5 Key Insights on the Future of the Labor Market
The "skills gaps' is an acute issue, and is a natural byproduct of structural shifts in the economy. Three major factors are at play to create a job market unique in living memory. First, though the pattern of today generally matches prior generations, the pace of change is accelerating, and the nature of innovation is different.
Second, the unemployment rate has stagnated at a record low. Five years ago today, unemployment was 7.5%. Compare that to unemployment rate in March which was 4.1% for the sixth consecutive month. The number of unemployed persons, at 6.6 million, also did not budge much.
Third, the rescaling and reimagining of job retraining and workforce skills development is well underway. New solutions are emerging that will disrupt the segment and affirm life-long learning. The traditional public federal, state and local workforce development systems will need to form new types of public-private partnerships to adjust to the breadth and depth of learner and employer market demands.
These changes have a real impact on the labor market that all employers need to be aware of. Against this backdrop, here are five pertinent insights on today's labor market:
1. Middle-incomes workers, that represent 83 million middle-skilled jobs, remain in short supply.
Employers are struggling with constrained productivity and top-line growth. Particularly in industries that require a high volume of workers with Associate's degree or less and have wage expectation of ~$12-$25/hour on average.
Key Insight: Employers cannot solve skills gaps by simply driving more candidates to the top of the recruiting funnel. A new approach that shifts emphasis to retention and upskilling is needed.
2. Workforce Participation remains a missing link in closing the skills gap.
Labor force participation rates are at 62.9 percent. A deeper look inside the monthly jobs report reveals several essential areas of opportunity:
- 1.3 million "long-term unemployed" ( jobless for 27 weeks+) = 20.3% of unemployed.
- 1.5 million persons are "marginally attached" to the labor force. That is, they were not in the labor force, but wanted and were available for work, and had looked for a job sometime in the prior 12 months.
- 450,000 "discouraged workers" in March, workers not currently looking because they believe no jobs are available to them.
Key Insight: Significant opportunity still exists to attract "folks on the bench" with opportunities that better match their needs.
3. The popular press argues that the risk of automation and jobs losses is only growing, and massive transitions are expected as 60% of all occupations will experience "significant' changes or elimination.
However, last week, a detailed OECD report on potential impacts on employment of machine learning (that is, more automation) - suggested low single-digit percentages could be affected, far less than the more apocalyptic forecasts.
Key Insight: Smart augmentation will for sure change workflows, but a vast majority of jobs will remain roughly consistent for the foreseeable future. To paraphrase Mark Twain: The reports of their death are greatly exaggerated.
4. The future of work is changing. "Shelf life" of required skills is compressing.
To offset over-credentialing cost challenges, firms are "right skilling" to required competency levels.
- Progressive employers are embracing "Ownership" of employee upskilling (both financial and skill pathway design)
- Institutions are shifting emphasis to apprenticeship and skills development to build work-ready talent " there are now over 1,000 apprenticeable occupations
Key Insight: Leading firms like Disney, McDonalds and Lowes have all announced $100MM upskilling efforts in the last 30 days and more are expected to follow.
5. Scaling and reimagining job retraining and workforce skills development is essential " new solutions are emerging that will disrupt the segment and affirm life-long learning.
- Traditional workforce development systems like workforce boards are not equipped to respond to market shifts
- Retooling of the workforce development systems is accelerating " new retraining and new credentialing models are emerging
- Adoption is accelerating as media consumption habits affect learning in the form of on-demand, mobile, self-serve, and shorter content sessions
Key Insight: Expectation of training and learning will be embedded in workflow of employment with easy on/off-ramps to regular reskilling and education-to-employment pathways.
In short, although change is on the horizon, the situation isn't quite as dire as it first appears. Successful companies need to reevaluate the way they think about recruitment, training, and talent pathways especially for middle skills jobs. Apprenticeship programs and a whole-funnel approach to upskilling will certainly be part of the mix moving forward.
Recommended for you: Workforce Participation: A Missing Link in Closing the Skills Gap
Resources: Photo Credit.