Thought inadequate training was to blame for STEM skills gap? You’re wrong, it’s low wages

Concern is growing in advanced economies, and in particular in the UK, about the skills gap: there is a gulf between the skills workers possess today and the skills bosses say they need. Such concern is often focused on the STEM sector.

Thijs van Rens, associate professor in the Department of Economics at Warwick University, is convinced that low wages rather than inadequate training are to blame for the STEM skills gap.

He said: “It is often taken for granted that the skills gap and skills mismatch is a supply problem and appropriate training is not available to workers. However, data shows that market wages do not reflect the relative demand for different types of skills.

“Businesses complain about the lack of workers with STEM skills but are unwilling to raise wages for these workers – or reduce wages for workers with skills that are less in demand.”

In his research van Rens used data on job finding rates, earnings and profits, industries and occupations to measure the extent of the skills mismatch or gap on the labour market – as well as the underlying frictions that gave rise to it.

He suggested the labour market could adjust to a skills mismatch in two ways. The workforce could adapt to the demand for skills, for instance by acquiring training or changing occupation, or firms would need to adapt to the supply of skills.

However for one or both of these to happen, wages needed to reflect the relative supply and demand for various skills.

He set out three reasons why the skills mismatch existed: workers didn’t adjust to changes in skills demand; firms didn’t adjust to changes in skill supply, or wages did not reflect skills shortages.

Van Rens also argued that reform of the education system is not an answer to the perceived lack of appropriately skilled workers. As long as wages did not reward certain skills workers would be less likely to acquire them, and even if they did, would find employment in higher-paid occupations that do not utilise these skills.

“While firms complain about a shortage of qualified physicists and engineers on the labour market, a very large number of graduates in these fields work in the financial sector, where they only use their STEM skills to a very limited degree,” he added.

“Encouraging universities to educate more physicists and engineers will not make any difference if these additional STEM graduates look for jobs in investment banks.”

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