The Looming Recession’s Workforce Dilemma
A hidden piece of today’s threatening recession? For decades, both our public and private sectors have been gradually weakening support structures that have strengthened the American workforce for generations. Two experts dissect this new dilemma, and look for solutions.
By KRISTIN SHARP and MOLLY KINDER
As factories and other businesses automate, the skills workers need to stay relevant are becoming elusive.
There may be no greater truism than saying the economy is changing, and that tomorrow’s work opportunities will be very different than what people do today. Yet a truly new change has arisen — one that creates tremendous opportunity with one hand, and keeps the labor force from taking advantage of it with the other. And if the dark clouds threatening recession these days turn into a full-blown storm, the trouble-making side of this equation will only get worse.
To fully understand this new reality, let’s first look at how it took shape. Since the turn of the 21st century, our economic landscape has suffered from the gradual weakening of three longstanding American traditions: a system of education that is relevant to the times; private and public investment in workforce training; and the preeminence of the traditional 9-to-5 job, as well as the assumptions of advancement that go with it. Decline in each of these traditions has eaten away a different corner of the economy. Over time, as the erosion in all three domains has spread and merged with technological change, we have been left with a brand new problem: a job market mismatched to the skills and needs of our workforce.
If a recession does arrive, it will be caused by many factors besides this dilemma. But one thing is clear: recessions discourage investments in any aspect of a business that won’t directly, and quickly, boost the bottom line. And unfortunately worker training is too often seen as exactly that — an extra, an intangible, an expendable.
In the view of McKinsey, the global consulting firm, the upcoming shift of workers to new occupations “could be on a scale not seen since the transition of the labor force out of agriculture in the early 1900s.”
This dynamic has put American workers in a quandary. While work opportunities remain alive in many pockets of the economy, a range of solid opportunities geared to the future still aren’t widely accessible. In fact, our research suggests that those best able to adapt and thrive in the years ahead will be people who possess an entrepreneurial turn of mind, and the discipline to think like master craftsmen. Unfortunately, the American system of advancement has never been designed to prepare people for these requirements.
WHERE DID STABLE CAREERS GO?
In your parents’ day, it was reasonable to expect a structured, predictable path for career advancement that could last most if not all of your working life. You earned a specific degree, slotted into an existing job, and worked to advance within the company or industry. No more. The average tenure for an American worker in today’s economy is just over four years. Companies are increasingly hiring people on a piecemeal or contingent basis.
As a result, project-based “gig” work has become more and more mainstream — a trend that is often enabled by technology. Two prominent labor economists, Larry Katz and Alan Krueger, estimated that 94 percent of the jobs added to the economy from 2005 to 2015 were temporary, contract, independent, or freelance. A recent Marist/NPR poll found that approximately 20 percent of Americans’ jobs are untraditional — a figure that could rise to 50 percent in the next 10 years.
THE HALF-LIFE OF SKILLS
There is another reason for today’s job instability: skills that correlate with a specific occupation are becoming outdated with noticeable speed. By one estimate, the “half-life” of skills today is about 5 years, and quickly shortening. As digital skills become more central to a range of occupations, workers will have to update and add to their skill sets even more often.
Adding to that pressure is the need to compete with tomorrow’s machines. In one of many predictions on this front, a study by McKinsey Global Institute, a leading consulting firm, recently found that 45 percent of job activities could be automated with existing technology, and up to a third of U.S. workers may need to change occupations. Pearson, an ed-tech company, estimates that 7 of 10 workers today are in occupations that will see increasing uncertainty by 2030. In McKinsey’s view, the shift of workers to new occupations “could be on a scale not seen since the transition of the labor force out of agriculture in the early 1900s.”
THE DECLINE OF EMPLOYER INVESTMENT
One would think companies would adjust to this change by ramping up their training programs, to keep the skills of their workforces relevant. In some cases, this is happening. Employers like Proctor & Gamble, Walmart and the Container Store are just a handful of companies with robust, internal employee training programs. Others like General Assembly, Galvanize, and various coding boot-camps are experimenting with new ways to train employees with skills targeted to an emerging need in a specific company.
The percentage of workers who benefited from employer-sponsored training between 1996 and 2008 dropped 42%, while on-the-job training fell by about a third.
Overall, however, internal training programs are increasingly hard to find. One recent study found a 28% decline in employer-paid training across the United States. According to another, an analysis by the White House Council of Economic Advisors under President Obama, the percentage of workers who benefited from employer-sponsored training between 1996 and 2008 dropped 42%, while on-the-job training fell by about a third.
