Section » Michigan Economy
As we explored in our last post, in a market economy its employers, not the government, who have the most effective levers to deal with skill shortages. Its not government or educators who are responsible for steering new entrants into the labor market to particular occupations or industries. And certainly not as a way to allow employers to keep wages low or barriers to employment high.
Two recent articles highlight practices (along with many others) by employers inconsistent with the complaints about labor shortages. A New York Times article on employers using long term internships as a substitute to hiring recent college grads. The article notes: “Once a short-term commitment at most, internships have become an obligatory rite of passage that often drags on for years.” And quotes an employer : “We need to hire a 22-22-22,” one new-media manager was overheard saying recently, meaning a 22-year-old willing to work 22-hour days for $22,000 a year.” And there is the increased utilization by employers of temporary workers as Crain’s Detroit Business reports in an article entitled Temporary workers nearing U.S. record makes Kelly Services a winner.
Neither practice is consistent with how markets deal with supply and demand imbalances. Where when supply is too low, Economics 101 teaches that you get to equilibrium by prices (in this case wages and benefits) going up. Not to mention other efforts to increase the attractiveness of what is in demand.
Two local employers have written about ways employers can deal with skill shortages. Both worth reading. In a Crain’s op ed entitled Businesses must do their part to find talent Mat Ishbia of United Shore Financial Services writes:
This positive spirit is needed to overcome the tired refrain that there’s a “skills gap” — that is, a lack of talent that matches up with employers’ needs — and that employers are powerless to do anything about it. At United Shore Financial Services, we’ve been able to successfully fill 500 positions since March 2011, and are on track to hire another 600 people this year. … There are three things in particular that employers can do to attract people with the right mix of talent and skills:
• Do our fair share of the work. Employers can’t just complain there are no skilled workers. Instead, we need to invest more of our time in finding the right graduates. If we do a better job of defining the exact skill sets we want, including “soft” areas like motivation, we can also screen more effectively. We also need to forge stronger ties with universities and community colleges, including making the effort to get to know administrators.
• Invest in supplementary training. It’s smart to look for employees who may not have all the skills they will ultimately need but who are highly motivated and willing to learn. Once you’ve found these highly motivated people, boosting your training budget for existing and new employees can then make a big difference.
• Be more flexible in creating great work environments. Our experience suggests that so-called perks can be valuable if they are extended to all employees. For example, free beverages, valet parking, concierge services and a fitness center not only help attract employees but free employees to do their best work.
In a post Nathan Hughes, responsible for recruiting at Detroit Labs, writes:
I think that worse than a skills gap, we’ve got a culture gap at companies that are looking for specific skills (i.e. resume keywords) and not finding them. I believe (know?) there are enough smart, talented, driven professionals in Michigan to fill all the jobs. But there’s not a culture in enough companies to identify and select people based on their potential, hire them, and then allow and help them learn/train/experiment/make mistakes to get them proficient in the skills. … What if we spent all our time finding the people that want our companies to succeed as much or more than we do and then trusted that drive to propel them into learning the specific fiddly bits necessary for them to succeed? (Emphasis added.)
There is a lot of skepticism about a skill shortage in technical occupations –– the most publicized are in manufacturing –– because employers seem to be doing the opposite of what they should to respond to shortages. Mainly not raising (in many cases cutting) wages and benefits, but also erecting barriers to hiring, filling vacancies with contingent and/or part time work, etc. (The MIT study I wrote about recently which declared the manufacturing skills shortage a myth is representative of this wide spread skepticism.)
MiBiz deals with the subject in an interesting story on manufacturing in West Michigan. The article reports on a presentation by Upjohn Institute economist George Erickcek to the Economic Club of Grand Rapids:
“I’m not sure there is so much of a skills gap, as a wage gap,” he said. “Wages for production workers across the Midwest have stagnated over the past three to five years. It’s possible some of the firms who are paying low wages are unable to attract the workers they need because of the inadequate wage and benefit packages they are offering. Nationwide, a lot of employers also are being picky about their new hires. They want to find a person who fits in well, needs little training, and is willing to work for lower wages. Otherwise, they don’t fill the open jobs.” (Emphasis added.)
