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    Entries in labor (73)


    The ever shrinking middle skilled workforce

    If you want to get a cogent, simple summarization of what is going on in the labor market and for the diminishing opportunities and prospects for folks caught in the middle so to speak, take a look at these recent comments and observations from New York Federal Reserve Bank Chair William Dudley:

    What Kinds of Jobs Have Been Created During the Recovery?

    Firms often change the way they utilize workers and the mix of skills they employ during recessions and recoveries.  The weakening demand during recessions forces firms to look for new ways to be more efficient to cope with hard times.  These adjustments do not affect all workers equally.  Indeed, it’s what we typically think of as middle-skilled workers—for example, construction workers, machine operators and administrative support personnel—that are hardest hit during recessions.  Further, a feature of the Great Recession and indeed the prior two recessions, is that the middle-skill jobs that were lost don’t all come back during the recoveries that follow.  Instead, job opportunities have tended to shift toward higher- and lower-skilled workers.

    As we’ll show, these same trends have played out in our region.  While there’s been a good number of both higher-skill and lower-skill jobs created in the region during the recovery, opportunities for middle-skilled workers have continued to shrink.

    I believe it is important for us to highlight these job trends and to understand their implications for our region.  There have been significant and long-lasting changes to the nature of work.  As a result, many middle-skilled workers displaced during the recession are likely to find that their old jobs will never come back.  Furthermore, workers are increasingly facing higher skill requirements in order to land a good job.  These dynamics in the labor market present a host of challenges for the region to address.  However one thing is clear: workers will need more education, training and skills to take full advantage of the types of job opportunities being created in our region, as well as across the nation.

    Lots to think about from NY Fed President Dudley's remarks, even if they are not surprising, it still seems that we (the big, society-encompassing we) are not doing enough or adequately preparing for this bifurcation in opportunity. The middle skilled jobs that Dudley is referring to were traditionally the majority of jobs in many small and midsize cities in America, and perhaps more importantly, the natural bridge from low-skilled and low paid work into higher skilled and naturally, better paid jobs. Even if an individual himself or herself could not make the leap from construction worker or administrative support into a managerial or exec role, chances were at least decent that their kids would be able to advance, even just a little further up the skill/pay ladder.

    I certainly don't have the answers to this problem, but it does seem like better strategies are needed. The commonly cited approaches that call for increased business/community college partnerships for workforce training and development and an emphasis to students that jobs in skilled trades represent solid career opportunities seem valid, but what if via the combination of technology progress, outsourcing, and better tools for automation, most of these middle skilled jobs are simply never coming back?

    What then? What if the middle skilled jobs continue to hollow out? What if we eventually become an economy comprised of lots and lots of low-skilled service workers and a relatively few (lucky) high-skilled knowledge and creative workers on the high end?

    And what happens when the chasm between these two ends keeps growing larger and larger all the time?


    CHART OF THE DAY: What age group has employment rising faster than population?

    Quick hit for a busy Tuesday - I wanted to share a chart (and the link to a few more interesting charts), on population growth, labor force growth, and employment growth between 2008 and 2014 for one specific category of workers - those aged 65 and up.

    First, here is the chart from Mish's Global Economic Trend Analysis, then some observations and free commentary:

    Apologies if the chart resolution isn't great, but hopefully you can still make out the key pieces of data. Essentially, while the population growth of those aged 65+ is really high (about 20% of an increase in this group since 2008), the rates of increase in labor force participation and employment are even higher (about 37% and 35% respectively).

    Additionally, this is the only age group where the labor force and overall employment rates are outpacing population growth. For example, 16-24 year olds have seen their ranks increase by about 4%, but employment for that group has declined about 6%.

    I know I have posted a few times about the general increase in age of the workforce, and the challenges and opportunities this presents to organizations, but it is probably worth thinking about perhaps more frequently than before. Older workers are often overlooked, and can present great sources of experience, insight, and even value, as any folks in this cohort do probably realize that they might be outside of their prime earning years. Also, many will be motivated by the opportunity to share their knowledge and give back as it were to their less experienced workers - which is exactly the kind of on the job learning and mentoring that the next generation desires.  Lastly, you probably don't have to be that concerned, (if at all), with ongoing development and career pathing with this group - they have likely ran most of their career journeys already.

    Anyway, this will have to be the last time I go on again about the aging workforce, I think the point has been beaten into submission. Unless I am still blogging say 20 years from now, where I will be screaming about the value of the older workers as far as I can still shout.

    Happy Tuesday.


    CHARTS OF THE DAY: On Increasing Job Openings and Scarce Candidates

    Today's chart(s) of the day come courtesy of Gluskin Sheff + Associates, and the excellent (and filled with charts) report from David Rosenberg titled 'The US Labor Market in Pictures, Tighter Than It Looks!', which provides a fantastic overview and re-set of the macro trends for employment in America.

    Taken from the Gluskin Sheff report, I want to call out two of the report's dozens of charts, the first on the growth in absolute job openings in the USA:

    Job openings continue to rise from the post-recession bottom, and with about 4 million current openings, seem on track to eventually climb to eclipse the pre-recession highs. In fact, if suddenly all 4 million openings were filled from currently (officially) unemployed workers, the unemployment rate would fall to about 4%.

    But of course things are not so simple or neat, and this next chart illustrates the challenges that many employers are reporting trying to fill jobs in a time of rising openings:

    Companies, especially smaller companies, are reporting increases in 'difficult to fill' positions, (a level just off it's five-year highs), and if you dig into the Gluskin Sheff report further, you will see that over 40% of companies are reporting 'few or no qualified applicants' for their openings.