Ironically, these cutbacks run counter to market demand. In a recent Gallup poll, Americans expressed little interest in classroom-based, off-site training programs, and even less interest in online training — which is an increasingly common approach to worker training. Workers were very enthusiastic, however, about their employers’ providing real, on-the-job training. The lack of training opportunities particularly affects lower-skilled and lower-educated workers, who are the most vulnerable to automation, and those workers who would benefit most from knowing in advance the outcome to which a specific type of training would lead.
SKILL DEVELOPMENT, BUT THE WRONG KIND
For millions of American workers, getting ahead in an age of automation will require more and different talents — in particular, the capacity for adaptability and entrepreneurialism. A recent report on the occupations of 2030 showed that 8 out of 10 top jobs will require ingenuity, creativity and judgement. In our own New America-Bloomberg report, conducted through the Shift Commission, when we looked at the emerging categories of work (in lifestyle, high-tech, and corporate settings), each one required workers to seek out their own pathway and training, if not outright invent the job they want to have.
Despite the urgency to “upskill” the workforce, our current system is not fit for this purpose. Anthony Carnevale, head of Georgetown University’s Center for Education and the Workforce, summed up our mentality this way: “the U.S. is an education nation, not a training nation.” According to Dr. Carnevale’s calculations, the U.S. spends just $8 billion a year on training, compared to $500 billion on higher education.
Meanwhile, even those adult training programs we’ve created have had an uneven and often disappointing record of effectiveness. “The ironic and sad truth,” says “Hillbilly Elegy” author J.D. Vance for the Shift Commission report, “is that we have bipartisan agreement that ‘retraining’ is a panacea, even as we learn that the ways we’ve tried to retrain workers have not been that successful.” One reason is that training programs almost always end up being reactive, and thus “stove-piped” to fit the industrial needs of the moment; what they continually miss are the deeper, long-term sources of dislocation — namely, automation.
To answer that challenge, our system has too often taken the easy way out. Some of the most promising, innovative approaches to credentialing and adult learning — such as “nanodegrees,” virtual and augmented reality, coding boot camps and MOOCs (Massive Open Online Courses) — disproportionately attract workers who are already digitally sophisticated or highly educated. (For an example of a program that bucked this trend and sought to train people who are not highly educated, see our sidebar, “Opportunities for High-Tech Training,” on the Learn and Earn pilot program by [email protected])
Put simply, we do not yet know what works at scale to retrain low- and middle-skilled adult workers for new occupations. The challenges to upskilling are especially acute for these workers — a group that receives little support from employers, and faces many obstacles to upskill, stay abreast of market trends, and search for opportunities. They must therefore navigate this territory on their own, despite having little financial cushion, scheduling flexibility, core skills, and belief in the payoff of pursuing training in new skills.
THE UNSTABLE MIDDLE CLASS
In the “Financial Diaries,” a fascinating study of more than 200 households, researchers found millions of families experiencing significant month-to-month fluctuations in pay. The volatility disproportionately burdens low and middle-income households, plunging them into periodic poverty. Many of us are already there. Data from the “Financial Diaries” project suggest that 40 percent of households have no emergency savings. A 2016 household survey by the Federal Reserve found that 44 percent of the adults who responded said they could not pay for a $400 emergency expense without selling something or borrowing money. In another study, more than three-quarters of the sample said they couldn’t afford a sudden expense of more than $1,000.
Meanwhile, the support structures that have long held up the economy have not kept pace with the changing nature of work. Despite the large shifts in the workforce to independent work and the more frequent turnover in traditional employment, the safety net is still built around employer-provided benefits. Today, a number of workers struggle to find affordable healthcare, start retirement accounts, and many lack disability or unemployment insurance entirely.
A worker saddled with that kind of economic instability has little time to explore or develop a talent, scant ability to forgo income in order to study, and no savings enabling him or her to invest in starting a small business or undertake an uncertain job search. Unfortunately, taking those kind of chances is fast becoming the way to get ahead.
THE EDUCATION GAP
The World Economic Forum predicts that upward of 65 percent of children entering primary school today will eventually work in jobs that do not even exist today. How should our schools prepare tomorrow’s adults for a world like this?
Forty-four percent of the adults in a 2016 survey said they could not pay for a $400 emergency expense without selling something or borrowing money. In another study, more than three-quarters of the sample said they couldn’t afford a sudden expense of more than $1,000.
