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Desperately Seeking Skills

How an unqualified workforce is prolonging America’s economic misery.


In demand: At its gas-turbine factory in North Carolina, Siemens is using headhunters to find workers with the right skills.(courtesy of Siemens)

Eric Spiegel dwells in an alternate universe. The hulking 53-year-old Ohioan, a former Harvard University offensive tackle, follows the headlines from Washington about America’s “jobless recovery” and the agonizingly high unemployment rate of 9.2 percent. But that’s almost the mirror opposite of the problem that faces Spiegel, president of Siemens Corp., the U.S. subsidiary of the German engineering conglomerate. He has jobs galore to offer, more than 3,000 of them nationwide, but he can’t find people with the skills to do them. He’s not just looking for engineering Ph.D.’s, either. He needs hundreds of technicians, welders, and machinists. He has even hired a crew of headhunters to scour the nation for prospects. “We didn’t have to do that a couple of years ago,” he says. “But our human-resource managers are under a lot of pressure from the businesses to fill these positions.”

So, in September, Siemens is launching a new strategy that draws on a very old practice from its parent company in Germany: apprenticeships. In Charlotte, N.C., where Siemens is building the nation’s largest gas-turbine plant and hopes to hire some 800 people next year, the company is opening a pilot program that will pluck non-college-track seniors from nearby Olympic High School; Siemens will pay them an hourly wage to work part-time and will also pay their way through a two-year college program at nearby Central Piedmont Community College.


Why? Because existing technical and vocational schools were not teaching the precision machining skills needed to make the steam turbines and electrical generators, says Mark Pringle, director of the company’s operations in Charlotte. Mike Panigel, Siemens’s chief of human resources, adds, “The bulk of the people, we’ll end up employing; and to those who have not proved to have the necessary skills, we can at least say, ‘You’ve been trained.’ ”


The challenge that Siemens faces highlights the nation’s large and growing “skills mismatch,” a widening gulf between the businesses that are hiring and the skills of millions of Americans who are looking for work. A big debate is raging about how much of today’s unemployment results from the skills mismatch. It’s clear that the Great Recession contributed most to the high jobless rate, despite the “recovery” that officially began two years ago. The weak recovery is nothing less than a total inversion of the debt-inflated consumer bubble of the 2000s. Consumers, with their wealth reduced and their incomes often stagnant or falling, are reluctant to buy, and stores are unable to sell. Not surprisingly, employers are reluctant to hire.


But beneath that overarching problem, one startling figure jumps out. Educated workers with the right skills are, for the most part, doing all right—far better, at least, than those with little education. “Since the start of the recovery, the economy has created something like 1.5 million to 2 million net new jobs, and of these the vast majority have been ‘high-skilled,’ ” says Susan Lund, head of research for the McKinsey Global Institute.

The most recent population survey by the Labor Department’s Bureau of Labor Statistics offered this striking contrast: Since the recovery began producing jobs in January 2010, the United States has suffered a net loss of 500,000 jobs among people with high school diplomas or less, but a net gain of 1.2 million jobs for college grads. “During the entire recession, the unemployment rate for college graduates never exceeded 5 percent, while the unemployment rate for people without a high school degree soared to 15 percent,” Lund says. Of the 9.2 percent of Americans who are currently unemployed, 78 percent did not finish high school.

According to a study of major economies by the ManpowerGroup, a Milwaukee-based workforce consultant, 52 percent of employers in the United States complain that they can’t find the right talent—even at a time of sky-high unemployment. That’s a much higher share than the global average of 34 percent.

More alarmingly, the statistics suggest that the skills mismatch is becoming part of a deep structural problem in the economy. Despairing of finding work, many of the least employable people are simply dropping out of the workforce and swelling the pool of the “permanent” unemployed. As of this June, 43 percent of the nation’s 14 million unemployed workers were in the ranks of long-term unemployed (defined as more than 27 weeks). That’s the highest level since the government began compiling that data in 1948, far exceeding the previous record of 31.5 percent in 2009, when the economy was near the trough of the recession; the number is likely to be even higher by the end of this year. Even during the great “stagflation” of the 1970s, the proportion of long-term unemployed was only about 18 percent.


The problem, economists warn, is that unemployment begets unemployment as skills atrophy. In a recent analysis, the Federal Reserve Board estimated that a person who has been unemployed less than four weeks has a one-in-three chance of landing a new job within a month. For a person who has been unemployed for 27 weeks or longer, the odds drop to one in 10.

This article appears in the July 30, 2011 edition of National Journal Magazine.

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