Gordon Report - November

NOVEMBER GORDON REPORT

Skills and Jobs in America: Past – Present – Future

 

First the good news: Over the past decade (2011-2020) investment in corporate training has grown by about 30 percent. The caveat is that professionals and executives received the lion’s share of these programs. (Development Dimensions International, 2023)

The current skills-jobs picture paints a different reality. Seventy-five percent of U.S. employers now struggle to find skilled talent (worldwide it is 77 percent). This is the highest figure in 17 years. (ManpowerGroup 41 Country Survey, 2023)

By 2030 U.S, talent shortages may lead to a loss of nearly $2 trillion from unrealized revenue. This will coincide with an estimated decline in the labor participation rate from 62 percent (2020) to 60 percent (2030). (Korn Ferry, “The Global Talent Crunch,” 2018)

The worker pipeline is being squeezed because too many skilled workers are retiring and too few younger people are entering the workforce. Until 2029, 10,000 U.S. workers will retire each day. At least one-third are skilled workers. Unfortunately, the following generations are smaller and many of them lack the educational attainments needed to fill the high-skill jobs of the Fourth Industrial Revolution.

In 2023 the ACT scores of U.S. high school seniors were the lowest in 30 years. Grade inflation at both the high school and college levels is masking the real educational accomplishments of today’s students.

TALENT-DEFICITS CONSEQUENCES

Here are some examples of the ways that current education and talent deficits are affecting the economic growth and social welfare of today and tomorrow.  The post-COVID surge in airplane travel is stressing the aerospace sector. Airlines have ordered more planes, but both Boeing and Airbus have fallen behind in filling these orders. They have heavily invested in new aero-space technician training programs to replace retirees and expand capacity. Yet, poorly educated trainees are dropping out of these programs or creating quality issues on the job. Also, airplane part suppliers are not delivering parts in a timely manner. They also are experiencing the same inability to find and skill more workers.

The shortage of new planes in turn is forcing airlines to ramp up their repair and maintenance services on older aircraft. They also face shortages of trained mechanics and spare parts. This is reducing the number of airplanes in service at a time of increasing demand.

Nearly 600 rural hospitals (30 percent of the total) are in danger of closing. (Center for Healthcare Quality and Payment Reform, 2023). A chronic shortage of doctors, registered nurses, and other skilled medical personnel and rising costs mean that many lack the resources to keep operating.

Factories or fabs for advanced chip manufacturing are now being constructed in several locations across the United States. Many of these fabrication companies have already begun training and education programs for the engineers and technicians who will be needed to staff these plants. However, the Semiconductor Industry Association is predicting that up to 58 percent of the projected 115,00 jobs that will be added by 2030 may not be filled due to an insufficient number of students completing degrees in science and technology programs.

The future U.S. labor economy needs more long-term talent investments. Demographic declines and increased job skills demands are not going away. Unless we do more to address skilled worker shortages, we can expect pay rises chasing a declining pool of qualified workers. This will complicate the U.S. inflation fight and raise the risk of a prolonged recession.

 

Edward E. Gordon is the founder and president of Imperial Consulting Corporation in Chicago. His firm’s clients have included companies of all sizes from small businesses to Fortune 500 corporations, U.S. government agencies, state governments, and professional/trade associations. He taught in higher education for 20 years and is the author of numerous books and articles. More information on his background can be found at  www.imperialcorp.com. As a professional speaker, he is available to provide customized presentations on contemporary workforce issues.

We invite to submit your questions or comments by email or by calling us in Chicago at 312.664.5196.

Thank you for your continued interest in our publication.

Imperial Consulting Corporation

220 E. Walton Place
Chicago, IL 60611

Ed Gordon September Report

 SEPTEMBER GORDON REPORT

A Changing Mindset on Training: Activate the "Hidden Workforce"

 

 

At long last, there are signs that companies are increasing employee training and participating in talent development programs. Why is this finally happening?

 

A recent Federal Reserve program held in Chicago focused on how companies in four Midwestern states are partnering with their local communities to upskill younger entry-level workers. Companies from many business sectors are collaborating with K-12 and post-secondary institutions to offer both career information and educational programs aligned with current job requirements.

 

This program also included a public high school graduate who told the audience how mentorships and a career exploration program interested him in pursuing a STEM career. He is now eager to begin post-secondary education that will qualify him for a career in information technology.