The article also features the hiring practices of Autocam Corp. Contrast them to the all too common employer practices Erickcek identified:
Now Bueche (Madalyn Bueche, a manufacturing apprentice) works 25 hours each week at Autocam and takes three or four classes during the afternoons at Grand Rapids Community College via the Advanced Manufacturing Partnership (AMP) program. … Autocam pays her while working and also pays for her college classes. Autocam workers in the AMP apprenticeship program start at $13 an hour while taking courses and can make more than $17 per hour by the end of the program. In a few years, when Bueche earns her associate degree at GRCC, she’ll be eligible to pursue a bachelor’s degree in manufacturing engineering at Ferris State University. Autocam will pick up the tab for her undergraduate degree as well. Both programs are taught at the GRCC Applied Technology Center in downtown Grand Rapids. … “We found some of these individuals became great techs and wanted to go beyond an associate’s degree,” he (John Kennedy, Autocam President) said. “So we sent them to engineering school, and they came out with bachelor’s degrees. Now they have hands-on work experience as well as college experience. When they reach the top and become hot-shot techs, they’ll be making $30 an hour and travel the world to our other plants to fix problems.”
$13 an hour as an apprentice, $17 an hour as a technician, $30 an hour as an engineer and tuition at both community college and university paid for. And Ms. Bunche found out about the occupation and apprentice program at an employer open house. That is how employers deal with labor/skill shortages. Economics 101 teaches that when demand exceeds supply prices (in this case wages and benefits) go up. Its how you bring supply and demand into equilibrium. Its what market economies do well. No need for government intervention to pick occupations for students to pursue or to provide training subsidies for chosen industries and occupations.
So I was reading, not for work, a New York Times article on the architecture of Columbus, Indiana when I came across this: It was, in fact, J. Irwin Miller, scion of the Irwin-Miller family and arts patron, who transformed Columbus into an architectural mecca. As head of the Cummins Engine Company for 30 years, Mr. Miller reasoned that extraordinary buildings would help Cummins lure top talent to the rural Midwest. (Emphasis added.)
All of sudden, I was reading it for work. In the 1950s the CEO of the Cummins Engine Company in a small southern Indiana town understood, what we are still having trouble understanding today in Michigan, that place matters. That quality of place is key to attracting the talent that is essential to successful enterprises and local economies. Miller thought it a good investment for his company and community to commission such noted architects as Eliel Saarinen, Eero Saarinen, I. M. Pei, Harry Weese, Robert A. M. Stern, Richard Meier, Kevin Roche, Robert Venturi and Cesar Pelli. Pretty amazing!
What was important in the Fifties is almost certainly more important today. Mobile talent –– particularly young –– value quality of place in choosing where they live and work after college. Quality of place isn’t something you do after you grow the economy and have more resources to do the extras. It is one of the essentials that you do to grow the economy. The arts and culture –– including architecture and reusing old buildings –– matter. So do outdoor recreation and parks. Maybe most important is big city walkable, high density, mixed-use neighborhoods tied together by transit.
Alan Ehrenhalt reports in The Great Inversion and the Future of the American City that political and business leadership in the South increasingly get it. He writes:
In the first decade of the new century, in cities all over the American South and Southwest, something puzzlingly happened. … leaders of these sprawl-based conurbations that have grown enormously in the past generation began to express deep longing for a downtown. … So it was in a remarkably few years, Phoenix and Dallas and Charlotte did things they would have been considered unthinkable a decade or two before. They spent billions of public dollars on light-rail transit systems; they drafted long-term ‘vision” documents that projected a future in which downtowns were friendly to pedestrians rather than automobiles; they won voter support for striking new public buildings and placed them as close to the center of the city as they could.
Why did they want those things? … the desire to recruit and retain big corporations, and the sense these companies were uneasy locating in a metropolis without a center. … This was a common refrain across the big Sun Belt cities. In the words of Michael Smith, Charlotte’s director of downtown development, the bankers who dominated the town’s economic strategy felt they had to have downtown amenities “to attract hip young professionals.” Virtually all of these Sun Belt cities agrees with the geographer Richard Florida that future prosperity depended on the ability to lure the “creative class,” and that this could be done only with a thriving urban culture. (Emphasis added.)
