Interview by Joseph Coombs, SHRM Workplace Trends and Forecasting Specialist
Much blame has been placed on economic conditions for the job market’s recent woes. But are there unrelated problems with the quality of the U.S. labor force?
In a recent New York Times column, Thomas Friedman explored whether a critical reason for the recession is “an education breakdown on Main Street” that has undermined the ability of the average American worker to compete in the global arena. The United States and much of the world do not have a labor shortage, but rather a growing shortage of skilled talent. This is being driven by the skill demands of more complex technologies, demographic and generational shifts, and the impact of globalization on skilled-talent mobility.
While the employment requirements of this 21st-century economy have radically altered, our human resource perspective on talent is still firmly rooted in an antiquated, 20th-century education-to-employment system. The American business sector’s fixation over the past 15 to 20 years on short-term profits has meant that most companies have invested little in updating their employees’ skills and education.
What sectors are hurting the most from the lack of qualified job candidates, and what can be done to improve the situation?
[Since December 2007] the U.S. economy has undergone significant structural changes. This jobs transition has been away from industries driven by housing and consumer discretionary spending, such as the automobile, low-skill manufacturing, financial services and retail sectors. Many of these jobs are likely gone forever. Retail and leisure jobs may be slow to return if consumer spending remains constrained.
More new jobs likely will be created around exports, services and such technology sectors as aerospace, nanotech, biotech or other areas in which the United States has a comparative economic advantage in brainpower. The 2009 EDGE Report [by Robert Half International and CareerBuilder] found technology as the number one area of future job growth once the economy recovers.
Economists at Goldman Sachs, HIS Global Insight, the Northern Trust and others are among those that also see these areas as strong sources of future job growth. The United States must keep generating new technology that produces high value innovative products and services that will generate high-wage employment gains.
How can U.S. companies fill these gaps in the labor force?
Businesses and communities are beginning to face the realities of the new tech-driven jobs market. This is not their parents’ economy or workforce anymore. They are beginning to build what I call “gateways to the future.” Across America, numerous community-based organizations (CBOs) and non-governmental organizations (NGOs) have been at work for more than a decade expanding business-education partnerships. They have mobilized the broad participation of chambers of commerce, unions, parent organizations, workforce boards, economic development organizations and other community groups. In Santa Ana, California; Fargo, North Dakota; Danville, Illinois; Mansfield, Ohio; and in many other communities, these local CBOs and NGOs are now making significant investments to reinvent their local and regional education-to-employment systems. They have helped businesses stay competitive through worker retraining and elementary/secondary/postsecondary career education programs. These CBOs and NGOs are rebuilding talent pipelines and helping to attract new businesses offering higher-wage, higher-skilled jobs for their communities.
At the national level, the U.S. Congress can encourage these business investments by allowing businesses to capitalize investments in training and education, just as they now capitalize investments in plants and equipment. This will help reduce unemployment by encouraging companies to once again offer entry-level job trainee positions.
Are more foreign workers seeking opportunities in their home countries rather than the United States? Why?
Many nations in Europe as well as Japan and South Korea are beginning to experience severe yearly population declines. This population shrinkage includes a significant decline in the size of their workforces. Thus, many countries are now competing to attract skilled workers. And the go-to sources of talent that countries could once easily rely on, such as India and China, are having challenges of their own. Both India and China graduate about 400,000 engineers each year. Yet according to several McKinsey & Company studies and other sources, only about 25 percent of Indian graduates are considered qualified for employment in international businesses. Worse yet, only 10 percent of Chinese graduates meet world-class multinational expectations. As India’s and China’s economies have become more sophisticated, they are moving from low-skill to high-skill products and services. To meet these demands, both countries have begun to call home millions of expatriates—engineers, scientists, medical personnel and others—to fill the large talent gaps growing across their economies.
What are the consequences of not addressing these shortcomings in the U.S. labor force?
Without a massive overhaul in our education-to-employment system, we predict that by 2020 the U.S. labor market will be significantly out of balance: High-pay/high-skill jobs will rise to 74 percent of the U.S. labor market; 123 million people will be needed, but only 50 million are likely to be qualified. On the other hand, low-pay/low-skill jobs will shrink to 26 percent of the total; 44 million people will be needed, but over 150 million will be available.
The impact of this talent meltdown will probably be greatest on small and mid-sized companies, with larger corporations merging or leaving the United States. Wages in key high-skill technology-related occupations will begin to rise rapidly. Over the next decade, more dollars will chase scarce talent worldwide. The United States has faced difficult economic odds before and beaten them throughout our history by encouraging flexibility, renewal and growth. Talent development and technological innovation will be key components in moving forward.