Workers: There are currently 5.1 million job openings in the US; an all time high. While the official unemployment stands at 5.5%, the U-6 unemployment rate, which includes people working as little as one hour a week for “economic reasons” (e.g. money) who state that they would rather find a full time job, stubbornly remains over 11%.
Employers: Employers increasing talk about the “talent wars;” the fierce competition for good employees, or even people who might become good employees. Corporate salaries are escalating at a rate that shocks many small business owners. It isn’t unusual to interview a young middle manager with a few years’ experience who makes a six figure income.
Workers: According to the Economic Policy Institute, the unemployment rate for college graduates hovers around 8.5%, again almost doubling to 16.8% when underemployment in included. For high school graduates it is 22.9% and 41.5% respectively. A recent (2012) study showed more than a third of those under 30 still living with their parents.
Employers: Those who are seeking staff laugh at the arguments over “minimum wage.” McDonalds and Wal-Mart are just the largest and most visible employers to admit that $10 an hour is the going rate for employees who will show up and work. (Although, realistically, $1,700 a month is still unlikely to get you out of your parents’ house.)
What is the problem? Employers are saying that they have jobs, but can’t find the people to fill them. Prospective employees are saying that they want to work, but can’t find a job.Is everyone blindfolded in a dark room, wandering around unaware of others in the same room unless they bump into them?
Not exactly. The problem is systemic, and has been building for the last 30 years. Its roots lie in an educational system that was developed during the longest sustained economic expansion in our history.
The Consumer Boomers drove long-term economic growth from the mid 1970’s to the late 2000’s. During that time, the expectation of constantly increasing opportunity skewed the educational system.
Boomers led a six fold increase in the number of college educated workers. Although college graduates still only represented 25% of the Boomer population (a percentage that remains steady today) they helped create an expectation that the”normal” course of education led through a university. The 80’s and 90’s saw a major shift in our educational system.
- High school counselors began to be rated, at least in part, by the number of kids who went on to college, so they naturally directed everyone towards college.
- Ridiculed as the refuge for dumb kids and criminals, manual arts, auto shop, home economics and other non-college preparatory classes were virtually extinguished from high school curricula.
- The Federal Government began guaranteeing low interest money for higher education (Sallie Mae — 1973). With privatization (1997) and Congressional urging, loan eligibility expanded to cover virtually any expense that could be related to education.
- Fueled by student debt, colleges increased their pricing at almost triple the rate of inflation. The parents of a Boomer child paid about 18% of median annual wage for tuition. Today it costs almost 80%.
Every business needs a value proposition. In the case of higher education, it is an implied promise that they are giving their customers the skills needed to earn a return on their investment.
Colleges understand economies of scale. What creates more incremental margin, auditoriums with hundreds of liberal arts majors, or high-tech labs with a half-dozen budding scientists? Shifting their national standard to a 6-year graduation rate (fewer than 50 of the 580 four-year colleges have 4 year graduation rates over 50%) merely acknowledges that they are in no hurry to move those lucrative young borrowers along.
Despite the more relaxed time frame, over the last 20 years 31,000,000 Americans (10% of the entire nation) started college but received no degree. Freshman lecture halls filled with people who will never graduate have become a massive cash cow.
We spent twenty years building an educational system that has no accountability for delivering employable skills that justify the cost of training. Too many people with the wrong education and a load of debt are sitting in their parents’ living room saying they can’t find a “suitable” job. Too many employers can’t find suitable employees.
Hopefully, it won’t take us another twenty years to fix this.
A personal note: After 55 days, 6 CT scans, 4 MRIs and (literally) over 5 gallons of antibiotics, I was released from care on Friday. Thank you to everyone who called, wrote emailed, or even thought their best wishes.