THE ENTERPRISE
"Where have all the flowers gone...?" was the line from an old Peter, Paul and Mary hit song. Now the refrain could be, "Where have all the workers gone?" Or, perhaps, "Where have all the jobs gone?" Two years ago, John Kerry was ranting about "Benedict Arnold CEOs outsourcing American jobs." Lou Dobbs has a regular one-hour CNN show entitled "The Outsourcing of America." I had a bit of an argument with a colleague just last week about this topic. That spurred me to write what follows.
In this issue of THE ENTERPRISE I want to paint the picture of a conundrum and a dilemma...jobs are being outsourced and at the same time that US employers cannot find enough people to fill the jobs they have open. What's that all about? In prior eras, we imported people from Europe and they populated our work-forces. Most of those immigrants were our ancestors. The big (public) worry is that we are sending too many jobs offshore. But no one is worrying about the fact that we have too few, too unskilled and uneducated (and unmotivated) people to do the jobs we need done here in the USA--and it will get worse before it gets better.
SHORTAGES OF SKILLED US WORKERS 2006 FORWARD
According to The KIplinger Letter (and many other sources) there is going to be a shortage of skilled workers in the US in 2006 and years going forward. How can this be? The problem lies in education and training--simple math--and the changing nature of jobs. Some specialized training, college or advanced education will be needed for about 85% of the new jobs, but only about 60% of American students/workers get that far! Those being displaced from "old-style" jobs, don't have the skills or knowledge for "new style" jobs.
There are shocking shortages of nurses, pharmacists and doctors now, and as America ages, these shortages will only get worse. We are filling them by "importing" people with the appropriate education, but our national security concerns lead to immigration restrictions which will not permit "importing enough." Baby boomer retirements will soon worsen the problem by taking more skilled people out of key positions.
Engineers, scientists, technicians, key manufacturing jobs (yes...but not the old "put and take" jobs) are all in short supply. So are workers in skilled trades like machinists, tool & die makers and many construction trades (bricklayers, HVAC installation/service technicians, electricians). It seems that the old "skilled trade" jobs aren't so glamorous for today's youth, and many require training and an apprenticeship of some sort. If anyone thinks I'm wrong, try to hire some of these skills, or ask someone who is hiring--or trying to.
The government's job training programs are haphazard or inept. Those will be no help. Visas for immigrants will not be increased any time soon, because of the politicians' perception that these immigrants are taking American's jobs, which they are to the extent that Americans are too uneducated/unskilled to do them and/or too lazy or unmotivated to learn the necessary skills. Therein lies the problem.
OUTSOURCING--A DIFFERENT PERSPECTIVE
A very interesting report was published recently by The McKinsey Quarterly. It's topic was "Sizing the emerging global labor market." It is too lengthy to cite in detail here, so I'll just hit the three overall conclusions conclusions and some of the surprising figures cited.
1) Offshoring will probably continue to create a relatively small global labor market--one that threatens no sudden discontinuities in overall levels of employment and wages in developed countries (Did you hear that Senator Kerry and Mr. Dobbs?)
2) Demand for offshore labor by companies in the developed world will increasingly push up wage rates for some occupations in low wage countries, but not as high as current wage levels for those occupations in developed ones.
3) Potential supply and likely demand for offshore talents are matched inefficiently, with demand outstripping supply in some locations and supply outstripping demand in others.
I'll paraphrase some of the other points made in the study. The most populous jobs (in the US, for example) are unsuitable for outsourcing--less than 1% can be readily outsourced--service jobs, support staff, etc. A large factor in this is retailing, which employs almost 5MM people globally, but only 3% are suitable for offshore/outsourcing. And conversely, the jobs most amenable to outsourcing are not nearly as numerous (e.g. packaged software, where about half of the jobs are suitable to outsource, only employs 340,000).
OFFSHORING WILL NOT DECIMATE OVERALL US EMPLOYMENT
McKinsey estimates that total offshore employment will grow from 1.5MM jobs in 2003 to 4.1MM in 2008. When you consider that 4.6MM people in the US alone start work with new employers each month in the year ending March 2005, you see how it reached the conclusion of "no sudden discontinuities ". Overall, the millions of new graduates in skilled positions that we read about in China and India are far from "ready" to fit new job needs of employers. McKinsey estimates that overall "only 13% of the university graduates [of 33 million studied] from the 28 low-wage nations are suitable for jobs in these companies" [Based on interview with the HR managers of 83 multinationals that operate in both developed and less developed countries].
Whether you believe the McKinsey Report's statistical accuracy and its estimates, the premises of its conclusions seem likely to be true. Millions of graduates in a far away, under-developed country don't equate to millions of qualified workers for jobs in developed countries. We know that even US college graduates require additional training and orientation before they can enter jobs and be productive. Another fact cited is also unarguably true. The raw number of graduates in those low-wage countries is increasing, so whatever "yield rate" of suitable job candidates is estimated, the raw number of suitable candidates available will also go up substantially.
CONCLUSION
This one is mine, not the sources cited. As a nation, and as business leaders, we need to quit wringing our collective hands and weeping about the jobs going offshore. Then we need to turn our attention to the real issue: how to prepare this generation and the next generation of American workers to do the kinds of things we can and must still do here at home--and that goes way beyond flipping burgers and bagging groceries. We need to find a way to better inform, motivate, educate, train and match Americans to the kinds of jobs we have and will be needing to fill--and we need to do it fast.
And "No Child Left Behind" is NOT going to do that--at least not in this decade. That is the job of US employers, banding together and engaging government to act--not vice versa. Government initiated programs ALWAYS miss the mark. This needs to be private sector driven and government supported. Where we can fill the job skill gaps, we must, Where we can't, we must then intercede with government to get immigration rules changed to allow the "right kind of skills" to be "imported" into the US.
We did it at the turn of the last century--even though it was low skilled, low cost labor that time--we must do it again now, smarter, and more collaboratively. If we don't, and demand exceeds supply dramatically, there are only three choices: pay more, ration/allocate, do without. Want to get the manual out and service your own air conditioner? Or worse yet, do you want to be your own nurse or doctor for your next surgery? I don't! It's time to put America's innovative might to work solving a real problem, not an imaginary one. If you can find anyone in Congress to listen and understand this, "pass it on."
Best, John
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