 

A barrier that discourages publicly traded corporations from developing human capital is now being challenged. Arcane financial accounting rules currently classify employees of these companies as costs rather than assets. The Securities and Exchange Commission (SEC) is now considering proposals to require publicly listed companies to report spending on training and other human capital outlays. This may be a step toward moving the Financial Standards Accounting Board (FASB) to change accounting rules thereby giving companies the option of capitalizing and depreciating employee development as an investment, rather than expensing it as a cost that reduces earnings.

 

The Current U.S. Labor Market

Employer job training is also growing as an answer to the unprecedented demographic meltdown. Over this decade 10,000 workers are retiring each year (approximately 3.6 million workers annually). This will continue into the 2030s. Up to 66 percent of job openings are to replace these retirees.

 

A recent National Federation of Independent Business survey reported that 42 percent of their members (companies with 500 or fewer workers) had vacancies they could not fill. The number-one problem facing members of the Association of General Contractors is the shortage of skilled labor. Contractors are reporting that this is causing them to turn down new construction projects.

 

In 2021 U.S. businesses experienced over 8 million job vacancies that resulted in a profit and productivity loss of over $1 trillion. By 2022 this had risen to over 12 million jobs and a $2 trillion loss. This trend seems to have abated somewhat this year. However, labor cost per unit rose to 6 percent in 2023. Average hourly earnings have increased 4.3 percent above last year as employers have raised wages to find qualified workers. Wage inflation is likely to continue unless businesses begin to enlarge the pool of skilled workers.

 

But where can this “hidden workforce” be found? According to U.S. Department of Labor reports, about 100 million Americans of working age are not participating in the labor force. Our research shows that at least 20 million of these workers have given up looking for employment because they lack some of the specific skills a job requires. They are capable of filling such job vacancies if employers offer the job training needed to mobilize these skilled workers.

 

As many other nations are dealing with a declining working-age population and significant skills shortages, it is important to develop all our own resources. There are hidden workers in our midst who could become productive employees if their skills are updated. Are U.S. businesses now beginning to realize that persistent job vacancies cost them more than it would to start entry-level skills training or to participate in community partnerships that are renewing local talent pipelines?

 

Edward E. Gordon is the founder and president of Imperial Consulting Corporation in Chicago. His firm’s clients have included companies of all sizes from small businesses to Fortune 500 corporations, U.S. government agencies, state governments, and professional/trade associations. He taught in higher education for 20 years and is the author of numerous books and articles. More information on his background can be found at  www.imperialcorp.com. As a professional speaker, he is available to provide customized presentations on contemporary workforce issues.

 

 

We invite to submit your questions or comments by email or calling us in Chicago at 312.664.5196.

Thank you for your continued interest in our publication.

May Gordon Report - "How to Repair America's Talent Pipeline"

 

Micron Technology Inc., based in Boise, Idaho, plans to invest $100 billion in a semiconductor-manufacturing campus in a suburb of Syracuse, New York. Once fully built this campus will employ 9,000 workers and possibly support 41,000 jobs for contractors and suppliers, Yet the highly skilled engineers and technicians needed for advanced chip manufacturing are in short supply across the United States. What steps are they and local community leaders taking for solving these critical talent shortages?

 

Micron is seeking to develop a regional talent-creation pipeline through partnerships with K-12 schools and local colleges and universities. It is providing $10 million to local K-12 schools to bolster STEM education. Macron is cooperating with Onondaga Community College to develop a new degree program for chip technicians. Syracuse University is developing plans to greatly increase enrollments in its undergraduate and graduate engineering programs.

 

The extent of Macron’s education partnerships is particularly notable. Education is a continuum. Even before the educational setbacks caused by COVID-19 restrictions, it was clear that K-12 education in the United States has not been providing a significant proportion of our students with the educational foundations needed for their future development The challenge we now face is that only about one-third of our high school graduates leave school with reading and math comprehension at the twelfth-grade level. These skill levels are needed for the successful completion of post-secondary certificates, apprenticeships, community college two-year degrees, or four-year degrees.

 

Cascading Challenges

It seems likely that Micron will be affected by other types of skilled worker shortages.  Micron’s Syracuse area expansion plans were spurred by the federal incentives offered by the Chips Act that was signed by President Biden in August 2022. Other companies have announced plans to build semiconductor manufacturing facilities in Arizona, Texas, and Ohio. Chip manufacturing plants have highly exacting construction specifications requiring specialized training.

