At the March Federal Open Market Committee meeting, I voted in favor of raising the federal funds rate. The U.S. economy is getting stronger and making good progress toward achieving the Federal Reserve’s full-employment and price-stability goals. Despite this progress, challenges remain that require broader steps beyond monetary policy.
One headwind for economic growth is the declining rate of labor force participation in the U.S. At the Federal Reserve Bank of Dallas, we believe that the majority of this decline is due to aging-population demographics, and that this trend will intensify in the years ahead. In addition, middle-class jobs are increasingly requiring higher skill levels.
In order to counteract these trends, the U.S. must work to find ways to expand the workforce and improve productivity. One important vehicle for doing this involves policymakers, businesses and educational institutions working together to create skills-training programs that equip workers to either join the workforce or improve their skills so they can take higher-paying jobs. Although creation of these partnerships is happening more often, I believe our country must make a quantum leap forward if we are to boost U.S. growth.
The skills gap in the U.S. is substantial. The National Federation of Independent Business found that as of first-quarter 2017, 45 percent of small businesses reported that they were unable to find qualified applicants to fill job openings. Dallas Fed surveys of businesses also indicate a significant skills gap. CEOs report shortages of workers for middle-class-wage jobs such as nurses, construction workers and truck drivers, automotive technicians, industrial technicians, heavy-equipment operators, computer-network support specialists, web developers and insurance specialists. If these types of jobs go unfilled, businesses will expand more slowly and U.S. growth will be impeded.
Closing the skills gap will likely involve greater emphasis on training current and prospective workers who haven’t attended college.
A nationwide focus on this challenge would be constructive, but ultimately skills-training partnerships must be created locally.
One example of this type of collaboration is the new Texas City Independent School District Industrial Trade Center. Texas City, located southeast of Houston, depends on industrial and petroleum businesses, both of which require skilled workers. The Industrial Trade Center is a partnership between the Texas City school district and local business leaders. It offers technical-skills training for maritime, construction trades, welding, pipefitting, instrumentation, electronics and machinist trades. It also trains students in soft skills, such as effective workplace communication, that will help them become more productive members of the workforce.
Another example is the collaboration between Year Up, a national nonprofit workforce-development organization, and El Centro College, a community college in Dallas. These two organizations have joined with leading businesses in the Dallas-Fort Worth community to offer an intensive, one-year program for college students ages 18-24, combining coaching, hands-on skills development and skills-based job internships.
These programs recognize that as technology increasingly disrupts various types of jobs – and challenges whole industries – the need for workers to be trained and retrained during their careers is likely to substantially increase in the years ahead.
The U.S. must work to find innovative ways to expand its workforce and improve productivity. Public-private partnerships that train current and prospective workers are critical to improving the prosperity of American businesses, towns, cities and our nation.
Rob Kaplan is president of the Federal Reserve Bank of Dallas. Distributed by Bloomberg View.
