What’s
Wrong Today:
ADP’s
private payrolls jobs report shows a gain of 119,000
private sector jobs for April 2013. This is the weakest monthly ADP report of
private sector job growth since August 2012. ADP’s report does not
include government or public jobs.
If
Friday’s official unemployment report from the BLS matches ADP’s, it would indicate that
once again, job growth is not enough to
keep up with population growth, much less cut in to unemployment. When
the BLS report comes out, most expect to see that government job growth will be
negative, as the Sequester begins to take a toll.
Remember
that the US needs about 120,000 jobs per month, just to keep up with population growth, given current
low labor participation rates.
Speaking
of low labor participation rates, here is a great chart that looks at the
people who left the labor force in March 2013 by age group:
Source:
WSJ
The share of the
population either working or looking for work in March, 2013 hit its lowest
level since 1979.
This is called the participation rate, which now stands at 63.3%, down from 66%
when the recession began.
That
represents about 7 million workers who are now “missing” from
the labor force.
Although
the 16-24 age group make up a large slice of the working-age population, they
are becoming much less likely to work. The labor force participation among 16-
to 24-year-olds was 66% in 2000; it is now 54% (BLS).
This
is caused by declining rates of employment among high school grads. More young
people are going on for higher education in part to avoid the brutal job
market, particularly because employers
are passing on hiring teenagers for more experienced employees.
The
Great Recession and longer life expectancy have caused older Americans to
postpone retirement. The participation rate among people 55 and older is at a
50-year high. That has added about 1.2 million older workers to the labor
force, offsetting some of the decline among other age groups.
But
the focus on the labor force participation rate obscures what’s really missing
from the economy: Jobs.
Nearly four years
into the recovery, the US still employs close to three million fewer people
than when the recession began in December 2007. Nearly 12 million people remain
unemployed, 40% have been unemployed for more than six months.
The
surplus of prospective workers is so large that employers have the luxury of
waiting for the ideal candidate (meaning someone who already has the exact job)
to show up. The automated systems that score resumes also drive this by
rejecting anyone who is not a precise fit.
But technology is also having a more general impact: Many companies simply
decide to wait and leave positions unfilled, letting other workers carry the
load.
They can do this partly because technology is automating more jobs and tasks, allowing fewer workers to do more. Of course, this isn’t the only reason behind increased productivity. Multiple companies also try and make sure that their working environments are positive and supportive to make sure that employees are able to work happily. By using HIPOs management software, employers are able to ensure high potiential employees feel mentored and supported to reach their full working potential, increasing business productivity. Also, producitivity can be increased by efficient communication. Many businesses are now looking at SharePoint Alert Plus, which you can learn more here about, which automatically sends customized and conditional email notifications to keep everyone in the loop. Employee productivity grew 6.7% from 2008 to the start of 2012, while GDP was only 1.2% higher at the start of 2012 than it was in 2008. This means that employers needed 5.5% fewer employees.
Meanwhile,
our population continues to grow. It is growing by about 140,000 each month (4%
larger now than at the end of 2008).
This
is really the elephant in the room that no one talks about. Technology is
getting better and better, and things are likely to become even more difficult
for prospective workers.
The
bottom line is that in a slack labor market, employers have no incentive to
invest in training. They can wait for the perfect candidate or rely more on technology.
Too many people are being left behind.
A 2011 Accenture
survey found only 21% of US employees receiving any employer-provided formal
training in the past five years.
Peter
Cappelli, a professor at Wharton and former co-director of the
National Center on the Educational Quality of the Workforce during the Bush and
Clinton administrations has written a book, Why
Good People Can’t Get Jobs
(2012, Wharton Digital Press) that describes this phenomena.
Cappelli
points the finger at two interrelated factors: The process that companies are
using to identify potential hires, and their refusal to offer training or on-boarding
training for new employees.
Cappelli
explains that automated hiring software makes it easier for companies to weed
out applicants than ever before. All they need is a piece of code that can
parse application materials for the right keywords.
The result
is that firms either get the perfect hire, or none at all. A money quote from
Cappelli:
in the world where the notion that employers are simply the consumers of skills
is seriously considered.
Today, in
many industries, on the job training has become a relic, with companies
increasingly fearful of investing time and money to train employees who can
then be poached by competitors. This causes a spiral where employees and
candidates increasingly have to use their own time and money to acquire the
skills that they think
employers might want.
That situation
isn’t ideal for anyone: Not just for the workers who end up going into their pockets
to get a shot at getting hired, but also for companies who can’t control the
training and ensure its quality or value to the firm.
Small
wonder, then, that Cappelli concludes his book with the observation that:
a more realistic sense of what their own interests are with respect to
workforce issues and what best serves both their interests and the well-being
of society as a whole.
Amen.
We
hear corporations say they “give back” to their communities through media-friendly
charitable contributions.
If
companies truly cared about their communities or this country, they would put
these efforts (and their money) where
it would give back to all, through sustained job creation and on the
job training.
In the movie, It’s A Wonderful Life, Jimmy Stewart, as George Bailey, delivers a moving speech to the building and loan’s board of directors telling them, in essence, that their prosperity is created from the prosperity of the working people, their customers.
this speech, if given today to a real board of directors, would be turned back by Potter’s wish for the thrifty (and browbeaten) working class.
In the movie, It’s A Wonderful Life, Jimmy Stewart, as George Bailey, delivers a moving speech to the building and loan’s board of directors telling them, in essence, that their prosperity is created from the prosperity of the working people, their customers.
this speech, if given today to a real board of directors, would be turned back by Potter’s wish for the thrifty (and browbeaten) working class.