Navigating a tighter labor market

Every quarter, the National Center for the Middle Market surveys 1,000 executives. One thing we ask is whether their company’s overall performance has improved, deteriorated or stayed the same in the past year. At the end of 2017, 71 percent said performance was better, and 6 percent said it weakened — a ratio of nearly 12-to-1. When the Middle Market Indicator started in 2012, the ratio was below 5-to-1.

Given this growth period, which began in June 2009 and has become the third longest in American economic history, it’s no wonder that middle-market leaders feel more confident. Growth, however, means growing pains. Half the respondents say talent is their biggest long-term challenge. One they don’t see getting better: By a 8-to-1 ratio, they expect labor market conditions to tighten even more.

The need for talent is likely to be more intense in Columbus. Economist Bill Lafayette’s 2018 area forecast expects the number of jobs here to grow 1.8 percent, versus 1.4 percent for the U.S.

Exacerbating factors

Openings need to be filled, but fewer people are out of work. Plus, new jobs require more digital skills, which heats up the competition for people with those skills.

We’re nearly at full employment, and the shortage of available talent is made worse by several factors, such as the ravages of the opioid epidemic. A Princeton economist estimates as much as 20 percent of the decline in workforce participation among men can be attributed to these drugs — a number that’s probably higher in Ohio, an epicenter of the crisis.

Also, new jobs in the Columbus area tend not to be located near the homes of the poorest residents who are the most likely to be looking for work, according to the Brookings Institution. The government and private sector should work together to solve this issue.

How to respond

As an executive, train and retain should be your mantra. In a full-employment economy, if you hire, you’ll probably take them away from another job, and when others are hiring, they’ll be looking at your people. So, you need to look good.
You have to raise your workforce productivity. You can’t increase output by putting more people on the job if more aren’t available. That means improving skills and investing in up-to-date, efficient equipment.

You should reach out to the “workforce system,” a decidedly unsystematic collection of community colleges, universities and groups like the Workforce Development Board of Central Ohio and Ohio Means Jobs. Our work with Brookings shows that middle-market companies usually lack strong connections with these organizations.

When executives report their challenges, we ask how they’ll address them. In 2015, 26 percent wanted to tackle their talent shortage by investing in workforce training and education. At the end of 2017, the number had jumped to 38 percent. During the same period, executives expecting to use wage increases as a retention tool remained at 43 percent.

Investing in employees makes them more likely to stay. It sends a message that yours is a good place to work. And improved skills enable you to increase output without adding headcount.

 

Thomas A. Stewart is the executive director of the National Center for the Middle Market, the leading source for knowledge, leadership and research on midsized companies, based at the Fisher College of Business at The Ohio State University.
Thomas is an influential thought leader on global management issues and ideas — an internationally recognized editor and publisher, authority on intellectual capital and knowledge management, and a best-selling author.

Mexico may be the next China for U.S. importers and manufacturers

Low cost transportation coupled with minimal import barriers allowed U.S. importers to access the low wages of China and turn that country’s manufacturing base into a U.S. workshop. Chinese wages are now rising to the point that Mexico is becoming the more competitive manufacturing base for the U.S. market.

If Mexico can maintain a safe investment environment and enhance its infrastructure, U.S. businesses increasingly will find it more desirable to manufacture in Mexico than in China. U.S. businesses that can benefit from lower cost goods should investigate that option now.

China in transition

Over the last 50 years China became the leading source country for U.S. businesses seeking lower costs and acceptable quality on a broad range of goods. These advantages arose primarily out of the low wages paid in China. At times the prevailing wage for a month of labor in a China factory was equal to about 10 hours of the U.S. minimum wage. That meant that a Chinese factory worker would perform a month of labor (working six days a week) for about the cost of employing an American for one day.

With that 25-to-1 labor rate advantage, manufacturing jobs rushed from the U.S. to China

But China’s fast growing domestic market has caused Chinese wages to rise rapidly, particularly over the last 10 years and especially on the eastern seaboard. In fact, wages in eastern China have risen so high that little of the country’s manufacturing is done there any longer. Eager for lower cost labor, Chinese manufacturers have been moving inland, just as U.S. textile manufactures began abandoning the U.S. Northeast for the Southern states about 45 years ago (before moving offshore).

But even in the interior, wages are rising. This turns out to be good for the people of China and, indirectly, Mexico.