Michigan’s future success is in large part dependent on our political and, a larger portion of, business leadership understanding what Mr. Miller understood more than a half century ago and political and business leadership in most American big metropolitan areas understand today. That the models for future economic success in a flattening world are New York, Boston, Chicago, San Francisco, Seattle and Portland plus non costal cities like Minneapolis, Denver and Madison. That the path to future prosperity is increasingly talent driven and that to concentrate talent you need a big metropolitan area anchored by a vibrant central city with the quality of place increasingly mobile talent values.
Thought provoking essay by Walter Russell Mead for the American Interest entitled: The job crisis: Bigger than you think. Worth reading!
Mead tells well the story Michigan Future has been describing for years. That just as more than a century ago when agriculture could no longer be a source of a prosperous America, the same is true today. The mass production economy that anchored 20th Century American –– and particularly Michigan–– prosperity can not be the anchor of a prosperous 21st Century America. Future American and Michigan prosperity most be built on a new economy.
Essentially, the problem is this: automation and IT are moving routine processing, whether what’s being processed is information or matter, out of the realm of human work and into the realm of machines. Factory floors are increasingly automated places where fewer and fewer human beings are needed to transform raw materials into finished products; clerical work and many forms of mass employment in business, government and management are also increasingly performed more economically by computers than by trained human beings.
The transformation is only beginning to kick in. Self driving cars and trucks may reduce the need for human beings in the transportation and freight industries. Information processing is beginning to change the nature of the legal profession and even as law school applications fall by almost 50 percent there is much more change to come. Computer assisted diagnosis is making itself felt in health care. MOOCs are likely to change the way much of higher ed works.
… automation and globalization aren’t going away; in both good times and bad the foundations of the old social order will continue to erode. … The old jobs are going away and they aren’t coming back. More, we can’t fix the problem by trying to create new jobs in factories or traditional office bureaucracies to replace the ones going away. We need new kinds of jobs that don’t involve manufacturing or traditional forms of information processing.
Unlike many others, Mead is optimistic that we can and will build a more prosperous America just as we did a century ago after the decline of agriculture. But to do so will require fundamental change from all of us. There are no political levers available to make the old economy work again. He writes:
In the 19th century most Americans spent their time working with animals and plants outdoors in the country. In the 20th century most Americans spent their time pushing paper in offices or bashing widgets in factories. In the 21st century most of us are going to work with people, providing services that enhance each others’ lives.
… A service economy resting on the high productivity agriculture, manufacturing and information processing will be a more affluent and a more human economy than what we have now. Human energy will be liberated from wringing the bare necessities from a reluctant nature; energy and talent will flow into making life more beautiful, more interesting, more entertaining and easier to use. By 1960 few American suburbanites really envied their hardscrabble, uneducated ancestors shivering through the winter in sod huts on the open prairie; one suspects that few Americans in 2060 will be pining for the glorious old days of 9 to 5 at GM.
But the change will come hard. The tax system and the financial system will have to change to promote the rise of a new world of jobs. The educational system will have to change to prepare young people for new kinds of lives. We are going to have to make all kinds of changes as our society comes to embody a new kind of economic logic. The changes won’t be easy but they aren’t optional.
Interesting Businessweek article entitled What’s wrong with the U.S. Job market?. It’s what we should debating.
The answer is clearly not the one we are hearing increasingly: that kids are getting too much education. That if only college aged students got technical rather than liberal arts degrees far more folks would be working. What nonsense!
As the article makes clear, the high unemployment rate understates the job creation challenge. Most worrisome is that the employment-to-population ratio is down to 58.6% even lower than during the 2007-09 Great Recession. In December 2007 –– the month the Great Recession started –– it was 62.7%. It’s unprecedented that the labor market has kept falling in an expansion.
Peter Coy, the article’s author, explores both supply and demand explanations for the absence of jobs. Supply being that people have the wrong skills for today’s jobs. This is that we have too little education attainment, not too much. On the demand side that employers don’t need to add workers due to a combination of globalization, technology and too little consumer demand for goods and services made worse by fiscal policy at the state and federal level to cut government spending to balance budgets rather than stimulate job creation.
