Is There a Talent Shortage in the U.S.? Start By Looking at Hours Worked

18 Jul. 2012 | Comments (0)

Economists and human capital professionals are debating whether a talent shortage exists in the United States. Talent shortages are difficult to measure and identify. We propose that one way to learn if there are talent shortages is to examine the average weekly hours worked by occupation. Our analysis of this data indicates that a few occupations may be developing talent shortages.

Both anecdotal and survey evidence suggest that employers are having a hard time finding qualified workers. For example, according to the Manpower 2012 Talent Shortage survey, 49 percent of employers in the United States report difficulty filling jobs, which is higher than pre-recession levels in 2006 and 2007 (41 and 44 percent, respectively).

However, the unemployment rate remains the most frequently used measurement of talent shortages, and there is little evidence of shortages there. The chart below shows the unemployment rate for occupations possessing some of the lowest unemployment levels. We see that in all of these occupations, recent unemployment rates are still far greater than they were before the recession.

                                       Source: Bureau of Labor Statistics’ Current Population Survey

Besides unemployment rates, what other measures of talent shortages should be examined?  It is useful to consider what employers are likely to do when dealing with talent shortages. We would expect to see:

    • Increasing work hours of existing workers
    • Increasing wages and benefits
    • Expanding employee training
    • Increasing hiring intensity
    • Compromising on quality
    • Outsourcing or changing location of operation
    • Reducing business activity

Many of these decisions are difficult to measure in an accurate and timely way. For example, it may take several years for average wages to rise in occupations for which talent shortages exist. It can often take a long time for managers and recruiters to recognize skill shortages as a significant issue, and even then, there may be significant obstacles hindering higher compensation, which is sometimes determined by factors such as merit, seniority, and location, rather than labor market conditions for particular occupations.

As an alternative indicator of talent shortage, we turn to usual weekly hours worked. As employers experience talent shortages, they are likely to shift the workload to existing workers, which should translate to an overall increase in the number of hours worked for existing employees. Drawing from the Bureau of Labor Statistics’ Current Population Survey micro data, we compare the average usual weekly hours in the last available 12 months (from May 2011 to April 2012) to 2005-2007 for select occupations. While on average usual hours worked fell by 1.4 percent, a handful of occupations experienced significant increases in hours worked between these two time periods. In particular, extraction workers have increased their average weekly hours by over 6 percent, which is unsurprising given the large boom in oil and gas extraction.

Another group of professions thought to be subject to talent shortages are STEM occupations. Therefore, it is also unsurprising to find communications equipment operators, mathematical occupations, and life, physical, and social science technicians among the occupations with the largest increase in their workload.

          

Source: Bureau of Labor Statistics’ Current Population Survey

While the table above does not end the debate concerning talent shortages, it suggests that developments in average hours worked by detailed occupation can be useful for both gauging the magnitude of shortages, as well as identifying in which occupations talent shortages are likely to develop.

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  • About the Author: Gad Levanon, Ph.D.

    Gad Levanon, Ph.D. Gad Levanon is director of macroeconomic research at The Conference Board, where he also leads the labor markets program. He also serves on The Demand Institute™ leadership team. Levanon create…

    Full Bio | More from Gad Levanon, Ph.D.

  • About the Author: Ben Cheng

    Ben Cheng Ben Cheng is an associate economist in the economics department at The Conference Board. He received his undergraduate degree in economics with honors and mathematics at New York University. Ben …

    Full Bio | More from Ben Cheng

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