With a civilian labor force approaching 4.5 million, New Jersey has finally recovered the jobs that were lost during the “great recession” of 2007- 2009, which officially ended, statistically at least, in 2012. But even as the unemployment rate is 4.5 percent, the numbers cannot mask the troubling structural changes in the economy that have occurred over this time.
The most recent Employment and Wages Report issued by the U.S. Bureau of Labor Statistics (April, 2018) shows the state’s economy at a tipping point. Job growth has occurred in all of New Jersey’s largest 15 counties over three years. However, in each of these counties, wages have actually gone down. In other words, even as hiring increases, wages in the aggregate have declined.
How is this possible? Results of our Talent Management Survey explains.
A cross-section of Association employer-members were surveyed in May, 2018. Almost all of the 85 respondents said that they would be hiring this year, most within six months. Recruiting strategies are varied but nearly 60 percent reported that their major recruiting challenge is lack of skills in the applicant pool. Nearly half reported lack of relevant job experience as an obstacle.
When drilling down, we find a more complex relationship between the type of hiring that is going on and the wages that are being paid.
Manufacturing has long faced the problem of finding skilled workers. And our survey shows that manufacturing respondents reported labor shortages for technical work. In fact, it’s the manufacturing sector that has the most job vacancies statewide. But again, the picture presented in the state’s manufacturing sector sometimes does not meet the eye.
It is undeniable that full-time manufacturing jobs remain vacant but the vast preponderance of manufacturing in New Jersey is done by small shops that rely on long tenured workers who have operate long depreciated equipment and whose unique skill-set has been molded by the job.
They stay in business primarily as niche players within a national supply chain, mostly doing defense work. About 1,400 small manufacturers in the state benefit directly from a U.S. defense contract, which typically does not place a premium on the type of innovation that requires capital investment. Not much has changed on the shop floor for decades, a tweak here, a fix there. Long-term workers operate decades-old machinery producing the same product line.
These are clean, decent places to work. Workers are loyal and owners care about their welfare. In some, workers and owners enjoy each other’s' company on the shop floor. In others, owners believe that they are morally obliged to help workers and their families in need. But finding skilled workers will continue to be a challenge. Investing in so-called advanced manufacturing will not help the majority of the state’s manufacturers.
However, the skills gap for larger, more advanced manufacturers poses a major concern on multiple levels. Manufacturing accounts for approximately 240,100 jobs in New Jersey with about 54 percent of those jobs classified as advanced manufacturing, meaning that in addition to a high school degree, learned or credentialed skills are required to do the job. Most of these skills can be learned on the job but requires some formalized process. Manufacturing respondents with 200 or more employees say that they want to fill technical jobs but cannot find qualified applicants. 75 percent of all respondents said they have no talent management process in place.
But aside from the perennial problem faced by the state’s manufacturing sectors, the survey tells a more troubling story of a state getting perilously close to being caught in a vicious cycle of low wages, decreased investment and underutilization of human capital; as the other biggest shortages are in jobs that pay low wages – drivers, retail workers, daycare workers, and administrative and health service. These sectors have the most vacancies and employers are scrambling to hire qualified people. Like manufactures, they will also continue to have trouble filling jobs.
As for the job market as a whole, about two in ten jobs require a college degree. And about 25 percent of college graduates now earn no more than does the average high school graduate. Part of the reason is oversupply. Technology increased the demand for educated workers, but that demand has been consistently outpaced by the number of new college graduates entering the job market.
Nevertheless, our survey shows that 6 of 10 respondents believe that labor shortages will negatively impact their business. But as long as wages remain stagnant, shortages will continue a drag on economic grow.