Coy concludes: Five years since the start of the unemployment crisis, the problem with the U.S. labor market isn’t weak supply or weak demand. It’s both. At the same time, plenty of good and innovative ideas for how to put more Americans back to work are out there. Fixing aging infrastructure is a job generator that’s a no-brainer at today’s low interest rates. Youth jobs programs need more funding, not less. Jeff Madrick, a senior fellow at the Roosevelt Institute, calls for a revival of “Fordism”—Henry Ford’s sensible idea of paying workers enough to afford what’s for sale. All that’s needed is the will to act.
Exactly. Why we are not debating job creation strategies is unfathomable. Governor Blanchard responded to an unemployment rate of more than 15% the year before he was elected with a big transportation bond program and the Michigan Youth Corps that put thousands of young people to work. They worked! Why is it that no one –– in either party –– has even proposed an aggressive job creation agenda like Jim Blanchard? Its time we put putting people to work at the top of the nation’s and state’s agenda.
Both Catherine Rampell of the New York Times and Matthew O’Brien of the Atlantic have articles (which you can find here and here) on the continuing evidence that those with four year degrees have done best since the onset of the Great Recession. It’ s not close!
Using Bureau of Labor Statistics data through March 2013 reveals this jobs performance sine December 2009. (College graduate means four year degrees or more. Some college no BA includes those with associates degrees.)
The bottom line as Rampell writes is: “In other words, college-educated workers have gobbled up all of the net job gains. In fact there are now more employed college graduates than there are employed high school graduates and high school dropouts put together.” (Emphasis added.)
Rampell also provides the latest Bureau of Labor Statistics data (through 2011) on employment by education status for those in their twenties. Same story, but not as good results.
As O’Brien writes: “During the recession, college graduates didn’t lose many jobs, while everyone else did. But during the recovery, college grads have gained the most jobs, while everyone else mostly hasn’t. … People without any postsecondary education not only got hit hardest during the downturn, but have also gotten hit during the upturn. In other words, they have even lost jobs during the recovery. Remember that the next time a college grad (or anyone else) tells you college isn’t worth it anymore.”
Phil Power, the terrific founder of the Center for Michigan, recently wrote a column for Bridge entitled: Schools, colleges aren’t preparing students for careers in Michigan. I find the title quite troubling. It assumes that the purpose of schools and colleges is preparing Michigan students for Michigan jobs and careers. It is the same thinking behind the increasingly popular notion that education should be the supplier of workers to meet the demands of Michigan employers.
As we explored previously it seems to me that the education system that we should want for all of our kids is the one the affluent want for their kids. As I wrote, the common characteristics of the k-16 schools most of their kids and grandkids attend are: “An education that prepares students for adult life in all its dimensions, not just for a job or even a career. An education that prepares students to pursue their dreams any place on the planet, not just here in Michigan. An education that is about being a lifelong learner, not just someone that scores well on a standardized test today.” Those –– not preparing students for Michigan careers –– should be the goals of our education system for all Michigan students.
In another post I explored more directly the notion that Michigan schools and colleges should be about preparing Michigan students for jobs with Michigan employers. I wrote then (October 2011):
For more than a century what it has meant to be a Michigan resident and taxpayer is access at affordable rates to a world class system of public higher education that prepares students to better take advantage of life’s opportunities no matter where you choose to live and work after college. It was one of the great benefits of being a Michigan resident. And it served us well – both as individuals and as a state.
… Our Governor, Larry Page and Eli Broad are among the thousands of kids who grew up in Michigan, graduated from a Michigan public universities and made their fortune elsewhere. Were they well served by our public higher education system? Of course they were. Did they do something wrong – rip off Michigan taxpayers – when they decided to use their terrific education someplace other than Michigan? Of course not.
Limiting public higher education to just focusing on the current needs of Michigan employers or what some government analysts think Michigan jobs of the near future will be will inevitably reduce the quality of our public higher education system. Courses and other programming that make a university great will be eliminated because they are not aligned with the needs of Michigan employers. The consequence: the same proportion of the next generation of Snyder’s, Page’s and Broad’s will still choose to live and work outside of Michigan but now they will be far more likely to go to college outside of Michigan as well. They will want an education – as you do for your kids and grandkids – that prepares them for global opportunities, not just those available in Michigan.
Bloomberg Businessweek just published their New Rules for the modern workplace. Their list:
Rule No. 1: Your job is temporary. Where you start isn’t where you’ll end up. Your job, company, and profession may completely change because of mergers and acquisitions, layoffs, outsourcing, automation, and various other factors that are outside your control.
