Most states saw dominant employment industry shift from manufacturing to health care just in recent years

Want to see a dramatic shift in jobs? Check out this new post from the U.S. Bureau of Labor Statistics. This is a data visualization map of the United States. This shows the dominant “industry” for each state for each year since 1990. http://www.bls.gov/opub/ted/2014/ted_20140728.htm What you’ll see is that in 1990, the manufacturing industry employed the largest number of workers in most states. Then the economy evolved so that the retail industry had the largest number of workers in most states. Then the economy evolved some more so that the health care and social services industry was the sector with the largest number of workers – for almost every state by 2014. Wow. The Wall Street Journal is pointing this out to its readers at http://blogs.wsj.com/numbers/how-americas-top-industries-have-changed-1990-2013-1619/ BLS says: “Employment in manufacturing declined steadily over the 1990–2013 period. By the mid-1990s, retail trade had become the leading employer in a number of states, and health care and social assistance was emerging as the largest employer in a few. Health care and social assistance became the largest industry in New York State in 1992, and in North Dakota in 1995. “The largest increase in healthcare and social assistance employment in the states occurred in 2009, as retail trade, manufacturing, and other industries showed declines with the onset of the most recent recession. Manufacturing remained the top employer in Michigan until 2009, when it was replaced by health care and social assistance; in 2013, however, manufacturing returned as the largest employer in Michigan. “The accommodation and food services industry was the leading employer in Nevada and Hawaii throughout the 1990–2013 period, and professional, scientific, and technical services remained the top industry in the District of Columbia. “These data are from the Quarterly Census of Employment and Wages program. For industry employment and wage data at the national, state, county, and metropolitan area levels, access the data search tool. The analysis for this edition of The Editor’s Desk was conducted by Frances Osei-Bonsu, a Denison University student who recently served an internship at the BLS Mid-Atlantic Regional Office in Philadelphia.”

Labor Market Polarization, more dramatic than previously thought for America

A series of new data is pointing out that the United States is still stuck in its trend of creating only TWO kinds of jobs: A) High Skill - High Wage jobs (think management, highly technical or high-experience business professional services kinds of jobs). B) Low Skill - Low Wages jobs (think food services, personal care, specialized household services and other kinds of basic jobs that have to be done in and around the customer so those tasks cannot be outsourced overseas). What is being lost are the "routine" jobs, according to a new report by the Federal Reserve Bank of Dallas. The Dallas Fed researchers have named their new report "Middle-Skill Jobs Lost in U.S. Labor Market Polarization." By "routine" jobs they mean many manufacturing production jobs, many crafts jobs, many repair jobs, many clerical jobs, most administrative jobs, and most sales jobs. The core driver for the elimination of these "routine" jobs is not labor unions or a shift to a more educated workforce. The Dallas Fed economists say the shift is really driven by more automation. And as the cost of computing power continues to come down, more jobs are becoming automated - from manufacturing production workers to cashiers to bookkeepers to cooks to engravers to title examiners to sales reps. Another key wrinkle is that the economic shift continues to impact American men and women differently. "While women were hit much harder than men by the disappearance of middle-skill jobs, the majority of women managed to upgrade their skills and find better-paying jobs," said Dallas Fed Economist Anton Cheremukhin in the report. "By comparison, more than half of men who lost middle-skill jobs had to settle for lower-paying occupations. Women's higher rates of education attainment are a potential reason for this difference." Now here’s the rub. America has always shed routine jobs in every recession and then gained back those jobs in the subsequent economic expansion periods following the recession – until the last three recessions. “This pattern changed dramatically in the three recessions since 1990,” Cheremukhin wrote. “None of the routine jobs list in these downturns came back in the following expansions. This fact fully accounts for the overall loss in routine jobs since 1990 and also explains the so-called jobless recoveries from the 1991, 2001 and 2008 recessions.” “Middle-skill, routine jobs still account for almost half of all existing jobs,” Cheremukhin wrote. “Unfortunately, as computing power spreads, and with more non-routine tasks becoming routine (driverless cars, drones, online education, robotic surgery), the pace of labor market polarization is unlikely to slow down anytime soon.” Another issue is a new series of data visualizations provided by the U.S. Bureau of Labor Statistics that shows the United States shifting from a predominantly manufacturing economy to a retail economy to now a health care services economy. We'll discuss those data charts in another post but they can be seen at http://www.bls.gov/opub/ted/2014/ted_20140728.htm and http://blogs.wsj.com/numbers/how-americas-top-industries-have-changed-1990-2013-1619/

