Wednesday, April 14, 2010

Crevice Jobs and Unemployment

I don’t have a true count, but I must have hired over a thousand people in my lifetime as a CEO and in various executive positions. That hiring streak spans four decades, and during that time I’ve seen some powerful trends and instructive lessons for dealing with economic unemployment.

There have always been jobs that required physical skills and jobs that required skills that were technical, or required the accumulation of business acumen, or sales/marketing/administration etc. In the first category, a candidate had to be physically adequate and reliable. In the second set of categories they required a technical skill set, specific educational level, or personal experience. For example, one would not hire a used car salesman to design a new hybrid car, at least not as a first choice. However, within broad categories, we always assumed there was a training period, perhaps a six month trial period, during which the newby would get on-the-job training and prove himself or herself. We used to hire for generic talent, capability, brains, but not for niche skills.

The first category of jobs are largely being exported or automated. Our economy is increasingly in the second set of categories. These are the people that are now out of work.

Three things have happened to make the market for this second set of jobs vastly different today.

First, specialization has progressed to the point where there are literally thousands of niche skills, most of which are transient. I don’t hear much about dictation skills today, and who cared much about Excel or Twitter in 1990?

Second, the technical explosion has left most recruiters in the dust and most technical managers overwhelmed and dependent on these non-technical recruiters. The recruiters do not comprehend the nature of the job in relation to either underlying capability or previous experience. So the recruiters are converting formal job descriptions into recruiting ads and doing a checklist matchup with candidates’ resumes. The fundamental values of intelligence, capability and character are below the line. The best real candidates get lost in the process and the checklist becomes the meat of the candidates’ evaluation.

Third, it has become so expensive to seek, hire and pay a new employee, especially with the higher payroll taxes mandated by the health care bills, that the only way the process can be justified is against immediate profits. The idea of bringing up new talent by training and mentoring, of balancing new talent vs the routine promotion of existing employees in order to broaden the talent pool for future growth is no longer very attractive. The new person has to come on board and instantly contribute to the bottom line. This means they are recruiting for skills that are often ephemeral in the marketplace. In some areas, the skills sets listed for a job are so absurd as to be laughable.

I used to be an expert on operating systems design and development. As computer languages changed, I learned 22 different languages, from COBOL, FORTRAN and BASIC, to a half dozen assemblers, TRAC, LISP. PROLOG, C, C++ and I almost learned C Sharp before I went on to another profession. The whole idea of only hiring a person who has years of experience in a particular language and even a single compiler product means you deny the existence of any underlying talent for writing computer code, and that is just plain stupid. Really good programmers are 25 times more productive than the ordinary college-trained professional, and learning a new language for such a person is a matter of weeks and a little practice.

One of the curious technical niches is for “drivers”, which are those components of operating systems that know how to operate printers, disk drives, ethernet connectors and the like. The real skill is interpreting the device manufacturer’s specs in code. There is a standard “tool set” for the part that connects to the operating system, and if you ever wrote a driver, you know it. Last year I saw a job opening for people who had at least 2 years experience writing drivers for a particular manufacturer’s device - an unremarkable device with a market life of about a year.

Narrowing the job below the niche to a crevice does not get talent - it does not produce anything but quick revenues for the lucky headhunter, who probably stole the only person with that crevice skill from the device manufacturer. That person will not stick around long. Being confined to that crevice will be like being put in a closet and maybe the employer will change the light bulb once a year.

Crevice jobs are becoming the trend in every technical area. In the health administration area I see ads for a specific medical record keeping system. Accounting job boards post positions for people who are expert in one brand of accounting system. Even C-level jobs are skewed to a particular niche industry, where history has proven that the best CEOs, CIOs and CFOs often cross over from other sectors.

All the time, the generic, unskilled jobs are being exported to countries where such labor is cheap, leaving the USA and other advanced nations with vast mismatch of crevice jobs and “unqualified” job seekers. No wonder recruiters complain about receiving 100 applications for every opening - nobody fits, so everyone applies everywhere.

In a vibrant economy commercial industry mines the job market for talent, not crevice skills, and invests heavily in new employee training and development. If government wanted to take a useful role in this situation, it would promote policies that encourage industry to recruit and train a smart and flexible work force. Current tax policy discriminates against any training costs that prepares a person for a new position. The current administration believes a dole, such as extended unemployment benefits alone, is preferably to creating work opportunities through training. What better time to get new job skills than when you are sitting around applying for jobs? The problem is no one in this position has any money to spend on classes.

I propose that Federal and State governments institute coordinated programs for job training.

First, all job skills training tuition ought to be tax advantaged - deductible or credited against taxes owed - whether the employee pays them or the employer pays them. Since every person will change occupations several times, tax law must not discriminate against education or training that allows entry to a new occupation. At state and local levels, training tuition assistance ought to be coupled to forecast needs, so that not everybody who thinks being a TV news commentator is a great job goes to a training program for broadcasting and empties the ranks of insurance sales people. Perhaps the private companies that provide education and training get rated by the percentage of placed graduates, which would affect their prices. They would then respond to the real market, not just the popularity of their courses.

Second, I propose that job skills training at the basic level be incorporated into jobless benefits, so that a person unemployed for more than, say, 13 weeks automatically gets enrolled in a job training class of their choice paid for by state and federal unemployment taxes, in lieu of the extended unemployment benefits now provided. To minimize abuse, the cost of the program becomes taxable income if the unemployed person fails the course. That should keep aspiring public relations people from taking courses in quantum physics, or people signing up and not attending classes at all.

Third, I propose that the Federal component of the unemployment tax be adjusted for company training history as well as employee retention history. A company that does not lay off people pays a much lower rate, say 0.5% of payroll, than a company with many layoffs, whose rate could become 5% of payroll. Under this proposal, a minimum training cost goal would be set, according to the estimated “change level” of that sector, and companies that spend over that limit get credit against their unemployment tax rate. Conversely, companies that spend less than their change level target would pay a higher rate. The rate adjustments and average tuition payments would be set by actuarial calculations to be revenue neutral and self funding over time.

Once the incentives for crevice jobs have been nudged back to reasonable limits, I believe that unemployment will decrease, productivity will increase, the tax base will rise, and the estimated ten year correction to the unemployment problem will be down to five years.

Incentives to create a more flexible, better trained, more productive work force in the skilled areas will go a long way toward restoring wholesome recruiting practices. Crevice recruiting will become less credible. Once it becomes clear that US talent can be retrained to meet the challenge of change, the labor force will be a more robust sector of the economy. Forging our excess realtors into accountants, and our out-of-work residential housing electricians into solar energy contractors cannot be a bad thing.

Anyone want to comment?

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