Where are All Those Jobseekers?

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.)

blindfoldedWhat 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.

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10 Responses to Where are All Those Jobseekers?

  1. Al Bellenchis says:

    Glad to see you’ve made the last turn, John. Best wishes!

  2. Chuck Smith says:

    John,

    So so glad to hear that you are feeling better!

    While agree with everything you said in the your this post, I’d like to extend your metaphor of the blindfolded people bumping the room. You and they found the elephant in the room and describe it from one limited perspective.

    Yes, education systems are a mess, but that is but one cause. There are many. Here’s another which helps to, but does not wholly explain, our current employment situation. Business has a tremendous responsibility for the state of affairs – the lack of skilled employees. How did the boomers get trained for manufacturing jobs, construction jobs, and other “manual” labor jobs?

    Businesses (and often unions) took responsibility for training workers. Starting in the 80s and continuing to today, the emphasis on corporate profit, just-in-time and lean labor forces, caused otherwise repsonsible businesses (and unions) to stop investing in training and cross training.

    Today we hear from 10s of business owners hoping to find skilled labor to replace their retiring workforces. Guess what… no one trained them. And to me the chief responsibility for that falls on the people who profit from having trained labor. Stockholders.

    Just another reason, I believe, we find ourselves in a pickle. There is a good solution though. Hire for aptitude and invest in your employees.

    Keep getting well. Chuck

    • John F. Dini says:

      I agree, but I think it goes farther, Chuck. As the cost of an individual employee has risen, not least because of government attempts to make all employment generate a “living wage,” small employers have largely ceased to be the training ground for basic job skills. Part time and summer jobs for kids who acted as go-fers and floor sweepers taught things like showing up and following a procedure.

  3. David Cunningham says:

    Hello John,
    I did not know that you had a health problem. Congratulations on your recovery.

    The college mess is getting worse. Cheap money has enabled colleges to embark on an expansion war, turning campuses into resorts. In Colorado, CU and CSU both have debt approaching $1 Billion. CSU is committed to a $250 million football stadium that the President thinks will elevate the mediocre RAMs from the Mountain West to Big 10/Big 12 status – and consequently boost foreign student enrollment to pay off the bond! (I have to check to see if CSU has an Economics department.) We have let on-line “colleges” entice veterans to spend their GI loans on courses that do not equip them to get employment.

    The colleges will not change a lucrative business model. Change will only come when parents stop believing that their sons and daughters deserve the college “experience” they enjoyed or dreamed of. That experience degraded from education to the high life in the 90s when colleges began to be rated for their partying credentials. Parents need to take a hard nosed approach to college selection, and counsel their children against taking on debt without a high probability of quick repayment.

    Another solution would be for student loans to be limited to only fund attendance at colleges that have a 50% or greater 4 year graduation rate, and an adequate record of graduate employment three years after graduation. Similarly, GI loans could only be spent on productive on-line courses. Money rules, and we would quickly see colleges actually focus on graduation and employment success.

    Regards,
    David Cunningham.

    • John F. Dini says:

      I would be afraid that setting a minimum 4 year grad level would just lead to further manipulation, but it is a good idea. Perhaps index the amount of a government-backed loan to the employability of the major?

  4. John Hyman says:

    Pleased to read that you are on the mend.

    “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 curriculums”[sic] is not universally factual. While the emphasis on college attendance is enormous, the emphasis on STEM oriented programs and the undervaluation of liberal arts is also to blame. Combined with the nonsensical new testing, the result leaves a diminished effectiveness in the new workforce.

    Now layer on HR & owner bias against anyone out of work over one year and you have the genesis for the statistics you report in your article.

    This emphasis toward STEM and standardized testing has another painful consequence: critical thinking capability is nonexistent in high school graduates. Do you agree this may be a contributing factor in the reduction in 4-year college graduations?

    Our regional high school has a thriving poly-tech program. This is a school with an excess of three thousand students. And yes, counselors get bonuses for the number of students who take AP and honors courses, and likely something similar for the number of grads who attend college. But the vocational training program is excellent and very much in demand.

    Lastly I believe this bullet was an oversight: “Fueled by student debt, colleges increased their costs at almost triple the rate of inflation.”… isn’t the equation the other way around? The debt is a by-product of the rising costs to attend college.

    And what will happen when the college bubble bursts… the current rate of tuition increases and incurred debt levels in many colleges and universities cannot be sustained. When will be start seeing colleges folding? It may not be very far into the future.

    • John F. Dini says:

      I’m surprised to hear you say that there is too much emphasis on STEM, John. I still think it is weak. When my youngest was reviewing colleges, he was offered a alternating tracks for his major. A BS required one science course, the BA required none. Thanks for the corrections as well.

  5. Walter Belt says:

    John — good to hear that you are doing better.

    Walter

  6. Jim W says:

    As many states, such as my state of FL, are seeking to do away with traditional student testing, more and more students will qualify for college entrance without a clue. High School
    counselors need to do more to assess students and work with them and their parents to develop a plan for their continued education. Goal setting and planning need to be a major part of their education.

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