Shortage of Skilled Workers leads to Rising Wages for Open Positions

The Wall Street Journal has another story about the shortage of skilled workers. I’ve blogged about this problem before and found this article’s facts to be consistent with what I’ve read from one local college and from CNN. Other articles about this problem are easily findable with a good Bing or Google search:

Industry Week


In an October 24 article, Peter Capelli asserts that the real shortage has much to do with companies not wanting to invest in training new workers while pointing the finger at the government and the education system for not producing the right skill sets that fit their needs. So companies report a shortage of skilled workers rather than looking at how they can restructure jobs and then do in-company training to get workers who have the aptitude and willingness to learn up-to-speed to do the job functions required.

Capelli also asserts that perhaps the real shortage has more to do with a company not giving a sufficient compensation package to attract people who could and would otherwise do the job. I tend to agree with his assertion. Today’s WSJ article points out the negatives of the job and then outlines the compensation package:

“This doesn’t require a bachelor’s degree but demands technical skills gained either through an associates’ degree or four years of experience in electronics. And it is grueling work. Technicians have to climb 50-foot communications towers, clamber up utility poles and work outdoors through Wyoming winters and Kansas summers. They put in 10-hour days, in clusters of eight or ten days, and are routinely away from home more than half of each month. Apart from the necessary skills, said Union Pacific’s construction manager for the Denver region, John Haberle, the job has two things that make attracting workers hard: the heights and the travel…Standing at the front of the room, Ms. Bailey described the deal. As installation technicians, they would earn $21.64 an hour, or close to $48,000 a year for the railroad’s regular work schedule. Overtime could add thousand dollars more. If they stuck with it and advanced through union ranks, they could earn more than $68,000 a year before overtime. She also told them Union Pacific would cover 85% of workers’ health-insurance premiums, subsidize college courses they took and pay a traditional pension.”

Being a bit facetious to make a point, suppose they compensated these positions at $120K/annual instead of $48K/annual: what do you think would happen? Add to that the idea that the company would train you to do the job and ensure that you could receive additional training to grow professionally and have your benefits covered. In this scenario, they would be able to attract all the talent they would need. Now, I’m not suggesting that $120K is the right compensation package, I’m merely making a point: There are always people who will do a job for a price. One of the few things you really own is your own labor and believe it or not, we all try to sell that labor for the best overall compensation package we can get.

To the company’s defense (in this story, Union Pacific), all of us have heard for decades how good our public school education system is and how it is the government’s role to provide job-retraining dollars so that workers can get training to find better compensating jobs. When this is the constant mantra of our public schools and our state and federal government systems, it would stand to reason that corporations would sit on the sidelines and accept this indirect subsidy for their businesses. What business doesn’t want the perfect worker to show up and be ready to do the entire job, perfectly, day 1?

But there is also a shift in our workforce as to what constitutes a “good” job or career. Our younger crew is increasingly resistant to doing hard manual labor. Having grown up with constant praise that was often out of balance with the results of their efforts, they now can’t really see themselves having to perform hard, tiring work for (what they perceive to be) low wages, especially in an industry not know for its’ warmth and encouragement.

I see the causes of this problem (like most problems) as multi-faceted: We probably do lack skilled workers, but those jobs likely lack sufficient compensation. Companies need to accept the role of educator and trainer again and our workforce needs to see these skilled jobs in the same light they view computer jobs or being the winner of American Idol. For now, Union Pacific should take a serious look at raising the compensation package for their skilled workers, invest in the professional development of those workers and take responsibility for growing the workforce that they can’t find.

To Union Pacific’s defense, they would have to re-do their income and expense models in order to raise the compensation for these jobs. But that’s how markets work. When demand for a good or service increases while supply stays the same, the price goes up. I don’t doubt that UP has limits within which it can raise compensation rates before it goes negative on its’ profits. But that’s the art and challenge of running a business – balance competing and often mutually exclusive demands and interests in a business to make the entire thing – moving parts and all – work better together for everyone.

Bill English, CEO