MAGA? How About MEGA?
Employment challenges are impeding business growth
I just finished reviewing student papers outlining key weaknesses of their employer organizations. The students are managers and supervisors, mostly in Colorado and primarily in health care. All but one student reported some aspect of employment as a weakness within their organizations – whether it’s turnover, recruitment, unfilled positions or the quality of applicants.
These employment challenges appear to be getting worse. Research my firm did in 2016 found about half of employers in the Pikes Peak Region reported growth was impeded due to difficulty in finding and keeping qualified workers. This problem escalates toward the end of business cycles as unemployment drops, wages rise and employees are emboldened to job-hop. While our stage in the business cycle is partially to blame, there are greater structural issues in the American economy that tease me when I think about the MAGA (Make America Great Again) movement. When I probe into this issue, I surmise people fundamentally want more reliable jobs with better pay close to home.
While socialist, or even low-income market economies, may focus more on appropriate levels of technology (i.e. being content with less technology when there is surplus idle labor), the U.S. has always had a penchant for innovation to increase labor productivity in the workplace. Economists point out that without productivity growth, there can be no real growth in our total national per capita income even though there could be income redistribution between workers and owners.
It’s a reinforcing cycle. Economic growth demands more labor, technology and/or efficient processes for production. Regardless of whether the economic engine is fueled by labor, capital or managerial talent, the employment of these resources further escalates the economic growth cycle while enhancing productivity.
When asked how they will adapt to labor shortages, two-thirds or more of companies in our research reported they will either train existing staff (92 percent), invest in technology (78 percent), or raise wages and benefits (62 percent). When asked about their recruitment strategies, more than three-quarters reported the greatest usefulness associated with employee referrals (97 percent), networking (92 percent), or online job boards like Monster or Indeed (77 percent).
These adaptive and recruitment strategies rely heavily on existing social networks of family, friends and co-workers, which creates a MEGA (Make Employment Great Again) conundrum, since an individual’s social networks significantly impact their employment opportunities, and social networks fundamentally influence the quality and availability of the workforce.
We have what some economists call a bifurcated labor market. People with modern skill sets, whether through college or training, are in community, employer and online networks where job opportunities and optimism abound. Individuals without modern skill sets are in the economic doldrums. Stress and conflict emerge within and between social groups any time our forward, goal seeking momentum halts for extended periods of time.
This can manifest in many ways, including social disengagement, violence, drug use and blaming. Given that we operate within social networks, our entire family or culture can become inflicted when in the economic doldrums, and frustration over perceived success and wealth distribution is not just between owners and workers but also between classes of workers and cultural groups.
From the 1960s through 2000, the national labor force participation rate (percent of people 16 or older working or seeking work) increased from 59 percent to 67 percent as women actively entered the labor force. After peaking around 2000, the participation rate declined, slowly at first and then precipitously after 2008, until it bottomed out in 2015 at its current level of about 63 percent. Declines in male participation disproportionately drove the drop.
The greatest decline in participation rates were among young people under 20, and the greatest increase was among people over the age of 65. Depending upon the cause, both these trends could be encouraging — if young people are getting more education or training before entering the workforce and more older people continue to find satisfaction in working. Colorado’s participation rate ranked sixth in the nation in 2016, which is consistent with a younger, more educated workforce comprised substantially of people pursuing opportunity through migration.
I was at a workforce conference recently and was paired with Jose, a community advocate who crossed the U.S.-Mexican border with his dad 60 years ago. He lamented about many of today’s young Mexican-Americans who, despite a great work ethic where most are working at young ages, live in what he termed a limited cultural and family vision toward the future. He wants his grandchildren to leave the comfort of their home community to pursue higher education and jobs outside their cultural norm — just as his dad did in his personal pursuit of greatness.