Saturday, August 4, 2012

You’re Fantastic, But Can’t Get a Job: Here’s Why

We are told over and over again that jobs go unfilled because of a lack of qualified candidates. We have a skills deficiency that is forcing companies to move overseas in search of the trained workers they need. The failure of our education system is even threatening our national security. Can things really be so bad? Peter Cappelli, a professor at the University of Pennsylvania’s Wharton School, claims that a lot of the blame has to be placed on businesses themselves.

James Surowiecki (JS) provides an interesting column in The New Yorker on the book Cappelli produced: Why Good People Can’t Get Jobs. Cappelli also discussed his conclusions in an article in the Wall Street Journal (WSJ).

JS describes Cappelli’s argument as:

"....if businesses are having a hard time hiring, it’s a problem largely of their own making."

"....employers tend to let the perfect become the enemy of the good: seeing an overwhelming number of reasonable applicants makes them less likely to pick one."

Companies have mostly given up on training new employees so they tend to look for the perfect fit for the job at hand. Skills are hard to assess, but experience is rather easy. Consequently, companies tend to look only for people who are already doing the exact same job.

"In a major survey done this year by the employment agency Manpower, nearly half of employers said that the problem with applicants was that they didn’t have enough experience. This creates the classic job-market Catch-22: you can’t get a job without experience, and you can’t get experience without a job."

This attitude can lead to absurd examples.

"Cappelli mentions a company that had twenty-five thousand applicants for a standard engineer’s job and rejected them all."

Cappelli’s WSJ article provides data on the types of positions for which companies claim they have trouble finding candidates.

If the claim is made that proper candidates can’t be found for positions such as office assistants, sales rep’s, drivers, and teachers, one has to suspect that there is more at play than just a reluctance to provide on-the-job training. JS suggests that the claims of a lack of good candidates mask a more serious situation.

"When employers really want to fill job openings, they place ads, hire headhunters, and screen candidates quickly. When they don’t care too much, they are much more passive....They raise standards, and they screen candidates slowly. That’s the world we live in. According to an index developed by three economists in 2010, ‘recruiting intensity’ is still nearly twenty percent lower than it was before the recession a weak economy most companies worry less about getting every possible dollar of new business than they do about keeping costs down. That makes them slow to hire, which keeps unemployment high, which keeps demand weak, which in turn makes employers reluctant to hire."

In other words, what we have is not so much a skills gap as an enthusiasm deficiency on the part of businesses.

If JS’s conclusion is correct, the implication is that we should focus more on increasing demand and less on "skills creation."

Paul Krugman would presumably agree with JS’s contention, and with the notion that increased demand would cure all. In his book, End This Depression Now!, Krugman provides this quote by Ewan Clague on the skills gap facing the nation.

"I believe this present labor supply of ours is peculiarly unadaptable and untrained. It cannot respond to the opportunities which industry may offer. This implies a situation of great inequality—full employment, much over-time, high wages, and great prosperity for certain favored groups, accompanied by low wages, short time, unemployment, and possibly destitution for others."

Krugman allows the reader to chew on that statement for a few moments before announcing that Clague’s comment was made in 1935, just before the most rapid, demand-driven expansion in the nation’s history. And that expansion occurred at the same time that a large fraction of our skilled work force was being absorbed into the military. Our "unadaptable and untrained" remnant did a pretty good job—and Rosie had no prior riveting experience!

We can definitely do a better job of training people for the types of jobs provided by the economy. However, business has a related duty. Corporations are sitting on record levels of profit, yet they hoard their cash and refuse to share it with their workers or invest it in their own businesses, both of which would increase demand.

And businesses have a duty to become involved in the training of our nation’s workers. Only they can provide the definition of the skills needed. As Cappelli points out in his WSJ article:

"Companies in other countries do things differently. In Europe, for instance, training is often mandated, and apprenticeships and other programs that help provide work experience are part of the infrastructure."

"The result: European countries aren't having skill-shortage complaints at the same level as in the U.S., and the nations that have the most established apprenticeship programs—the Scandinavian nations, Germany and Switzerland—have low unemployment."

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