Friday, July 1, 2011

Why aren't employers hiring?

The Great Recession officially ended two years ago this month.  Corporate profits are reaching record levels.  Yet the United States has seven million fewer jobs today than it did in 2007, and even under the best scenario might not get back to full employment levels until 2020.  What's going on?

The McKinsey Global Institute has some answers.  In An Economy That Works: Job Creation and America’s Future (June 2011), McKinsey found a number of structural challenges that make this recovery different from previous recessionary periods:

1) So-called "jobless recoveries" are becoming the norm.  From the end of WWII to the 1980s, the economy on average recovered its lost jobs within six months after the end of a recession.  According to McKinsey, "it took 15 months after the 1990–91 recession and 39 months after the 2001 recession. At the recent pace of job creation, it will take more than 60 months . . . for employment to recover" just the jobs that have been lost over the past several years.

2) Even as the economy struggles to replace lost jobs, the potential labor force continues to grow.  Under the best scenario, the economy will not be able to produce the 21 million new jobs required to provide work for everyone who wants a job until 2020.  "However, in the low-job-growth scenario, only 9.3 million net new jobs are added—implying continued levels of high unemployment. In our midrange scenario, about 17 million jobs would be created, with the unemployment rate remaining at nearly 7 percent in 2020."  Disconnected young people at the bottom of the labor pecking order will undoubtedly feel any shortage of jobs most acutely.

3) Under current trends, the United States will not have enough workers with the right education and training to fill the skill profiles of the jobs likely to be created.  As a result, companies that lay off workers are opting to invest in equipment rather than workers when demand picks up.  The New York Times recently noted that in the past two years "businesses’ spending on employees has grown 2 percent as equipment and software spending has swelled 26 percent, according to the Commerce Department."  One employer illustrated the challenges in hiring:

“I dread the process we have to go through when we want to bring somebody on,” he said.
“When we have a job posting these days, we get a flurry of résumés from people who aren’t qualified at all: people with misspellings on their résumés, who have never been in the industry and want a career move from real estate or something. It’s a huge distraction to sort through all those.”
Culling the résumés takes three days. Then he must make time to interview applicants, and spend $150 for each drug test.
Once a worker is hired, that person must complete a federally mandated safety program, which Vista pays an outside contractor a flat fee of $7,000 annually to handle. Finally, Vista’s best employees spend several months training the new hire, reducing their own productivity.
“You don’t have to train machines,” Mr. Mishek observes.

4) The bulk of job growth over the next 10 years will occur in just six sectors: health care, business services, leisure and hospitality, construction, manufacturing, and retail.  These sectors account for 66 percent of employment today, but up to 85 percent of new jobs created through the end of the decade.  To meet the demand for qualified workers, policy makers must do a better job in highlighting labor trends and pushing schools and colleges to better prepare young people for the emerging opportunities.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.