BUILDING AMERICA S MIDDLE SKILLS WORKFORCE
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1 BUILDING AMERICA S MIDDLE SKILLS WORKFORCE Joseph B. Fuller, Harvard Business School 13 th Annual Indiana Logistics Summit September 21-22, 2015 P 1
2 SIGNS OF TROUBLE: DECLINING SHARE OF ROUTINE OCCUPATIONS 12 8 Percent Change Non-Routine Cognitive 29% to 38% Routine 56% to 44% Non-Routine Manual 15% to 19% Source: Henry Siu and Nir Jaimovich, Jobless Recoveries, Third Way, April 8, Authors calculations using data from the Bureau of Labor Statistics, Current Population Survey. P 2
3 KEY INFLUENCES ON WORKER OUTCOMES Policy Workers Education system Employer practices P 3
4 KEY INFLUENCES ON WORKER OUTCOMES: EDUCATION SYSTEM Are graduates workforce ready? 96% of provosts think their institutions are effective at preparing students for the workforce 33% of business leaders agree 36% of community-college graduates are in jobs directly related to their studies 4% of job seekers say schools are the best source of information 69% of college graduates say they will need more training or education to obtain their desired job Sources: Gallup and Inside Higher Ed, The 2014 Inside Higher Ed Survey of College and University Chief Academic Officers ; Gary Warth, Community college graduates happy, San Diego Union-Tribune, January 6, 2015; Accenture Job Seekers Survey 2013; Accenture 2014 College Graduate Employment Survey. P 4
5 UNDEREMPLOYMENT AND UNEMPLOYMENT RATES FOR RECENT COLLEGE GRADUATES, % 47% 45% Underemployment Unemployment 7% 6% 43% 5% 41% 4% 39% 3% 37% 2% Source: Federal Reserve Bank of New York. Data originally published in Abel, Jaison R., Richard Deitz, and Yaqin Su, Are Recent College Graduates Finding Good Jobs? Current Issues in Economics and Finance 20:1 (2014). Authors tabulations of data from U.S. Census Bureau and U.S. Bureau of Labor Statistics, Current Population Survey, March Supplement; U.S. Department of Labor, O*NET. P 5
6 KEY INFLUENCES ON WORKER OUTCOMES Policy Workers Education system Employer practices P 6
7 HIRING A FULL-TIME EMPLOYEE: A SOLUTION OF LAST RESORT? Your firm prefers to invest in new technology to perform work rather than hire or retain employees 17% 29% 19% 17% 9% 6% 4% STRONGLY AGREE SOMEWHAT AGREE NEITHER AGREE NOR DISAGREE SOMEWHAT DISAGREE STRONGLY DISAGREE N/A DO NOT KNOW Your firm prefers to rely on vendors that can be outsourced rather than hire additional employees 15% 34% 15% 21% 9% 4% 3% STRONGLY AGREE SOMEWHAT AGREE NEITHER AGREE NOR DISAGREE SOMEWHAT DISAGREE STRONGLY DISAGREE N/A DO NOT KNOW Compared to three years ago, your firm s U.S. operations use part-time workers 20% 49% 10% 9% 13% MORE ABOUT THE SAME LESS U.S. OPERATIONS ESTABLISHED <3 YEARS AGO Note: Percentages do not sum to 100% because of rounding. Source: Harvard Business School Survey on U.S. Competitiveness. DO NOT KNOW P 7
8 EMPLOYER METRIC: THE COST OF MIDDLE-SKILLS EMPLOYEE TURNOVER 25.0% Cost of turnover as a percent of employee s annual salary 20.0% 15.0% 10.0% 5.0% 16.1% 19.7% 20.4% 0.0% Jobs paying $30,000 or less Jobs paying $50,000 or less Jobs paying $75,000 or less Source: There are significant costs to replacing employees, Heather Boushey and Sarah Jane Glynn, November 16, 2012, Center for American Progress, P 8
9 UPSKILLING BY EMPLOYERS: CREDENTIALS GAPS IN MIDDLE-SKILL ROLES Occupation Title Credentials Gap % Job Holders with BA+ % Postings Requiring Bachelor s Degree Executive Secretaries and Executive Assistants 46% 19% 65% First-Line Supervisors of Production and Operating Workers Transportation, Storage, and Distribution Managers 45% 17% 62% 42% 32% 74% Credit Authorizers, Checkers, and Clerks 40% 26% 66% Training and Development Specialists 25% 50% 75% Human Resources Assistants, Except Payroll and Timekeeping 22% 29% 51% Source: Moving the Goalposts: How Demand for a Bachelor s Degree is Reshaping the Workforce, Burning Glass Technologies, September P 9
