Monday, April 29, 2013

Education and Experience in the Job Market

The U.S. economy continues to sputter along in its recovery from the Great Depression, but while most turn their gaze to the unemployment percentage or how many jobs government and private corporations added/subtracted over a given month or quarter this focus is misdirected. Unfortunately most people do not consider the type of jobs that are driving the “recovery”. Most of the job gains are lower paying service and healthcare jobs, which exist near minimum wage salaries and part-time work. For example 19.1 percent of employees work part time (fewer than 35 hours a week) versus 16.9 percent when the Great Recession started.1 Note that while some may mitigate the absolute percentage change consider that this percentage encompasses over 150 million people, thus the percentage change involves millions.

Most commentators believe that these lower paying near-minimum wage service jobs and other part time work are a byproduct of the general lack of education of U.S. citizens. The common counter solution is rhetoric extolling the need to invest in education. Basically these individuals are lamenting that if only the general citizenry were more educated then most of the problems surrounding under and unemployment would be significantly alleviated. Therefore, the key to re-energizing the economy is widespread focus on and reform of education. Believers attempt to support this position by citing the numerous unfilled jobs that various companies have had open for months, if not years, due to a lack of appropriate candidates. Unfortunately this evidence damages the simplistic education argument in that it exposes more of the complexity of the modern relationship between the work force and quality jobs.

The principle reason why most high quality jobs remain unfilled over years is a lack of experience not a lack of education. Excluding this element from the economic issue is especially troubling because some pundits seem to assume that if a person has a college degree they will get a job, a reality that is illusionary. The quality job issue boils down to education and experience. When some comment about the lack of qualified individuals to fill all of these open positions in science, engineering and manufacturing they neglect to discuss the required experience only focusing on the education requirement. For example most of these job openings read something like this: company x is looking for an engineer with a Masters in electrical engineering and has 10 years experience in MEMS, not company x is looking for an engineer with a Masters in electrical engineering only. There are plenty of individuals with Masters in electrical engineering, but few individuals with that education and 10 years experience in MEMS. The principle reason for the lack of quality candidates is that over recent years most companies have cut back significantly on the number of entry-level positions they hire.

Unfortunately this reduction has created a form of negative feedback loop because if one is not hiring entry-level positions then those individuals who would take those jobs are not acquiring appropriate experience and are instead gaining experience in something else or nothing at all. Thus, this “redirection” of experience reduces the amount of individuals with requisite experience limiting the pool of candidates for companies to draw from when they require someone with certain experience. At present this experience pool for science, engineering and other high quality non-financial based jobs is so diminished that most companies have trouble filling these “experience required” positions almost requiring them to poach these qualified individuals from other companies, which does not solve the overall problem just the problem for company A while creating a new problem for company B (the company that loses the employee). Instead companies need to train for these positions by increasing entry-level hires versus looking for one who already has the experience.

Filling these higher quality jobs is important because they have a higher probability than most jobs of being both high paying and long lasting. This long lasting element is one commonly missed by those championing the Green Job revolution for most of those jobs are transient being temporary construction and manufacturing jobs. Also the supporters of the Green Job revolution forget the aspect of skill mismatch in that constructing a wind turbine is not equivalent to fixing a roof. Thus individuals without proper experience in construction and manufacturing will not be able to take significant advantage of any Green Job-type revolution. Even if the millions of jobs promised by the supports of the Green Job revolution were an accurate appraisal of the scenario, those jobs would not go to millions of different people, just the same general pool of hundreds of thousands of appropriately qualified individuals.

Another problem is that education needs to be more focused because not all education is created equal when it comes to employment. Pharmaceutical majors and philosophy majors may both receive an excellent education, but what they can do with that education after college is vastly different. In addition corporations need to restore confidence that university distinction is nominal in the selection process. Clearly there is a significant difference in the rigor and education one is expected to receive from John Smith State University versus Stanford, but the difference between a university like Purdue and Stanford is far less. Unfortunately employers do not honor the notion that education and other non-tangible characteristics (leadership, etc.) are what matter instead allowing nepotism, favoritism and connections to win out in the end, elements that are more easily acquired at Ivy League institutions over other high-ranking schools.

It is also worth noting that Ivy League graduates have higher salaries versus other universities over the initial stages of their careers regardless of career choice and despite a lack of demonstrated superior ability.2 If this problem persists then no amount of “education reform” and/or additional access to education will change the quality job concern because these “top-tier” schools have had declining acceptance rates over the last few years, thus the enhancement strategy would simply leave more people with an education, but no job adequate for it and some unnecessary amount of debt.

Two key steps to addressing this experience/quality job shortfall is that corporations will have to start expanding entry level hires and generate more advanced and extensive training methods. Basically corporations have to stop waiting for someone else to solve their problems (company a hires and trains individual A who is later poached by company b) and start solving it themselves (remember corporations are legally people now) by spending some of that billions in profit they have accumulated over the last few years since the Great Recession. Corporations must also form more cooperative relationships with universities establishing more paid internships linked to graduation credits. While rather obvious this relationship will help enhance early experience and enlightened students regarding the compatibility of actually career operation to their interests.

Overall there has been a shift towards part time work over full time work in recent years driven by two elements beyond the circumstances of the Great Recession (which should not be utilized as a excuse anymore). First, creating an efficient schedule organizing appropriate time for all full time workers requires sophisticated math or software scheduling versus a much more simplistic scheme with part time workers. In some respects laziness is carrying the day and augmenting the “advantages” of having part time workers. Second, the concern of increased health care costs, which will be born from the healthcare reform legislation of 2009 (the Affordable Care Act) that demands corporations employing at least 50 full-time employees in the previous calendar year provide health insurance for all or face penalties. Hire a lot of part time employees over a smaller number of full time employees and avoid the mandate.

Society must determine whether it is more appropriate for various industries to have numerous part time workers or a slightly smaller number of full time workers. If the latter wins out, yet corporations are unwilling to address that desire then government will have to pass legislation limiting the percentage of part time workers that a corporation can hire for most part time worker strategies are executed solely for the company’s bottom line and not for the health of society or the employees.

Citations –

1. Rampell. C. “Part-Time Work Becomes Full-Time Wait for Better Job”. NY Times. April 19, 2013.

2. 2012-2013 Payscale College Salary Report.