more skin in the game.

So why can’t Americans who want jobs find them, despite millions of openings? To get the answer, we have to first dig into the economy’s anatomy.

America’s job openings

A "now hiring" sign at Chase
A “now hiring” sign is posted at Chase. | Justin Sullivan/Getty Images

Job vacancies and job openings are exactly what they sound like — open jobs waiting to be filled. These positions represent needs from employers, and as such, employers advertise them as jobs to be filled. As mentioned, these openings are at the highest levels on record, which goes back to the year 2000 when the government started keeping track.

The number of openings is sourced from the Job Openings and Labor Turnover Summary. The data, from the Bureau of Labor Statistics, show as of April 2017, there are more than 6 million job vacancies in the U.S. economy. There are still more people out there who are unemployed — 6.9 million — but the 6 million figure is a signal of economic strength.

Compare that to July 2009 (deep recession), when there were around 2.4 million openings, for some perspective. But why, if there are so many openings, are employers unwilling to dip into the pool of 6.9 million unemployed people?

The ‘skills mismatch’

graduation
There are jobs, but people don’t always have the necessary education. | Imeh Akpanudosen/Getty Images for UCLA

The answer, it seems, is a “skills mismatch.” What does that mean? In a nutshell, those unemployed Americans out there don’t have the required skills or experience to be successful in the open positions. For example, an out-of-work coal miner is going to be a bad fit for a Silicon Valley tech company — probably for several reasons.

A report from Reuters says the skills mismatch is the primary motivator behind slower hiring. But is that truly the case? Or are employers reluctant to bring on more workers for another reason?

Reluctance to raise wages …

$100 bill
Businesses are reluctant to raise wages. | Paramount Pictures

The skills mismatch is a very real issue. But a much more obvious issue is the fact that many employers are reluctant to pay workers more. Labor, like any other commodity, is subject to the rules of the free market. When there’s a shortage (as there appears to be right now), prices go up. But businesses don’t want to increase spending, and as a result they are allowing positions to go unfilled.

It’s not merely a matter of not being able to find quality employees. It’s that businesses are reluctant to pay more for them.

… Or offer training

Teacher training students In catering cutting onions
A teacher trains students in the kitchen. | iStock.com/bowdenimages

If you have millions of workers who don’t have the skills needed to fill your positions, one option is to train them. But that’s something fewer and fewer businesses are offering these days. More jobs than ever require college degrees, and many entry-level positions expect you to come in with some sort of certification or experience. This, of course, is at odds with the “entry-level” designation.

What we’re seeing is an offloading of training costs from businesses onto workers. This makes sense, logically, from an employer’s perspective. But when everyone’s trying to avoid training or educating? You’re left with a growing skills mismatch.

Employers still think it’s a buyer’s market

Job applicants lined up for interviews
Job applicants line up for interviews. | Mario Tama/Getty Images

If employers are unwilling to pay more for trained applicants, train potential workers, or do anything to help close the skills gap, then what do they expect? The problem is rooted in the fact that businesses were able to get away with paying people considerably less in the post-recession period. Because jobs were scarce for so long, people were willing to work for smaller salaries. It’s the reversal of what we’ve already mentioned. When labor was in high supply, it could be purchased for cheap.

But now, there’s a shortage of labor because more people have jobs or don’t want them. It’s making it harder to attract workers with the right skills, leading many businesses to throw their hands up and say it’s impossible to find decent applicants.

The key point: There’s a labor shortage at prevailing wages

A man walks away from an interview during which he was probably offered a job paying $10 per hour
A man walks away from a job interview. | Foter.com

The fulcrum point of all of this is many employers simply aren’t offering attractive enough compensation packages to get the people they want. Yes, there’s a skills gap out there. But even that can be solved with high enough incentives.

What we’re seeing is there’s a labor shortage at the current wage levels. So if wages were to go up, we’d expect to see more people enter the workforce or be incentivized to earn the necessary degree, certification, or training to get the skills employers are looking for.

That brings us to another question: Where and what are these positions employers can’t seem to fill?

Where are the jobs?

A nurse working in an Indiana hospital
A nurse works in an Indiana hospital. | Mike Simons/Getty Images

As a report from Pew Research says, the Job Openings and Labor Turnover Summary doesn’t include state-level data. As a result, we can’t determine what specific states have more openings than others from that report alone. But we can look at regional numbers, which show the South and Midwest are where the most open jobs are.

“The South had the most job openings in April of any region — nearly 2.2 million — though the openings rate there (3.9%) was slightly below that of the nation as a whole,” Pew’s report said. “The Midwest had the nation’s highest regional openings rate (4.4%), followed by the Northeast (4.1%); the rate in the West lagged behind at 3.6%.”

As far as what types of jobs are going unfilled, Pew’s data show it mostly comes down to two specific industries: professional and business services, as well as health care and social assistance.

‘Full employment’

A construction worker hammering away
A construction worker hammers away. | Justin Sullivan/Getty Images

With the unemployment rate at sitting at 4.3% (as of June 2017), we’ve hit or come close to “full employment.” This is a term used by economists to describe a period during which everyone who wants a job has one. The remaining 4.3% of unemployed are “structurally” or “cyclically” unemployed. There is always going to be some people in the economy who aren’t working for one reason or another. Perhaps they were laid off, quit, or are seasonal workers.

Full employment is a good thing typically. This is one of the reasons the labor market is tight and why employers are having a hard time finding workers (at the wages they’re offering). What does it mean for you, the average American? Theoretically, it means you’re due for a raise.

The good news? There’s pressure on wages

A cashier rings up a customer's purchases at a Walmart
A cashier rings up a customer’s purchases at a Walmart. | Joe Raedle/Getty Images

When the labor market is tight and employers can’t get people to work for the wages they’re offering, what are they supposed to do? The answer is to offer higher wages — and keep raising them until people start to bite. If we’re sitting at or near full employment, we would expect to see this “pressure” on wages produce raises. We’ve seen some evidence of that but not as much as we’d like.

The problem, it seems, is a lot of employers are willing to let the 6 million unfilled jobs sit there rather than offer higher wages to fill them. That is why we’re seeing the discrepancy — why we have a record number of job vacancies and why we have millions of unemployed people who aren’t interested or, as employers say, aren’t qualified.

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