Rule No. 2: Do not let your job description confine you. … While you’re managing your role, you should be acquiring new skills to help carry you to your next role.
Rule No. 3: Your Rolodex is more important than your knowledge base. We’ve moved from the information economy to the social economy. Companies are hiring based on cultural fit, connections, and soft skills over a candidate’s ability to get the job done.
Rule No. 4: Your experiences matter more than your title.
Rule No. 5: Your personal reputation is your greatest asset.
Add these to the non job specific attributes that we have explored in previous posts that employers are increasingly looking for and that will most define who has successful careers in the future. And then ask yourself whether policy makers in emphasizing standardized test results, job specific skills and online learning are moving k-16 education towards or away from the economy of the future.
Harvard’s Tony Wagner in his interview with Thomas Friedman I wrote about in my last post clearly thinks the answer is no. Friedman writes:
“We teach and test things most students have no interest in and will never need, and facts that they can Google and will forget as soon as the test is over,” said Wagner. … More than a century ago, we ‘reinvented’ the one-room schoolhouse and created factory schools for the industrial economy. Reimagining schools for the 21st-century must be our highest priority. We need to focus more on teaching the skill and will to learn and to make a difference and bring the three most powerful ingredients of intrinsic motivation into the classroom: play, passion and purpose.” (Emphasis added.)
… “Teachers,” he said, “need to coach students to performance excellence, and principals must be instructional leaders who create the culture of collaboration required to innovate. But what gets tested is what gets taught, and so we need ‘Accountability 2.0.’ All students should have digital portfolios to show evidence of mastery of skills like critical thinking and communication, which they build up right through K-12 and postsecondary. Selective use of high-quality tests, like the College and Work Readiness Assessment, is important. Finally, teachers should be judged on evidence of improvement in students’ work through the year — instead of a score on a bubble test in May. We need lab schools where students earn a high school diploma by completing a series of skill-based ‘merit badges’ in things like entrepreneurship. And schools of education where all new teachers have ‘residencies’ with master teachers and performance standards — not content standards — must become the new normal throughout the system.”
Jack Lessenberry in a Michigan Radio commentary entitled Education for education’s sake also would answer no. (In the column Lessenberry is critical of remarks made by State Superintendent Mike Flanagan. Mike –– a terrific member of the Michigan Future Leadership Council –– responds in a podcast that you can find here. I know they both agree that we need an education system that provides all students with broad, rather than narrow job specific, skills building.)
There’s nothing wrong with education for education’s sake—if that means teaching people how to think, and how to learn. There is also nothing wrong with knowing lots of things that are part of culture and civilization, even if they aren’t knowledge that can immediately be converted into cash. The schools cannot possibly teach students how to cope with the technology or the tax structure that they’ll need to know in the year 2035, because we have no idea what that technology will be.
The woman with whom I share my life spends her days digitizing archives and designing and creating online catalogs for special library collections. These are not things she learned in high school or college, because the technology hadn’t been invented, and partly because she hadn’t developed an interest in that field. Instead, she studied languages and comparative literature. She didn’t learn how to do modern computer coding till she was in her 50s. I didn’t study journalism until graduate school. But I studied other things that equipped my mind with a set of intellectual furniture and the tools to try to keep learning and figuring stuff out.
… whenever I hear people say that education should be geared to the needs of a particular set of employers or a specific job, I think of Aldous Huxley’s nightmare novel, “Brave New World,” where humans were rigorously selected for certain tasks before birth, and the lower orders kept dumb and ignorant.
… Doug Rothwell, the CEO of Business Leaders for Michigan does understand what education is, and said so yesterday. “We need people with the skills to adapt to changes in their careers,” he said, adding, “A lot of that comes from a good liberal arts education.” From where I sit, I couldn’t agree more.
Our policy makers have a lot to learn from folks like Wagner, Lessenberry, Rothwell and so many others –– including most importantly many employers –– who understand that it is broad skills –– many not cognitive or job specific –– that matter most to success in the economy of the future. Until they learn those lessons we are in real danger of preparing our children and grandchildren for an economy that no longer exists with a huge cost to both them and our economy. Not smart!