 

At the same time, growing international tensions and supply chain disruptions precipitated by the COVID pandemic are leading to the in-shoring of all types of manufacturing to the United States. Construction spending for manufacturing projects was the highest on record last year and is expected to remain elevated as there is a considerable backlog of nonresidential projects across the United States. A major reason for construction delays is worker skills shortages. In a recent survey conducted by the Associated General Contractors of America, 80 percent of the respondents reported difficulty in finding qualified workers.

 

Last year U.S. businesses lost $2 trillion in productivity and profit due to skills-jobs disconnects. We estimate that there are over 27 million skilled and semi-skilled Americans who are not participating in today’s labor force. If their skills were updated through entry-level training, the impact on U.S. productivity would be substantial due to the magnitude of this hidden population.

 

By 2030 Korn Ferry predicts that up to 90 million jobs worldwide could go unfilled. This could cost employers $8.5 trillion in profits. To meet the steeply escalating skill demands of the Fourth Industrial Revolution, more regions across the United States must develop a comprehensive approach to workforce development for a wide range of occupations in which employers and educational institutions cooperate in education and training programs that keep pace with technological advances.

 

Edward E. Gordon is the founder and president of Imperial Consulting Corporation in Chicago. His firm’s clients have included companies of all sizes from small businesses to Fortune 500 corporations, U.S. government agencies, state governments, and professional/trade associations. He taught in higher education for 20 years and is the author of numerous books and articles. More information on his background can be found at  www.imperialcorp.com. As a professional speaker, he is available to provide customized presentations on contemporary workforce issues.

 

We invite to submit your questions or comments by email or calling us in Chicago at 312.664.5196.

Thank you for your continued interest in our publication.

Gordon Report March

 MARCH GORDON REPORT

Inflation, Jobs, and Interest Rates

 

Recent news headlines report that stocks are crashing. The markets are focused on further interest rate increases as the Federal Reserve responds to inflation. But to what extent is inflation triggered by surging jobs hiring and a falling unemployment rate?

 

Overall businesses are still experiencing great difficulty in hiring skilled workers. Massive retirements and COVID-19 are identified as the main culprits. However, reports from research groups and trade/professional associations are identifying skilled worker deficits as the chief cause of workforce shortages and wage inflation. As Harvard economist Gabriel Chodorow-Reich stated, “companies will keep bidding up pay as they compete for employees.”

 

The McKinsey Global Institute report, “Rekindling US Productivity for a New Era,” (2/23) centers on the urgent need for worker training and education to fill the rising tide of vacant jobs across America. McKinsey’s research lends future credence to similar statements by the American Hospital Association, the Association of General Contractors, the National Federation of Independent Business, and many other organizations.

  

The skills-jobs disconnect has only grown since the 1990s. Companies generally fail to recognize that investing in their employees’ continuing knowledge growth is a core business function. In fact, as they continue to focus on cost-cutting, they are further losing ground as automation requires better-skilled people. Data shows that this skills-jobs disconnect will persist at least until the 2030s.

 

Is this the new normal? The longer businesses only circle these issues at 30,000 feet, the bigger the risk of the economy running out of the required skilled workers to keep it expanding.

 

What has to happen before this requirement is acknowledged by our business culture? We hope soon rather than after a major economic crisis.

 

Edward E. Gordon is the founder and president of Imperial Consulting Corporation in Chicago. His firm’s clients have included companies of all sizes, from small businesses to Fortune 500 corporations, U.S. government agencies, state governments, and professional/trade associations. He taught in higher education for 20 years and is the author of numerous books and articles. More information on his background can be found at  www.imperialcorp.com. As a professional speaker, he is available to provide customized presentations on contemporary workforce issues.

February Gordon Report "You Can't Click for Brains"

 FEBRUARY GORDON REPORT

 A New Series: "You Can’t Click for Brains"

 

This new series explores the consequences of failing to recognize that maintaining and advancing computer technology depends on raising the education and skill levels of more Americans. The widespread illusion that your electronic device provides all the data or answers you will ever need is causing many to question the value of obtaining a good education, when, if fact, it is human intelligence that produces technological innovation. If education falters, so eventually will technology.

  

Part I: "A Ticket to Nowhere"

Claudia Chacon’s two boys attend Fairfax High School in Los Angeles. While they get good grades in English and math on their report cards, she was chagrined to learn that neither of them met grade-level standards in these subjects on California’s state-wide achievement tests. She is worried that their report cards inflate what they actually have learned. Claudia thinks that her sons aren’t being fully prepared for college or any other type of post-secondary learning.  Rather than equipping them for the future are they in fact being given a ticket to nowhere?

