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As evidence accumulates that many of the policy decisions of the past that benefited particular business interests are shown to be false or harmful, a resilient farce is the idea that workers lack the skills needed by industry and thus we must look to other countries to supply the needed talent.  If this argument could hold water, then the skilled would enjoy full employment and the unskilled would suffer from high rates of unemployment.  Here we have a partial truth at work… the educated enjoy a lower rate of unemployment than those of lesser education yet there is still significant numbers of educated people that remain unemployed, not to mention under-employed.  While the unemployment rate for the less educated is double that of those that have a bachelor’s degree or higher, recent petitions to increase H-1B visas limits implies that the supply of workers is insufficient to meet the demand of industry.  However, a story by Martin Kaste from NPR notes that the H-1B visas are granted not to cutting edge tech giants… but to consultancies aimed at temp workers and project consultancies.  The result of review H-1B visas by sector is that hiring is NOT to fill permanent skill needs, but to replace higher priced American workers through temporary assignments.

It may naturally follow that a free-market economic argument brushes of this cost cutting use of foreign workers as necessary to deliver lower costs to the marketplace of the end product and thus beneficial.  In fact, the argument goes so far as to follow from Facebook’s Zuckerberg and his supporters (FWD.us) to claim that the growth of new businesses is curtailed by the current levels of H-1B visas. If the benefits of lower costs were transferred to consumers then the argument may have merit, however there is little evidence to support the free-market claim of long run low prices that offset the wage loses of a displaced worker.  Instead, the displacement further supports wage erosion of across all socioeconomic classes, except the very top.  Thus the push for more H-1B visas ends up supporting the loss of purchasing power by labor, while further amplifying the inequality from capital.

A second objection naturally arises regarding education and the skills that American workers acquire, that graduates are ill-prepared for the needs of industry, and thus in the most high-tech industries that require advanced science and technology (skills not quickly developed in a worker with a training in a non-quantitative skill set) whose supply is insufficient.  The counter to this is that the marketplace is not offering sufficient wages to compel an increase in supply.  However, the supply-demand approach is predicated upon a faulty premise that it is the role of educational institutions to provide specific skill sets to workers in industry.

The flaw here lies in the fact that industry appears unwilling to invest in their workers to develop new skills, and is aiming to externalize the costs of training to others.  Secondly, the pace of change results in an absurd assumption that the education system can or should adapt curriculum so quickly as to deliver a steady stream of workers outfitted with the skill du jour.  Consequently, many businesses are stuck in a linear mindset that humans flow to schools, that then flow to colleges, that then flow to hit the ground running at the firm upon day one hiring… this is simply an over generalized view that ignores the reality of harder to quantify costs of worker training, orientation, and retention.  Furthermore, as workers are viewed as temporary, or materialistic cogs, in the process of producing a good or service business illustrates what a static view of the world they operate within.

Innovation is unlikely to follow from the temp worker… the strategic advantage unique to a particular firm is unlikely to follow from the consultant hired to accomplish a single project that they implemented at another firm last month.

HR must understandably hire workers for a specific need, however a firm should always be on the prowl for channels to further develop the skillets of their current human capital.  Additionally, most firms would do well to look towards the humanities in their hiring… as these are the students that completed schooling to learn how to think, how to critically analyze, how to innovate… you can teach them the trade skill quickly.  In fact, hiring humanities students may be the better choice for a firm aiming for long term value due to the fact that these graduates are more adaptable to change than a trade oriented new hire that is akin to a ‘one trick pony.’

Education is aimed at instilling wisdom and principles that are transferrable and adaptable… the best hire for an organization is the one that can adapt to new market opportunities and realities… and not so much the one that is simply there with the needs of today.  Stagnating wages and benefits is reason that the labor market might not be delivering the needed skilled workers to industry… it is not due to a lack of supply!  If supply and demand are to work at all… then a lack of applicants at a particular wage necessitates raising the wage to attract the needed talent… otherwise… one must abandon the supply-demand approach entirely to account for the fact that there is still highly educated and unemployed Americans out there!

Paul Krugman notes that if the wage was sufficient to attract talent, then many would get retraining and flock to fill the acute need… but that is not the reality, thus industry clamors for an increase in H-1B visas… yet their arguments are empty.  The real test of whether there is a skills gap or not lies in evidence that the top paying firm is incapable of attracting the talent… or anyone capable of being trained.

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