Over the past 30 years Mexican manufacturing wages have been higher than those in China, the Mexican infrastructure less developed, and some believe the Mexican labor force less productive. Consequently, Mexico captured a relatively small share of U.S. offshore manufacturing work, despite its close proximity to the US.

Conditions are evolving

But conditions have changed and perceptions are catching up. Many large and medium U.S. businesses are performing operations in Mexico that would have gone to China a decade ago. Rising wages in China, positive internal developments in Mexico, and duty-free exports to the U.S. under NAFTA are rebalancing the cost savings equation increasingly in favor of Mexico. U.S. political sensitivity to China’s growing power and U.S. businesses’ interest in accessing Mexico’s growing domestic market are additional long term factors that favor Mexico.

Mexico is not the only attractive alternative to China for low cost manufacturing. Vietnam, as only one example, offers many of the features that enticed U.S. manufacturing and U.S. importers to China decades ago. But Mexico’s proximity to the U.S. and the shared contiguous border are unique among low labor cost nations serving the U.S. market.

One of the most obvious benefits is that a container of Mexican manufactured goods can reach the U.S. in a day or two compared with weeks for a crossing from Vietnam or China to California.

Eventually, as more competition develops for Mexican labor and as the Mexican economy improves the Mexican labor market will become less attractive relative to other regions, including certain areas in South America. But that day is still far off.

For the next couple of decades at least Mexico will become a less expensive, closer to home option. U.S. manufacturers and importers would do well to take a careful look at Mexico now, and again from time to time as this dynamic situation regarding China develops.

Jerry McLaughlin is the co-founder and former CEO at Branders.com.

How to tap into the growing labor pool of service members to benefit your business

Laurie Bradley, President, ASG Renaissance

A projected 175,000 service members will be exiting the military in the next year. When they return to civilian life, these young veterans of the Iraq and Afghanistan wars will face an unemployment rate of 23 percent, contributing greatly to the Department of Defense’s annual unemployment compensation payments of more than $900 million. However, at the same time, there are 1.7 million high-wage, high-demand jobs open in the U.S. today that match the skills of service members, representing more than $136 billion in gross wages.

“Many service members do not fully grasp the value of their training and experience in the work force and end up underemployed or unemployed as they struggle to find work,” says Laurie Bradley, president of ASG Renaissance.

Smart Business spoke with Bradley about how hiring veterans can benefit your business.

Why are veterans seemingly being overlooked in the marketplace?

Part of the reason is because it’s very difficult to translate military experience into a civilian resume. For example, an infantryman with 20 years of experience in the Army might state on his resume that he ‘operated weapons and tanks and dug ditches.’ He needs to convey these skills in terminology recognized in the civilian world of work, such as ‘supervised, trained and evaluated 35 personnel, and supported more than 2,500 troops in four countries. Core competencies include personnel management, logistics and operations.’ This will help the reviewer match these skills to possible employment opportunities that may include logistics or personnel management.

Once you overcome the language barrier, you can recognize some of the softer skills people have learned in the military, for example, being entrepreneurial, which is crucial today. Service members understand how to be part of a team and have respect for a team, which can translate to any job. They also have cross-cultural work experience and have worked in very diverse environments, traits that many employers seek. The stereotype of service members just following orders and not thinking is outdated. It’s a new military today that operates in ever-changing environments.

What are some industries that would benefit from veterans and their skills?

The skills of service members translate well into any industry. You want people who are not only able to learn a product or a service but also who have good communication skills and are adept at skills transfer. Our military really demands that people think on their feet and react very quickly, making the right choices in a very short timeframe. In the fast-paced business environment we all compete in today, that is a great attribute to have.

What are the benefits of hiring veterans from a marketing perspective?

The message of being a veteran-friendly environment is significant. Having a veteran-friendly message in your hiring materials helps improve a company’s image, because you don’t have to look far to find someone who is or who knows a soldier. It really supports a message of inclusion and speaks to the fact that a company has been thoughtful in its hiring process as it looks to source talent across a broad spectrum of potential candidates.

From a tax perspective, new rules provide for an expanded tax credit for employers that hire eligible unemployed veterans. The credit can be as high as $9,600 per veteran for for-profit employers or up to $6,240 per veteran for tax-exempt organizations.

To qualify, the employer must file a request with the local state agency for the Work Opportunity Tax Credit.  This applies for veterans hired on or after May 22, 2012, and before Jan. 1, 2013.

How can companies better integrate veterans into their businesses?

