Skilled Workers More Important Than Ever for Employers

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Economists, business leaders and labor experts have warned for years that a coming wave of automation and digital technology would upend the work force, destroying and deskilling some jobs while altering how and where work is done for nearly everyone. But as the coronavirus pandemic has caused a near catastrophic economic calamity, New Jersey’s challenges are more acute than ever.

Prior to the pandemic, about two in ten jobs in the state required a college degree. About 25 percent of college graduates earned no more than the average high school graduate. Part of the reason, of course, is oversupply of college graduates for an economy that has not made the transition to information-intensive jobs. While technology increased the demand for educated workers, the demand has been consistently outpaced by the number of new college graduates entering the job market. Indeed, most of the technology investments have not favored college graduates. Basic enterprise software has mostly standardized work, creating more routinized work than ever.

Hidden below the state’s competitive advantages of geography, world-class institutions of higher education and the richness of its human diversity, New Jersey ranked 47th in long-term unemployment and 36th in underemployment.

Challenges ahead

Indeed, as 2019 came to a close we were facing the classic employers’ dilemma. As the state was enjoying one of the lowest unemployment rates on record – 3.5 percent - six of ten employer-members of the Employers Association of New Jersey (EANJ) reported that a shortage of skilled workers was beginning to negatively impact the business.  With a civilian labor force approaching 4.5 million, New Jersey had 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 reached a record low, the survey told a 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.

The most recent Employment and Wages Report issued at the time by the U.S. Bureau of Labor Statistics (April, 2018) showed the state’s economy at a tipping point. Job growth had 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 increased, wages in the aggregate declined.

At the time, six of ten employer-respondents believed that skilled labor shortages would negatively impact their business.

The standard government response has been to provide training grants to employers to upskill their workforces. For decades, public policy has sought to remediate the social harm caused by offshoring and job elimination due to automation. We have assumed the social costs of mass layoffs and worker displacement by expanding unemployment insurance for workers and funding training programs for employers. Because we are using taxpayer money, a workforce development bureaucracy has been built to deliver checks to unemployed workers and grants to employers, mostly in a top-down, one-size-fits-all fashion.   But New Jersey is a small business state, a fact that is often overlooked by government officials and almost always missed by the academics who advise them. Here is New Jersey’s private sector breakdown:

  • 88.6% of businesses employ 9 or fewer workers
  • 97.7% of businesses employ 49 or fewer workers
  • Only 2.9% of businesses employ 50 or more workers
  • Half of the private sector workforce is employed by employers with 49 or fewer employees.

As such, the vast majority of small employers assume their own costs and fund their own on the job training. They do not seek out government assistance for training because it is not perceived as necessary. With the exception of the present economic crisis caused by the pandemic, government typically supports small businesses through the tax code, not by direct grants. Only one-third of EANJ’s employer-respondents identified the state labor department as a training resource and only 22% identified the One-Stop Unemployment Office as a place to recruit skilled workers.  Small business hiring and on the job training routines are simple, direct and efficient – finding a person with basic skills that can be trained in a few weeks or months.

However, forty-one percent of employer-respondents reported lack of basic skills/professionalism as an obstacle to hiring. This is an astounding figure and tells us that the necessary skills are as much social as technical, with only 35% saying that inadequate technical skills posed a barrier to hiring. This tells us that hiring has a strong social and interpersonal component - dress, communication and grooming. Employers are more than willing to train someone who is perceived as being ready to work even as they are less willing to increase the starting wage.

At least one in four employer-respondents admitted that the primary barrier to attracting skilled workers was the below average wages they were offering. Even so, only about ten percent were considering a higher starting wage above the state-mandated minimum wage of $15 per hour.  

Competing with limited resources

So, what we have discovered is that skilled people do not want to work for low wages. As for that segment of the lower wage labor force, the $600 weekly enhanced unemployment benefit (which expired at the end of July) showed very clearly that many workers made more money unemployed than working. Incidentally, that same cohort of workers went without earned sick pay until a state law was enacted in 2018.

Before the pandemic, the Murphy Administration quickly determined  that it had inherited an economy that for decades had been losing "middle-skilled jobs" such as registered nurses, health technologists and most jobs in the trades – jobs that require an educational attainment or credential but not a four-year college degree. Many of these same jobs, by the way, have been deemed “essential” to the public health during the pandemic. Not coincidentally, they are also essential to the health of the state’s economy. .

A statewide apprenticeship initiative was launched by the Department of Labor and Workforce Development that has achieved promising early results. Even now, the apprenticeship program is expanding and reaching a diverse population of on-the-job learners. But by April of this year, 88% of EANJ survey respondents said they had furloughed or laid off workers, reduced hours or cut pay and presently nearly 1.3 million workers remain unemployed. Over $12 billion dollars in unemployment claims have been paid. About a third of EANJ members say that they are waiting for the pandemic to recede before a full recall and about one in four are not planning on recalling any workers back, planning to do more with less. And even as the unemployment rate seemingly plateaued las month, more workers are now losing jobs as medical equipment manufacturers and other essential businesses are reducing production. Good news for the public health, bad news for some essential production workers.

Attracting and retaining the best available talent

Conventional wisdom says that we are back to a sellers’ market, that employers will have their pick of skilled workers at recession-level wages. But this view is an illusion. Interviews of EANJ member-essential employers during the pandemic show that finding skilled workers remains a barrier to expansion. Tragically, the skills of the idled worker depreciate over time. That is the story of the state’s problem with long-term unemployment. The skills of labor force, one of our primary assets, are diminishing unfortunately aided and abetted by many small business just scraping.    

But COVID-19 has required many employers of all sizes to immediately embrace new ways of working while remaining safe, healthy and productive. Building on what we discovered from the EANJ surveys, employers must now step up in a new and unpredictable environment.  

Attracting, developing and retaining skilled workers takes time, effort and money – all three of which are difficult to come by given the challenges of today, especially for a lean HR team required to wear many hats each day. It requires moving beyond reactive hiring to planned, strategic hiring, understanding not only current but future needs while at the same time keeping safe, sound and focused.  This can only be accomplished in a cooperative environment based on mutual trust. Indeed, the most prevalent retention strategy reported by EANJ members is creating a positive working environment.

What can employers do to attract and retain talent to compete? Enroll now for five, online sessions Practical HR Strategies for the New Normal, September 17 – October 15.