Thursday, December 11, 2014

Utah Has Enough Skilled Workers?

Mark Knold, Supervising Economist

Utah has more skilled workers than the Utah economy demands. That is the conclusion of a lengthy report by the Paris-based Organization for Economic Co-operation and Development (OECD) [1] referenced in the LA Times. (Follow the link to OECD in the LA Times article; go to page 354 in the OECD report).

The OECD report is titled “Job Creation and Local Economic Development.” It involves four major sections: 1) how labor market policies and training can contribute to local job creation, 2) entrepreneurship and enterprise creation, 3) local economic strategies and systems, and 4) profiles of 35 country’s economies, including the United States.

In the United States section is a map classifying each state, with each evaluated by what OECD calls skills supply and demand. Skill supply is based on the amount of the labor force with post-secondary education. Demand is represented by the distribution of occupations in the state economy and those occupations’ education requirements. The idea is that knowledge of occupations and what skill or education quantity they employ are the proxy for labor skill (education) demand.

There are four outcome possibilities in the state analysis. “High skills equilibrium” means a state has a high amount of post-secondary educated workers, and a high amount of skilled occupations to absorb that high skill supply. A “skills deficit” would be a state with a high amount of occupations asking for advanced skills, but a labor force with not enough post-secondary education to fill that need. A “skills surplus” is a labor force with high post-secondary education, but an economic structure with not enough occupational types that demand and correspondingly absorb this supply of education. Lastly, “low skills equilibrium” is a state with a low supply of post-secondary educated workers, but an economy that isn’t asking for a lot of post-secondary education. In other words, the economy is asking for a lot of low-skilled workers, and the labor force has plenty to offer to it.

Utah is labeled as a “skills surplus” state, one of only four with that classification. In other words, our labor force holds a higher skill package overall than what the Utah economy’s occupational structure is asking of that labor force. The report did note that Utah had increased its skill demand between 2006 and 2012, meaning the occupations that do ask for higher education levels increased in Utah across that interval. Yet, the gains were not significant enough, therefore Utah was given a “skill surplus” classification.
[1] Wikipedia lists OECD as an international economic organization of 34 countries founded in 1961 to stimulate economic progress and world trade. It is a forum of countries committed to democracy and the market economy, providing a platform to compare policy experiences, seeking answers to common problems, identify good practices and coordinate domestic and international policies of its members.

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