Start with a great outreach program. Be clear in your hiring message and have the ability to translate military resumes to determine if you have a fit. Companies should consider installing a customized onboarding program that includes a partner or coach to help the new hire navigate the civilian employment world.

The program should be sensitive to the varying needs of veterans, including those who have only been out of the service for a few months, or ones who have been back in the market for a year or more. In general, it’s important to make sure your onboarding process includes cultural acclimatization to the civilian work force. Civilian corporate culture is not as black and white as the military and language and communication styles differ. Former military personnel can be formal and direct, whereas civilian communication styles can be much more nuanced. The U.S. military has a top-down system for making decisions, while many civilian companies have a more bureaucratic process.

Where can companies find veterans?

There are job boards and employment services that cater to military personnel in transition, such as Hire A Hero, careeronestop.org, or contact your State’s Director for Veterans’ Employment and Training (DVET).

Are there reasons a company might not hire a veteran?

Concerns range from post-traumatic stress syndrome to skills transfer and the gap between military and civilian work styles. Some employers are uncertain how to provide work site accommodations for those with physical injuries, but there are a host of resources to navigate these concerns.

Just as with civilians, you have to evaluate each person on a case-by-case basis. Employers need to spend the time in the hiring process to determine if there is a fit.

If you know that there is a pool of talent that has the skills to do the job, why wouldn’t you consider putting that to work? Those who served our country are ready to transition those skills and dedication to service into the civilian world of work. Ultimately this translates into a win for both the employer and the veteran.

Laurie Bradley is president of ASG Renaissance. Reach her at (248) 477-5321 or [email protected]

Insights Staffing is brought to you by ASG Renaissance

Major economies need more skilled workers, engineers: study

MILWAUKEE, Tue May 29, 2012 – The United States and other large economies cannot find enough skilled workers, engineers and other in-demand employees, according to an annual study on talent shortages.

The study, by staffing services giant ManpowerGroup, found 34 percent of employers around the world report trouble filling jobs because of a lack of available talent. The percentage is unchanged from 2011 but up from the prior three years.

However, most of the employers – 56 percent – say unfilled jobs are likely to have little or no impact on customers and investors. That is up from 36 percent who said so a year ago.

Talent shortages persist despite high unemployment in many economies, especially among young people. Employers are more comfortable conducting business in an environment of talent shortages and remain reluctant to add workers while memories of recession are fresh, according to Manpower.

“Leaving positions unfilled may be a short-term fix, but it’s a short-sighted and unsustainable approach to addressing talent shortages,” Manpower Chief Executive Jeff Joerres said.

The top reasons for not filling jobs include a lack of available applicants; too few hard skills, such as speaking a foreign language among those who do apply; and a lack of experience. Smaller numbers of employers complained about deficiencies in applicants’ soft skills, such as showing too little enthusiasm.

Jobless claims drop to near four-year low

WASHINGTON – New claims for unemployment benefits unexpectedly fell last week to a near four-year low, a government report showed on Thursday, suggesting the labor market was finally strengthening.

Initial claims for state unemployment benefits dropped 13,000 to a seasonally adjusted 348,000, the Labor Department said, the lowest since March 2008. The prior week’s figure was revised up to 361,000 from the previously reported 358,000.

Economists polled by Reuters had forecast claims rising to 365,000. The four-week moving average for new claims, seen as a better measure of labor market trends, fell 1,750 to 365,250 – the lowest since April 2008.

Last week’s drop pushed claims below the 350,000 level that economists normally associate with sustained strength in the labor market. New jobless claims have declined for three straight weeks.

Job gains have exceeded 200,000 for two straight months and the unemployment rate dropped to a three-year low of 8.3 percent in January.

But considerable slack still remains, with 23.8 million Americans either out of work or underemployed. There are no job openings for nearly three out of every four unemployed.

A Labor Department official said there was nothing unusual in the state-level data and no state had been estimated.

The number of people still receiving benefits under regular state programs after an initial week of aid tumbled 100,000 to 3.43 million in the week ended February 4. That was the lowest level since August 2008.

Economists had forecast so-called continuing claims falling to 3.50 million from a previously reported 3.52 million.

Job openings rise to 3.4 million in December from month earlier

WASHINGTON – The number of jobs waiting to be filled rose in December as employers tried to ramp up hiring in factories, retail and business services, the government said on Tuesday.

There were 3.4 million available jobs at the end of December, up from 3.1 million in November, according to the Labor Department’s Job Openings and Labor Turnover Survey.