    These trends of rising job openings combined with, at least for many types of jobs in many industries, are having a tightening effect on the labor market overall. I am not smart enough to try and tell you exactly why this is happening right now, it is certainly a complex and debatable set of circumstances that includes the aging workforce, the governmental safety net, firm's inability or unwillingness to invest in training candidates, and the 'fake-or-maybe-it-is-not-fake' shortage of candidates with the needed skills for the modern age.

    But the data seem to show one thing that is clear - the labor market is starting to show signs of tightening, probably making it more difficult for you in the short and medium term to deliver the candidates you need to sustain your business and talent objectives.

    It might be time to start re-thinking all the things that make your shop the place where increasingly scarce candidates want to land.

    Happy Wednesday.


    CHART OF THE DAY: The Labor Force in 2022

    ...will be older, (relatively smaller), more non-white, and will certainly have more robot participation...

    First, here is the chart, courtesy of our friends at the Bureau of Labor Statistics:

    And below are the key findings from the aggregate data presented in the chart above, as well as in the details on gender, ethnicity, and sub-age group data (all found from the BLS in a piece titled "Labor force projections to 2022: the labor force participation rate continues to fall").

    The Bureau of Labor Statistics (BLS) projects that the next 10 years will bring about an aging labor force that is growing slowly, a declining overall labor force participation rate, and more diversity in the racial and ethnic composition of the labor force.

    The labor force participation rate increased in the 1970s, 1980s, and 1990s and reached an all-time high during the 1997–2000 period. The rate declined during and after the 2001 recession before stabilizing from 2004 to 2008. The labor force participation rate fell in 2009 and continued to fall after the 2007–2009 recession ended. As the baby-boom generation ages and begins to retire, BLS projects that the overall labor force participation rate will continue to decline to 2022.

    During the 2012–2022 period, the growth of the labor force is anticipated to be due entirely to population growth, as the overall labor force participation rate is expected to decrease from 63.7 percent in 2012 to 61.6 percent in 2022.

    There is lots more in the details from the BLS piece, but I think you get the gist. And if you have been following this trend for any amount of time, you are probably not really surprised by the data.

    What is surprising, at least to me, is that whenever a new monthly employment report is released by the DOL that the talking heads on the business news continue to lament the low (and declining) labor participation rates, and speculate on the reasons why and the potential policies that could reverse this trend.

    If these 2022 projections from the BLS are accurate, or even close, I wonder if it makes more sense to quit trying to bring back the days of 2000 or so, and instead focus on what a smaller, more diverse, and older labor force means to our organizations and our economy.

    No fiscal program is going to turn back the clock for all the aging boomers. And hardly any feasible rise in the minimum wage is going to convince more 16 - 24 year olds that they would be better off working more and going to school less.

    The only age groups where participation is increasing are 55+.

    Keep that in mind this year as you are working on your 5 - 10 year business plans.

    Happy Wednesday.


    CHART OF THE DAY: On the Labor Force Participation Rate

    Lately whenever we get a new jobs report that shows the official unemployment rate continuing on its slow but steady decline (currently at 7%), we also have to consider the Labor Force Participation Rate, that is, the percentage of the working-age population that is either employed or is actively looking for work, and thus considered to be officially unemployed.

    As seen in the below chart, the Labor Force Participation Rate has declined to levels not seen in about 35 years or so, to about 63%. 

    Or said differently, the percent of people that are classified as actually being in the labor force, (either working or actively seeking work), has sunk to a level not seen since the late 1970s.

    Every time these figures are reported and repeated, there seems to be quite a bit of speculation around the causes of this decline. Just why are there relatively fewer participants in the labor force?

    Is it simply a matter of demographics as retirements of the first wave of baby boomers (now in their mid-to-late 60s) start to accelerate?

    Or are younger workers simply dropping out of the labor force due to the frustration of not being able to find work, either due to a simple lack of openings or having repeatedly failed to secure work in what is still an extremely competitive job market?

    The underlying reasons for this drop in participation do matter I think, as they can be used to more effectively create policies and programs to address them, (if that is needed), as well as for HR and talent pros that might need to understand these trends and include them as an input into their workforce planning process.

    Shigeru Fujita from the Federal Reserve Bank of Philadelphia recently published a research paper on the topic, titled On the Causes of Declines in the Labor Force Participation Rate, that attempts to break down the causes of these declines, and for anyone interested in the topic is well worth a read.

    In a nutshell, the paper concludes that about 65% of the decline in the Labor Force Participation Rate since year 2000, (roughly when the decline began), and 2013 are due to retirements and disabilities, both suggestive of the 'demographics' side of the declining labor force equation. Note that the 'retirement' portion of the decline only commences in about 2010, when the oldest boomers would be about 65 years old.

    Additionally, the paper also concludes that while there was a significant jump between 2007 and 2011 of 'discouraged' workers leaving the labor force, i.e. people that wanted to work, but simple gave up trying to find work, that all the declines seen in participation since 2012 are due to increased retirements and not increases in discouraged workers. These conclusions suggest that the lower labor force participation rate is really the new normal, at least for the short term.

    I know I am probably boring you to tears at this point, but I find this data, and the reasons driving the changes, really interesting. If you're organization is having a hard time finding the people you need for your opportunities, or has plans to grow or expand in any substantial way in the near future, then these macro labor force trends are worth considering.

    Once folks leave the labor force, it is really hard to get them to come back, whether they have retired, or have simply given up.

    Have a great week!