We are not off to a good start. A few years ago, the Association of American Colleges and Universities (AACU) posed questions about career preparedness to several hundred employers and college students. Despite students’ confidence in their abilities, most employers found recent college graduates poorly prepared for the workforce. The employers were particularly concerned about new employees’ capacities for applying knowledge in real-world settings, critical thinking, and communication. And those are just a few of the “soft skills” considered increasingly important.
In a new book called “Robot-Proof: Higher Education in the Age of Artificial Intelligence,” Joseph E. Aoun, president of Northeastern University, calls for universities to revamp their entire approach to education. He describes a new discipline called “humanics,” which he believes would help students prepare for jobs that will increasingly exist alongside automated machinery. The study of humanics would emphasize three core skills: data literacy, technological literacy, and human literacy. Aoun also calls for more experiential learning, including regular internships and work experience.
If Aoun is right, how far should schools go? While some experts have advocated a greater focus on coding and computer skills, others like Harvard University’s Sendhil Mullanathan disagree. Sendhil argues that it’s impossible to know exactly what change is coming — but we can prepare for change itself. If schools transform their curriculum to emphasize computer or IT skills, Mullanathan wonders, what will happen if technology evolves and computers themselves do those jobs, rendering those skills obsolete? “Rather than changing what we teach, we could change when we teach,” he writes. As the relevance of workers’ skills change with increasing speed throughout their careers, Mullanathan argues, we need to design education to span a lifetime. In other words, adult workers should get the same sort of in-depth studies that a youngster receives in primary school.
To make such a change really work, those primary school studies must be truly in-depth, and foster a capacity for change and innovation. But in primary schools, where standardized testing is emphasized, failure is often seen as unacceptable, which discourages thinking outside the box. That’s a great way to “educate people out of their creativity,” says Sir Ken Robinson, author of “Out of Our Minds: Learning to Be Creative” and other books about revolutionizing education. “If you’re not prepared to be wrong,” he said in a 2006 TED Talk, “you’ll never come up with anything original.” Interestingly, some of the most vocal critics of education’s status quo are teachers themselves. Nonetheless, our public schools continue to set up desks in neat rows, distributing memorization-based worksheets in younger and younger grades.
THE ENTREPRENEURIAL GAP
As the spread of technology brings its upheaval, of one sort or another, not everyone will need to be an entrepreneur to get ahead. They will, however, need to be entrepreneurial. The tumultuous changes we just described in the economy will require more people to be self-directed, seeking out their own opportunities and charting their own path through them. Reid Hoffman, founder of professional social networking site LinkedIn, calls this needed mindset “the startup of you.”
Ironically enough, this kind of ultra-independence is the true American tradition. “The whole concept of a 9-to-5 job for life was a historical quirk,” says Susan Lund of McKinsey. “In 1900, 45 percent of people in the United States were self-employed. Today, with the rise of new employment and wealth generation platforms such as Uber, TaskRabbit, and Airbnb, it looks like we’re returning to that.”
Despite the buckets of ink that have been spilled describing the economy’s turn (or return, it seems) to an entrepreneurial future, a disconnect exists between trends and the preferences of the American worker. In a widely circulated report, the Economic Innovation Group (EIG) found that there is actually a decline in the number of businesses being started, the number of people moving for job opportunities, and the number of workers changing into new jobs.
EIG named this phenomenon the retreat of “economic dynamism.” And by all indications, even millennials seem averse to taking risks. In a 2016 poll, millennials overwhelming responded that entrepreneurship is essential to the economy, and they consider someone working at a startup a success. Yet when asked about the best way to achieve success, a majority chose employment at one company and working their way up as the best option. This conservative preference is not a coincidence: millennials carry more student debt, face rising housing costs, and have less confidence about the future than previous generations.
In policy discussions about the future of work, experts emphasize opportunity, training, and skills. Meanwhile, the financial stability that people need to explore those opportunities is rarely mentioned.
Undoubtedly there are many reasons why workers are reluctant to take chances, but it’s also likely that a good number of them would feel bolder if they could afford to experiment. But almost no one connects the dots on this dilemma.
In policy discussions, these conflicting trends — career instability and income volatility — are continually treated as entirely separate and unrelated. Conversations about the future of work emphasize opportunity, training, and skills; meanwhile, the financial stability that people need to explore those opportunities is rarely mentioned.
By this point, today’s job market is littered with these pitfalls, which can be summed up as follows: We have now created a world where jobs are less certain and structured; where skills lose relevance more quickly; where pay is becoming highly volatile; where employers provide fewer benefits, training, and assistance with career advancement; and where the traditional safety net is ill-suited to the sources of disruption and instability that workers face.