The number of jobs open in November was revised slightly downward from an initially reported 3.2 million.

Monthly job openings – unfilled, posted vacancies that employers plan to fill within 30 days – help describe demand for labor. The number of job openings has increased about 30 percent since the end of the 2007-09 recession, although they remain well below the 4.4 million level registered in December 2007.

In December, job openings in business and professional services increased by 149,000 from the prior month, while openings at manufacturers rose by 22,000 and openings at retailers climbed 31,000.

Hiring declined marginally in December, with business and government hires slipping to 4.05 million from 4.13 million in November.

The U.S. jobless rate was 8.5 percent in December, down from 8.7 percent in November, and it fell further, to 8.3 percent, in January, data from the Labor Department showed this month.The sharp fall in the unemployment rate could boost President Barack Obama’s chances of winning re-election in November, although unemployment remains well above pre-recession levels.

The rate at which workers were separated from jobs by lay-offs or quits, a measure of labor turnover, was 3.0 percent in December, unchanged from November.

The proportion of separations due to people quitting their jobs, which can indicate workers’ confidence in their ability to find new jobs, was unchanged at 49 percent in December.

The percentage due to lay-offs or discharges was 42 percent, down from 43 percent in November.

The Job Openings and Labor Turnover Survey encompasses employment data from about 16,000 establishments across the country.

Jobless claims drop to 3.5 year low; labor market strength seen

WASHINGTON ― New U.S. claims for unemployment benefits dropped to a 3½  year low last week, a government report showed on Thursday, suggesting the labor market recovery was gaining speed.

Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 366,000, the Labor Department said. That was the lowest level since May 2008.

The prior week’s claims data was revised up to 385,000 from the previously reported 381,000.

Economists polled by Reuters had forecast claims rising to 390,000 last week.

The unexpected drop in claims last week pushed them closer to the 350,000 mark that analysts say signals labor market strength.

It offered further evidence of increased momentum in the pace of economic activity, even though retail sales rose modestly in November. This is in sharp contrast to Europe, where t he festering debt crisis has already pushed some economies into recession.

The Federal Reserve on Tuesday acknowledged the improvement in the jobs market, but said unemployment remained high. The jobless rate dropped to a 2-1/2 year low of 8.6 percent in November.

The U.S. central bank said the debt crisis gripping Europe was a big risk to the U.S. economy, which it described as “expanding moderately”.

A Labor Department official said there was nothing unusual in the state level data and noted that only one state had been estimated.

The four-week moving average of claims, considered a better measure of labor market trends, fell 6,500 to 387,750 — the lowest since mid-July 2008.

The number of people still receiving benefits under regular state programs after an initial week of aid edged up 4,000 to 3.6 million in the week ended Dec. 3.

Economists had forecast so-called continuing claims rising to 3.63 million from a previously reported 3.58 million.

The number of Americans on emergency unemployment benefits increased 254,642 to 3.05 million in the week ended Nov. 26, the latest week for which data is available.

A total of 7.45 million people were claiming unemployment benefits during that period under all programs, up 874,670 from the prior week.

Services growth slows, but silver lining in job growth

NEW YORK ― Growth in the U.S. economy’s vast services sector remained sluggish in June as new orders fell, but economists said a steady employment reading pointed to job growth later in the year.

Wednesday’s picture of labor market conditions in the Institute for Supply Management’s services sector data comes two days ahead of a key U.S. jobs report that is expected to show non-farm payrolls rose modestly last month after slumping in May.

Analysts are watching closely for signs the economy is gaining traction after growth slowed in the first six months of 2011, and many are looking for acceleration in the later part of the year.

John Silvia, chief economist at Wells Fargo, said that while the services data was weaker than expected, it was still consistent with continued economic growth in the second half of the year.

“The silver lining is that the employment index remained in expansion territory,” Silvia wrote in a note. “This reading suggests prospects for continued payroll growth in the coming months.”

The ISM report’s services index fell to 53.3 last month from 54.6 in May. The reading was shy of economists’ forecasts for 54.0, according to a Reuters survey. A reading above 50 indicates expansion in the sector.

The dip comes after a modest gain in May, and the index is still well off the peak seen at the beginning of the year.

The new orders component eased to 53.6 from 56.8, while the employment gauge improved slightly, edging up to 54.1 from 54.0.

Gains in employment are key to bolstering consumer confidence, and even though the employment gauge held up this month, it needs to be higher, said Anthony Nieves, chairman of the ISM non-manufacturing business survey committee.