I recently pointed out in this space that Maine faces a growing shortage of young workers and that this demographic fact was beginning to be reflected in the average wages paid to our youngest workers.

This gives rise to the question: How is this demographic trend playing out not just for our very youngest workers and not for the economy as a whole, but in the sectors requiring greater skills? In other words, what effect does demography have on the so-called skills gap?

An analysis of the Department of Labor’s Employment Dynamics data reveals some interesting findings. Between 2006 and 2012, total employment in Maine fell by 2 percent. Average earnings for those who were employed, however, rose by about 14 percent, from $2,852 per month to $3,256 per month.

For workers in the 24 to 34 age cohort, employment fell somewhat less (about 1.5 percent) and average earnings rose only half as much (about 7 percent) as the all-age average.

These facts seem to indicate that during the recession, older workers who did hang on to their jobs also hung on to their raises, while younger workers, fortunate to have a job, fared less well with wage increases.

The impact of recessionary job losses seemed to offset any wage gains young people might have expected because of their relative scarcity.

Does the story change when we narrow our focus to the professional and technical services sector? Does the skills gap play a role in relative wage gains?

And is there any difference between what happened to all workers in this more highly skilled sector and those in the 24 to 34 age cohort?

Over the same 2006 to 2012 period, the professional and technical services sector fared much better than the economy as a whole.

Total employment actually rose by 2.8 percent. Average wages for all workers increased 18 percent to $4,414 per month, and average wages for new hires increased over 29 percent to $3,633 per month. So far, so good.

But for younger workers the story is not so rosy. For the 24 to 34 age cohort in the professional and technical services sector, employment actually dropped by nearly 5 percent, a loss of over 250 jobs. Average wages for this age cohort rose only 12 percent above their 2006 level, and average wages for new hires in this sector rose only 14 percent above their 2006 level.

Indeed in some ways, the value of new young professional and technical workers in Maine appears to have fallen in the eyes of their employers.

In 2006, the average wage paid to a new hire age 24 to 34 in the professional and technical services sector equaled the average wage of all new hires regardless of age. In 2012, the average wage of young new hires had fallen 12 percent below the average of all new hires.

And here is where the crux of the “skills gap” debate rages.

Does the problem arise from the fact that potential workers age 24 to 34 just don’t have the requisite skills to be productive additions to the work force, and employers are therefore hiring older workers to meet their needs?

Or, is the problem that employers aren’t willing to pay wages sufficient to attract young workers with the skills they want?

Regardless of which of these two competing theories is more accurate today, the demographic reality remains inescapable.

Whether they hire younger workers or older workers, employers are going to have to pay more because, unless we can attract more workers to come here, each year there will be fewer and fewer available.

In short, all employers in Maine (high-tech and others) would be well advised to raise wages and add depth and variety to their training programs if they hope to meet the sales growth potential the coming economic recovery may offer.

Charles Lawton is chief economist for Planning Decisions Inc. He can be reached at:

clawton@planningdecisions.com

 

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