Importance and Shortages
of Qualified Workers in the American Economy
Subcommittee on Immigration and Claims
House Committee on Judiciary
U.S. Chamber of Commerce
Randel K. Johnson
March 25, 1999
Mr. Chairman and members of the Committee, good morning. I am Randel Johnson, Vice President, Labor and Employee Benefits, U.S. Chamber of Commerce. The U.S. Chamber of Commerce is a business federation representing more than three million businesses and organizations of every size, sector and region.
We have been asked to address the importance of an available, qualified workforce to American employers and shortages thereof. Obviously this is not a new issue to the members of this subcommittee as you are more than familiar with the contentious debate which led to passage of the Workforce Improvement and Protection Act (passed as part of the omnibus appropriations bill) which increased the number of available H-1B visas just last year. Fortunately, that legislation was passed on a wide bi-partisan basis with the support of the Congress and the Administration. Hearings on the shortages of high tech workers and the need for legislative relief were held in the Senate and the House–the Chamber submitting testimony at both—and there was much debate over the various studies and best legislative solutions. Fortunately, a consensus was reached and while I do not intend to rehash all that transpired surrounding that issue, it would be useful to take a quick look at the workforce and future trends.
Let’s go back to the one study no one questions, by the Bureau of Labor Statistics, reviewing occupational employment projections from 1996 – 2006 (Silvestri, Monthly Labor Review, Nov. 1997). The study’s conclusions were summarized as follows:
Total employment is projected to increase by 18.6 million jobs over the 1996-2006 period, rising from 132.4 million to 150.9 million, according to the latest projections of the Bureau of Labor Statistics (BLS). The projected 14-percent change in employment is less than the 19-percent increase attained during the previous 10-year period, 1986-96, when the economy added 21 million jobs. Consequently, growth rates among the major occupational groups will be very different from the past, resulting in a change in the structure of employment from 1996-2006. (emphasis added)
The economy will continue to generate jobs for workers at all levels of education and training, although average growth is projected to be greater for detailed occupations requiring at least an associate’s degree than for occupations requiring less training. Still many occupations requiring less formal education or training are projected to have above-average growth as well. Many slower growing occupations, some requiring little education and training and others having significant educational requirements, will add significant numbers of jobs primarily due to their large employment bases. There also will be numerous job openings due to the need to replace workers who leave the labor force or move to other occupations. (emphasis added)
It is not surprising that the survey noted that the fastest growing occupations were to be found in the computer and data processing services industry, which was expected to more than double its employment size to 2.5 million workers by 2006 (page 62.) The explosive growth of occupational categories in this industry and the immediate lack of high skilled workers to fill those jobs was covered in detail during the H-1B debate. And, when one turns again to the BLS, the data is fairly astounding, with, for example obvious growth rates of 118%, 109%, and 103% for computer scientists, computer engineers, and systems analysts, respectively. Lost in that debate, however, was the fact that growth in terms of raw numbers is also quite high in lower skilled jobs, although the rate of growth was less. This point is demonstrated from the two charts I have attached to this testimony from the 1997 BLS study, the first ranking the fastest growing jobs and the second those with the largest job growth. Note that the former generally requires a higher degree of education or training (according to the BLS) than the latter, although this is not uniformly true.
The important point to understand here is that, despite the (proper) attention and recent focus on the high technology area and its rapid growth, employment promises to increase in the vast majority of job categories across the board—from high skilled to low skilled. The Congressional Research Service reached a similar conclusion in an August 8, 1997 report "The Education/Skill Distribution of Jobs: How is it Changing?" emphasizing the continued expansion of low skilled jobs:
As defined in this report, low skilled jobs are not disappearing either in a relative or an absolute sense. Many occupations with limited educational requirements are experiencing above-average rates of job growth or substantial increases in employment levels. Consequently, jobs that typically require a high school diploma or less could continue to account for about one-half of total employment in 2005 just as they did in 1994. And, in relatively slow-growing or declining populations, many jobs are expected to become available to low-skilled job seekers because employers will need to fill vacancies created by departed employees.
With regard to existing shortages of qualified workers for individual job categories there is, frankly to my knowledge, a lack of specific statistical studies (once one ventures beyond the high tech area) on a job to job basis. Nevertheless it is clear that employers find problems in finding and retaining qualified workers across the board, high skilled to low skilled. This is a recurrent complaint of Chamber members. For example, at a meeting last July of over one-hundred state and metro chamber executives in Colorado, the lack of qualified workers ranked first on a list of 8 issues of major concern.
Similarly, in a 1998 survey by Price Waterhouse Coopers approximately 70 percent of those responding, ranked the "Lack of skilled/trained workers" as a major potential barrier to their own company’s growth over the next twelve months. To put this ranking in perspective it was ranked significantly higher than other issues such as increased taxation, legislative/regulatory pressures, the lack of consumer demand, profitability/decreasing profit margins and lack of investment capital. Further, with regard to entry level workers, of those surveyed, 31 percent identified a deficiency in problem solving skills, 21 percent noted a deficiency in computer/technical skills; and 12 percent in math and reading skills.
A 1998 survey by the Manufacturing Institute found that 88 percent of those surveyed reported difficulties in finding qualified job candidates in at least one job function, from unskilled production-line positions to highly technical computer programmers; and 60 percent typically reject half of all applicants as unqualified. The study noted that "Knowledge workers—men and women capable of performing sophisticated, technology-related tasks—have replaced line workers who perform repetitive tasks requiring a limited skills set. Yet 36 million American adults lack even high school diplomas."