TOMORROW’S CRAFTSMEN AND CRAFTSWOMEN
The clear take-away from all these competing trends is that in tomorrow’s world, taking a risk may be the only safe way to go. Before a sufficient number of people will be willing to take these chances, a lot of groundwork will have to be laid. Among other things, we need a new educational framework that prioritizes adaptability and entrepreneurialism; re-investment in on-the-job training instead of just classroom or online learning; and an updated safety net that gives people the stability, time, and resources to take risks.
As the country waits for our leaders to catch up with this reality, there is plenty that enterprising individuals can do. In fact, inspiring exceptions to the economy’s decimated support structure already exist — and the jobs people are finding aren’t all in high-tech. Yes, the benefits of automation are real (and if past trends hold, automation will spawn as many new jobs as it eliminates), but there are lots of people seeking a life, and interesting work, beyond a computer screen. And plenty of consumers are looking for products made by entrepreneurs who think like master craftsmen.
HANDCRAFTED WALLPAPER IN ARKANSAS
In 2011, Christian and Heidi Batteau were a power couple of the Brooklyn art scene. He was a successful sculptor and she a textile designer for Carnegie Fabrics and Wearbest Mills. They had followed traditional paths to achieve that success and were considering a family. But the high costs of Brooklyn real estate meant few prospects for home ownership, let alone opportunities for their own studios.
Driving past an abandoned mill one day, during a visit to Heidi’s tiny hometown of Witter, Arkansas (pop. 600), inspiration hit. The cost of land here was so cheap — comparatively speaking — the couple realized they could afford to buy an entire farm (to live on), and a place to start a business. They leveraged their existing clients and contacts and launched a handmade wallpaper company, featuring beautiful, artisanal products made with traditional plaster-shaping techniques.
At first, business was fine, but not booming. Then they realized that what customers cared most about was the handcrafted nature of their wallpaper, and the production process itself. So they started telling the story of the wallpaper’s origins — in other words, its craftsmanship — and how it had formed the lifeblood of a small community. The couple was also scrappy and resourceful: YouTube videos guided much of their mill rehab and farm activities; to launch their business, the couple simply Googled “business plan development” and learned on the fly. Before long, business was indeed booming.
For the Batteaus, the keys to success were basic principles that are time-honored but often forgotten: human-to-human engagement, and the constant ability to pivot and learn on the job. In similar ways, countless creative entrepreneurs have used services like Etsy and Ebay to create, and then expand, their businesses.
HUMAN SKILLS IN A WORLD OF AI
Judging from newspaper headlines, one might expect robots to have already replaced the jobs of almost every American worker. Yet technology has clear limitations — today, and for the foreseeable future.
While machines excel at processing data and performing routine tasks, they fall short on inherently human traits such as empathy, social intelligence, communication, and leading and inspiring others. Machines also aren’t particularly good at a range of other qualities, often identified with craftsmanship, which are expected to be in increasing demand as well. These include deep expertise, creativity, artistry, adaptability, and the capacity for innovation.
What will it take for today’s workers to turn the threat of machines on its head, from danger to opportunity? The first step is a mental shift — to see technology as not just a machine that must be operated, but a challenge that must be mastered.
Consider the example of apprentices of Siemens USA, who said their goal is to move beyond being simply a “machine operator” who “pushes a button.” Instead, they want to learn to become true “machinists”— employees who can understand the bigger picture, program the machine, fix problems, apply judgement, and comprehend with precision how their programming will impact production.
That’s how a manufacturing apprentice at Siemens can learn to think like a master craftsman. But this is not where the story ends. As technology advances and the nature of work changes, both the apprentice and the master craftsman alike will need to constantly evolve, take risks, relearn and adapt. Like Heidi, Christian, and Shelly, those who do will find their place in the 21st-century economy. But far too many will not, unless we start making changes — now — to our systems of education, workplace training, and employee support.
Kristin Sharp co-founded the Shift Commission and launched the Work, Workers, and Technology project at New America. She is now a Partner at Entangled, a strategy firm and venture studio focused on the future of work. She served as guest editor of our 2018 series on “Craftsmanship and The Future of Work”.
Molly Kinder is a senior advisor on Work, Workers, and Technology at New America. She is also a fellow at the Beck Center for Social Impact & Innovation and adjunct faculty and affiliated research fellow at Georgetown University’s McCourt School of Public Policy, where she teaches a graduate seminar on the social, economic, and policy implications of Artificial Intelligence.
Topics: Work, Education, and Community