 

The Los Angeles Times compared district-wide spring 2022 grades in the city with the results of California’s Smarted Balanced test scores. These findings were reported in a December 22, 2022, article:

• 73% of 11th-graders received grades of A, B or C in math; only 19% tested at grade-level.
• 79% of 8th-graders received grades of A. B, or C in math; only 23% tested at grade-level.
• 85% of 6th-graders received grades of A, B, or C in English; only 40% tested at grade-level.
• 82% of 7th-graders received grades of A. B. or C in English, only 43% tested at grade-level.

It appears that report card grades are a smokescreen hiding serious gaps in student learning skills and knowledge. Los Angeles it not an outlier; grade inflation is rampant throughout the United States. Social promotion or advancing students by age rather than through achieving appropriate grade-level academic attainment has become common in U.S. elementary and secondary schools.

 

What does this mean for the overall state of education across America? Our public and private schools are central for developing the critical education mass need to support the skill demands of the Fourth Industrial Revolution.

 

 A Persisting Problem

Forty years ago, President Ronald Reagan’s administration produced a report entitled “The Nation at Risk.” It warned that U.S. schooling was producing “a rising tide of mediocrity.” Has anything really changed?

 

Since 1990 the U.S. Department of Education has conducted the National Assessment of Educational Progress (NAEP) commonly called the Nation’s Report Card. It tests 4th, 8th and 12th grade students in core academic subjects at 13,600 public and private schools in all 50 states. From 1990 to 2022 most student test scores have been flat or rising very slowly. In reading and math only 33 to 37 percent of U.S. students are at or above their appropriate grade level. This means that about 66 percent of students are not meeting grade-level standards in reading and math. This was true even before COVID-19 closed most schools across the nation. The 2022 NAEP testing of 4th and 8th graders in reading and math showed scores declined in both subjects at both grade levels. A Stanford University report estimated that learning losses could lower current students’ income over their lifetime by as much as 6 percent.

 

All of these test results indicate that a significant proportion of U.S. students are not being equipped for success for any type of post-secondary education including certificate or apprenticeship programs, and 2- or 4-year college degrees. Annually about 67 percent of high school graduates enroll in these programs However, only about 33 percent graduate.

 

 Higher Education Disfunction

Our colleges and universities are facing a demographic decline in the number of students at the traditional age for beginning college studies. Therefore, the competition to enroll and retain students has become more intense especially because federal funding is linked to enrollment in credit-earning courses. For the past 40 years most colleges and universities offered remedial reading, writing, and math programs to help poorly prepared students gain the skill levels needed for the successful completion of college-credit courses. As federal funding does not cover remedial courses, some institutions have curtailed or eliminated them which means that such students are now immediately enrolled in credit courses.

 

Our informal survey of college professors across the country indicates that many of these students are failing in entry-level courses. Often college administrators are pressuring professors to pass the students with a D-grade so they continue to pursue studies at that institution. Also, courses are being dumbed down due to skill deficiencies.

 

What We Face Today and Tomorrow

The degrading of educational standards at the K-!2 and post-secondary levels is having profound consequences. Employers in many types of industries are reporting that finding people with the skills needed to fill their vacant jobs is their greatest problem. At the same time there is a significant number of people aged 18 to 65 who are not employed or seeking employment. Often in localities where the unemployment level is high, there is an elevated level of criminal activities. Better education of students and training in the workplace is not a total solution to these issues. However, people with poor educational preparation or no opportunity to be retrained with the skills needed for new technologies often give up hope for a better future.

 

In his seminal book, Future Shock, Allen Toffler warned us about this problem. He predicted that the hardest part of adapting to major technology change will be a societal acceptance of the need for higher educational standards. We have now reached that crossroad.

 

 

Edward E. Gordon is the founder and president of Imperial Consulting Corporation in Chicago. His firm’s clients have included companies of all sizes from small businesses to Fortune 500 corporations, U.S. government agencies, state governments, and professional/trade associations. He taught in higher education for 20 years and is the author of numerous books and articles. More information on his background can be found at  www.imperialcorp.com. As a professional speaker, he is available to provide customized presentations on contemporary workforce issues.

 

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Imperial Consulting Corporation

220 E. Walton Place
Chicago, IL 60611