Needless to say, employers have responded to these problems with billions of dollars in investments to training and educational efforts. Again, this was an area covered during the hearings on the H-1B issue but it is worth noting that a study by the American Council of International Personnel found that its 300 members alone spent over $350 million in support of higher education, internal/external career development programs and K-12 pre-collegiate education. A 1998 survey by Training Magazine found that companies of 100 or more employees spent $60 billion on formal, structured training programs and these estimates do not count informal programs or companies with less than 100 employees. (See also, June 1998, BLS Monthly Labor Review, on employer training.) Employers do not spend millions and billions of dollars for the fun of it. They are doing so because they cannot find the qualified workers they need.
All of this indicates that employers are having a difficult time finding the qualified workers they require to produce their products. However, I should also note that a good case could be made that the future will see us simply without enough workers to maintain reasonable economic growth. Based on Census Bureau data, we estimate that from the present through the year 2026 the nation will need approximately 20 million more workers in order to maintain a 2.5 percent growth rate, assuming productivity growth would average about 1.5 percent, as employment demand is projected to outstrip workforce growth. Of course, this is based on many variables which could change, so the estimate is a very rough one.
Carol D’Amico, PhD, co-author of Workforce 2020, in a recent article entitled, "Got Skills? U.S. Workers Are not Prepared for the Jobs of the Future," summarized the situation as follows:
We will not only experience a quantity shortage of workers early in the next century but a quality shortage as well. Evidence suggests that we very likely will have a mismatch between workers’ skills and the skill requirements of the available jobs.
Increasing the number of high-school graduates with appropriate reading, writing, mathematics, reasoning and computer skills would go a long way toward filling the available jobs and laying a suitable foundation on which workers could upgrade their skills once in the workforce.
The U.S. has a serious mismatch between higher education and economic needs. A Hudson Institute study by Chester E. Finn Jr. found that more college degrees were granted in home economics than in mathematics, and more in "protective services" than in all the physical sciences combined. Yet a large share of unfilled jobs today and those that are growing in the economy are in the technical fields, and we are not preparing enough people in these areas.
Furthermore, a large share of the fastest-growing occupations in the years to come will require education beyond high school but not necessarily a four-year college degree.
I would like to spend some time now outlining what the Chamber is doing in the work force development area and some of the specific problems facing our members.
Through the Center for Workforce Preparation, the Chamber’s non-profit affiliate, we have taken a strong role in addressing the critical shortages in the availability of skilled and unskilled workers that business is experiencing today. The shortage of workers is creating an urgent situation for the U.S. economy because it throws into question our ability to keep growth industries on our shores, retain the talent to stay competitive in the 21st century, and generate the taxes to support our national infrastructure.
The mission of the Center for Workforce Preparation is to help ensure that U.S. workers are prepared with the knowledge, skills and attitudes to compete and succeed in the global economy of the 21st century. Three goals form the focus of the Center’s activities –
Workforce development and education have been key priority issues for the U.S. Chamber since Tom Donohue became its President and CEO in 1997. As mentioned previously, these two issues are raised by chamber members consistently and overwhelmingly as the most critical issues they have to deal with today. The Center for Workforce Preparation has been restructured in the past year, with the hiring of a new Executive Director, and has taken on a more active role with respect to workforce issues. The following represent some of the current activities of the Chamber through the Center’s efforts:
The Center has been working closely with local chambers to make sure that the opportunities available through the Workforce Investment Act, enacted last year, will be utilized to their fullest capacity and that business will drive the program to meet its needs for skilled workers. As part of my testimony, I have provided to each member of the committee a copy of the guide we developed to assist chambers in this effort.
I would like to add a few examples of what local chambers across the country are experiencing and how they are working in their communities to address this critical issue:
In Lancaster, Pennsylvania, industries that are experiencing acute shortages include hospitality, retail and construction. The Lancaster Chamber has organized, "workforce readiness breakfasts" where over 1,500 businesses will be surveyed to determine their workforce needs. This data will be made available to schools and training centers/organizations across the commonwealth so that they can better meet the needs expressed.
The San Diego Chamber has indicated a shortage of workers in the technology field, specifically engineering and electrical manufacturing. They are working as a community intermediary to begin to link the resources of the education system with the needs of the business community. This effort is sponsored by the Center for Workforce Preparation through a joint proposal with the National Association of Manufacturers and Jobs for the Future, funded by the Ford Foundation.
The Richmond area is feeling shortages specifically in the manufacturing industries and in the teaching profession. The Chamber has just begun a workforce development initiative which draws upon the experience of business leaders to bring the community together to find solutions to its workforce problems.
In Vermont, the Addison Chamber of Commerce is working closely with the education community and linking its efforts with the business needs in an effort to meet the shortage of workers in the technology fields.
The New Jersey State Chamber of Commerce stresses the needs of the manufacturing and utility industries. Its efforts are to identify "best practices" which describe ways that organizations are combating the problems associated with worker shortages across the state.
These are just a few of the ways that chambers are working with their local communities to assist businesses in meeting their needs for a skilled workforce. What is evident from these few examples is that each community faces different kinds of shortages and is seeking ways to address these needs. Chambers can facilitate local efforts and can bring together various segments of the community to form common strategies.
I hope that the information I have prepared in this testimony helps underscore our workforce needs as we move into the 21st century. The U.S. Chamber will continue to take an active role in addressing the educational and training needs of the workforce and to work with state and local chambers, businesses and educational institutions to meet these needs.
Thank you for the privilege of participating in this morning's panel and I look forward to questions.