Hiring Difficulties for Manufacturers

In just the last couple years, manufacturing employers in Minnesota have seen the labor market suddenly tighten for workers so much that they are shifting from "buying" talent to "making" talent. This is the key conclusion of a new report by the Minnesota Department of Employment & Economic Development. My counterpart there in Minnesota, Alessia Leibert, has put together a series of fascinating and insightful reports about the labor market and the behavior of employers. These reports are often based on anecdotal comments by business leaders and their survey responses to labor market conditions. That's not the hardest of data but it is eye opening. Leibert points out that two-thirds of manufacturing job vacancies in Minnesota are classified as "hard to fill." Minnesota manufacturers seem to be getting proactive and creative in their search for workers, particularly by increasing their internal training efforts. "Hiring difficulties are not synonymous with skills gaps. When employers were asked to identify the causes of their hiring difficulties, only 14% of cases were attributed exclusively to the lack of skilled applicants for current vacancies,” Leibert wrote in her report titled: “Hiring Difficulties in the Manufacturing Sector.” Based on the survey responses that Leibert and her co-workers in the labor market information department at the Minnesota labor department, the majority of hiring difficulties were caused by a mix of skills mismatches in the available workforce, general hiring difficulties, an job candidates’ “lack of work ethic or interest in a manufacturing career.” The toughest jobs to fill are 1) Machinists/CNC Machinists 2) Machine Tool Operators 3) Welders 4) Production Supervisors. Specific comments by hiring managers (unnamed) also spice up this report. “The job is not that specialized. It’s more about the work ethic, the willingness to work from 10 to 14 hours a day, the willingness to live in a small town and the low pay,” said one hiring manager. And those are critical points: Many of the employers are struggling the most to fill jobs are in more rural areas while the more trained, experienced or available workers are residing in the urban areas. Similarly, those rural manufacturers are often paying less than similar jobs in the big cities, so convincing an out-of-work manufacturing worker to move from the Twin Cities to rural Minnesota to take a job that pays less than he was expecting (in a community with a lower cost of living) is not an easy sell. “Failing to account for these factors may lead employers and policymakers to misdiagnose the problem of hiring difficulties as a lack of qualifications along – skills gap – and to prescribe policy responses that address the symptoms rather than the real causes of hiring difficulties,” Leibert wrote. The job applicants who do apply for manufacturing job openings seem to have either inadequate hands-on training or inadequate experience. These gaps may be best filled through employer-provided training, she wrote. “We are looking for a mixed skill set: good mechanical aptitude, physical energy, and the ability to set up and operate a multi-axis lathe,” one hiring manage said. “You can’t come out of school and be able to run these machines. It’s a skill usually built through mentorship programs in companies that stay current with technology. Some people can pick it up after 3 to 5 years, others after a decade.” This leads to the great questions: How do we encourage employers to be patient with worker learning? How do we encourage employers to think long term in a business climate that is short-term focused? Also, education requirements are a self-induced constraint. “Expecting high-school educated external candidates to bring a mid-level skill set clearly presents a challenge for employers, especially after the disappearance of machine shop classes from K-12,” Leibert wrote. She cites a few examples of unnamed employers who are acknowledging the education issues in unique ways. One employer has created an “internship” program where a student worker can spend the summer working at the firm, which in turn pays half the tuition of that student at a local community college. With community college tuitions relatively inexpensive, the employer makes job offers to the best summer workers who graduate and negotiate pay and further training from there. Another company acknowledges that new production line managers cannot be expected to have superior people skills or management skills just because they were great line workers and is trying to get management training for these new managers to become skilled coaches. And another employer openly states that it is one of several manufacturers that has lowered its hiring requirements, particularly work experience requirements, while also increasing training and even incorporating an apprentice program with the local community college and university. As Leibert points out: “As the labor market tightens and competition among firms for qualified workers increases, employers are clearly more willing to hire inexperienced candidates and address their skills gap through training, indicating a shift from ‘buying’ to a ‘making’ approach to skill.”

Referrals from a friend really, really matter according to new research by NY Fed economists

The idea that companies only hire the friends of existing workers is a fascinating complaint. Employee referrals do not seem to account for most hiring in America but job applicants referred by an existing worker do have some real advantages - and even some unique disadvantages - according to a new study by economists at the Federal Reserve Bank of New York. New York Fed economists Meta Brown, Elizabeth Setren and Giorgio Topa did an in-depth study into the hiring practices of a very large financial services firm in New York City that also had offices around the world and employs thousands of people. With assistance from the firm's human resources department, they tracked the job application, interviewing, hiring, promotion and pay of job applicants who were referred by an existing employee as well as applicants who were not referred by a friend on the inside. While most workers hired were not referred by an employee, the results were amazing. To start, this firm took 62,127 job applications and hired 340 people (that's just 0.5% of the applicants landed a job at this main location of the company). From those thousands of applicants, just 29% were referred by somebody already working at the firm. Also, on average, 185.2 individual people applied for each position and an average of 6.7 people were brought in for each open job position. People who were not referred and applied to the company via a job board made up 60% of all the applicants but only resulted in 40% of the interviewees and 24% of the hires. By contrast, referred applicants were only 6% of the job applicants but 21% of the interviewees and 29% of those hired. "In other words, the pool of candidates receiving serious consideration increasinly favors the referred over the course of the hiring process," the researchers stated in their report titled "Do Informal Referrals Lead to Better Matches? Evidence from a Firm's Employee Referral System." Another interesting point is that new hires who were referred started out earning 2.1% more money than their non-referred counterparts. But then things get more interesting. The pay difference between referred hires and non-referred hires diminished after 3 years on the job, meaning the non-referred workers caught up to their co-workers who had a friend on the inside. Also, referred workers stay with the company longer -- on the whole. These numbers can be skewed because lower-level employees who are referred stay a very long time with the company. Meanwhile, mid-level workers who are referred stay a normal amount of time with the firm. And referred executives depart the company quickly. It's also interesting to know that referred executive-level employees earn less than their non-referred counterparts. Again, this is all a study from just ONE employer. Nevertheless, this is a comprehensive and revealing look into current hiring behavior. A key issue is how homogenous the referred workers are. The vast majority (more than 70%) of referred workers were the same age, race, ethnicity and even educational status of their friend already in the company. When the New York Times wrote about this study, the final paragraphs of the article cited the human resources department at Enterprise Rent A Car, which tries to use employee referrals but still wants to limit that practice because that company realizes referrals just give more of the same kinds of people and possibly more of the same kind of thinking that is already inside the firm.