10 A SYSTEMIC PROBLEM POLICYMAKERS Episodic initiatives Independent actors Systems effects Disruptive and short-sighted EDUCATORS Internally-focused metrics Reluctance to engage employers as customers Weak market signals Significant misallocation of resources Not responsive to needs EMPLOYERS Lack of workforce planning Incomplete understanding of total costs Lack of engagement with workforce intermediaries WORKERS Lack of counseling Lack of workplace experience Widespread soft skills deficits P 10
11 SOLUTION: AN EMPLOYER-LED SYSTEM Employers: sustain competitiveness by accepting leadership Apply supply-chain and total quality management principles Understand the all-in costs of skills gaps Educators: define success Policy makers: catalyze new relationship between employers and educators P 11
12 FRAMEWORK: CAREER LIFETIME VALUE AND VALUE TO U.S. BUSINESS High Which occupations are critical to U.S. competitiveness? Occupations Most Critical to U.S. Competitiveness Y: Value to U.S. Business Analysis Based on: Industry Labor Productivity Industry Economic Multiplier Occupation Criticality to Business Model Low Low Occupations Less Critical to U.S. Competitiveness X: Career Lifetime Value Analysis Based on: Compensation Future Earning Potential (Opportunity for Advancement) High P 12
13 VALUE TO U.S. BUSINESS AND CAREER LIFETIME VALUE NATIONAL National - Middle Skill Job Importance to U.S. Competitiveness By Occupation Group Production Architecture and Engineering Technical Sales and Sales Management Value to U.S. Business Healthcare Support Installation, Maintenance, and Repair Legal Office and Administrative Support Construction and Extraction Transportation and Material Moving Healthcare Practitioners and Technical Management Computer and Mathematical Business and Financial Operations Career Lifetime Value Sources: Bureau of Labor Statistics, 2013 Occupational Employment Statistics dataset; Bureau of Economic Analysis; Accenture Middle-Skills Survey 2014 and industry subject matter experts; Burning Glass Technologies database of online job postings for The number of construction and extraction jobs is an estimate. P 13
14 VALUE TO US BUSINESS AND CAREER LIFETIME VALUE GREAT LAKES: TRANSPORTATION & MATERIAL MOVING Great Lakes Region - Middle Skill Occupation Importance to US Competitiveness Oilfield / Rig Worker Route Sales Representative Value to US Business Warehouse Supervisor Transportation Supervisor Distribution Supervisor Tractor-Trailer Truck Driver Crane Operator Transportation Inspector Career Lifetime Value P 14
15 DEFINING MIDDLE SKILLS: RELATIONSHIP BETWEEN EDUCATION AND SALARY FOR TOP MIDDLE SKILLS OCCUPATIONAL GROUPS $80,000 $70,000 Management IT Occupation Family Online Middle Skills Postings (2014) Sales and Related 1,464,718 Average Salary (BLS) $60,000 $50,000 $40,000 $30,000 Installation, Maintenance, and Repair Production Finance Transportation and Material Moving Customer and Client Support Healthcare Support Sales and Related Clerical and Administrative Health Care Practitioners and Technical $20, Average Years of Education / Training Advertised in Postings Clerical and Administrative 945,523 Health Care Practitioners and Technical 856,900 Customer and Client Support 615,159 Transportation and Material Moving Installation, Maintenance, and Repair 595, ,923 Finance 487,641 Production 446,596 Healthcare Support 368,481 Management 331,099 IT 295,303 Sources: Bureau of Labor Statistics, 2014 Occupational Employment Statistics dataset; Bureau of Economic Analysis; Burning Glass Technologies database of online job postings 2014 U.S. P 15
16 KEY INFLUENCES ON WORKER OUTCOMES Policy Encourage companies to collaborate Provide transparency to the jobs market Remove barriers to innovation Embrace middle-skills jobs publicly Workers Education system Employer practices Work with employers to forge supply chain partnerships Shift resources to current job market trends Focus on career lifetime value and ladders of advancement Apply supply chain management Measure the all-in costs of job openings and employee turnover Engage in workforce planning for middle skills P 16
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