The U.S. Skills Shortage Is a Wage Shortage in Disguise

Every few months, headlines warn of a growing "skills gap" in the U.S. labor market. Employers say they can't find enough qualified workers. Policymakers call for more vocational training. Think tanks urge investments in STEM education. But what if the real problem isn't a shortage of skills, but a shortage of wages?

The notion of a "skills gap" has been a convenient narrative for businesses and policymakers alike. It shifts responsibility away from employers and onto workers and schools. If workers aren't qualified, it's their fault, not the fault of companies offering uncompetitive wages or failing to invest in on-the-job training. But peel back the layers, and a different picture emerges: many jobs that supposedly suffer from a "skills shortage" are simply underpaid.

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Employers Want Experience Without Paying for It

Take job postings for entry-level positions requiring two to three years of experience. That's not entry-level. Or look at roles demanding advanced technical skills but paying less than what a competent worker could earn driving for Uber or delivering groceries. When businesses advertise jobs that require high-level skills but offer low pay, it's not a skills shortage. It's a wage shortage.

A genuine shortage means that demand outpaces supply, and wages typically rise to attract more talent. In much of the labor market, that hasn’t happened. Instead, many employers have kept wages stagnant and complained that workers aren't biting. If you're offering $18/hour for a job that requires a bachelor's degree and specialized software knowledge, the problem isn't that no one can do the job. It's that no one will do it for that pay.

Wage Growth Has Lagged Behind Productivity

Economists have pointed out for decades that wage growth has decoupled from productivity growth. Since the 1970s, worker productivity has continued to rise, but wages have largely flatlined when adjusted for inflation. This divergence didn't happen by accident. It reflects decades of policy choices, weakening labor unions, offshoring, and corporate consolidation.

When employers say they can't find workers, often what they mean is they can't find workers at the wage they're willing to pay. But labor markets, like any market, respond to price signals. Raise the price—in this case, the wage—and the supply increases. More people train for those jobs. More people move to where those jobs are. More people leave less attractive jobs.

Credential Inflation and the Moving Goalpost

Part of the "skills gap" story also involves credential inflation. Jobs that once required only a high school diploma now demand a bachelor's degree. Not because the work has changed, but because employers can demand more during times of labor surplus. This creates an illusion of a more skilled job market while simultaneously locking out capable workers who can't afford four years of college debt.

Credential creep doesn’t improve productivity; it just raises the barrier to entry. And for many workers, it’s a barrier that doesn’t come with a commensurate increase in pay. When companies require more degrees, certifications, or unpaid internships without raising salaries, they aren’t solving a skills shortage. They’re pricing people out.

Training Used to Be the Employer's Job

In previous generations, many employers provided extensive on-the-job training. Apprenticeships, mentoring, and internal development were common. But over time, companies began expecting new hires to arrive fully trained. The costs of training were offloaded onto workers and the public education system.

This shift has been framed as a response to economic efficiency. In reality, it means companies have saved money by cutting training budgets while expecting workers to frontload those costs themselves. It's no surprise, then, that potential employees hesitate to enter low-paying fields that require expensive upfront investment with no guarantee of return.

If employers truly faced a skills shortage, they’d be investing heavily in training, offering signing bonuses, and raising wages. Some companies do. But many prefer to complain rather than compete.

Market Logic Cuts Both Ways

Businesses love to invoke market forces when justifying decisions like automation, outsourcing, or layoffs. But when it comes to labor, they often resist those same forces. The market says that if you can’t fill a role at the offered wage, you need to raise the wage. Yet many employers treat wage increases as a last resort, not a basic function of supply and demand.

Instead, they lobby for immigration reforms to expand the labor pool, or push for public subsidies to train workers. In some cases, that makes sense. But it also reveals a reluctance to pay what the market demands. If a restaurant can’t find a line cook for $15/hour, maybe the solution isn’t to bring in workers from abroad or blame Gen Z. Maybe it's to pay $20/hour.

Reframing the Conversation

Calling the issue a "skills shortage" implies a deficiency on the worker side. It paints a picture of a ready and willing employer community frustrated by an unqualified labor force. But the reality is more complex. Many workers have the skills or could acquire them quickly if the incentives were right. What’s missing is a willingness to pay for those skills.

Reframing the issue as a wage shortage puts the focus where it belongs: on employer practices, wage stagnation, and the undervaluing of labor. It forces companies to confront their role in creating the very shortages they decry.

The Pandemic Changed the Game

COVID-19 reshaped labor dynamics in ways that made the wage shortage more visible. Workers reassessed their priorities. Burnout, safety concerns, and the cost of childcare led millions to quit or switch jobs. Employers who once offered low wages found themselves scrambling to staff positions.

Some responded by raising wages and improving benefits. Others resorted to the old script of blaming worker laziness or lack of skills. But the pandemic exposed how many jobs had been underpaid and undervalued for years. It also revealed that when wages rise, workers return.

A Better Path Forward

Addressing the wage shortage doesn’t mean abandoning workforce development. Education and training still matter. But they must be paired with fair compensation. That means:

• Raising minimum wages and ensuring they keep pace with inflation.

• Supporting unions and collective bargaining.

• Encouraging employer investment in training and development.

• Tying tax incentives and subsidies to job quality, not just job creation.

None of this is radical. It's basic economics. If you want good workers, pay good wages. If you can’t fill a role, ask whether the compensation matches the expectations. In many cases, the answer will be no.

Summary

The U.S. doesn’t have a skills crisis. It has a compensation crisis. Framing labor shortages as a skills gap lets employers off the hook. It ignores the reality that many workers are making rational choices to avoid low-wage, high-requirement jobs. If we want a strong, stable workforce, the solution isn’t to blame workers. It’s to value them—and pay them accordingly.

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