Posted by: dstieglitz | June 9, 2009

The Unemployment Paradox

      The Consumer Confidence Index is rising and surveys report optimism among business leaders despite gloomy labor statistics. Unemployment claims rose to 637,000 in April and 13 million people were unemployed. The projections are that unemployment will peak close to 15 million before the recession ends in early 2010. The labor report also said there are roughly three million vacant jobs that employers are looking to fill. Sounds like promising news – but it’s not. Instead, it indicates an irreversible shift in the U.S. economy and a widening gap between employer needs and worker skills. People who have lost jobs in shrinking industries like manufacturing, construction, and retail generally lack the skills required for open positions in growing industries like health care, education, green technologies, and government. At the same time, the worst fall in 50 years in real estate values has frozen unemployed workers in place because they can’t afford to sell their homes and move.

      The recession is transforming the U.S. economy – and sweeping transformations don’t happen overnight. As bad as it is today, the skills gap will create even worse challenges for employers and the unemployed when the economy begins to expand. The most optimistic economists predict it will take three years of sustained growth to absorb the unemployment created during this recession. Unemployment will stay painfully high because job seekers lack the credentials to compete in areas where new jobs are being created. For employers, the bad news is they may be forced into bidding wars to fill positions from a frustratingly small pool of qualified candidates.

    So far, the unemployed are clinging to desperate hope that things will return to “normal.” It’s hard to accept that their old jobs aren’t coming back, and it will take years to rebuild their savings. For example, many of the 27,000 people laid off when Chrysler entered bankruptcy won’t be rehired when it emerges. People in severely impacted states like Indiana and Michigan are ignoring well-paying jobs in southern states that are recovering because they are reluctant to move and retrain themselves. Similarly, laid-off Wall Street workers are grappling with the stark reality that they must change their lifestyle and accept a job that pays less. It will probably take several years for the realization to sink in that there is an entirely different “normal.”

      Employers need to change their thinking as well, recognizing that the “perfect” candidate may not exist. Some jobs in emerging industries will require skills that salary, no matter how high, will be insufficient to attract enough qualified candidates until a new generation of workers can be trained. For example, the financial crisis has produced a demand for accounting specialties that far exceeds the labor supply. To solve this dilemma, employers and governments must fund new training programs. The stimulus act, unfortunately, provided little funding to retrain the workforce. So, in the mean time, employers will be forced to accept imperfect fits to fill vacancies, and the unemployed will have to accept lower pay to start new careers.

     These broad economic shifts arouse the dragons of change – the emotional resistance we  feel when we’re forced to change. Change is the process of letting go of the old and embracing the new. The chasm between the old and the new is a chaotic but creative period. We struggle to accept that the old is gone, but at the same time we’re not sure what the new will be like. The uncertainty causes some to run away from risky new beginnings and cling to the slim hope that things could be like they were. Business strategies that once produced great results, don’t work any more. To stay on top in such times of change, you can’t just react to changes. You must anticipate changes, embrace the realities of the changes you see, and use them to advance your success.

     Today is the ideal time to hire talent to position your organization for the economic rebound, but you may want to use alternative hiring techniques. For example, hire future employees as part time consultants to minimize compensation costs and verify that they fit your organization. A second idea is to hire employees with deferred start dates and pay them a salary retainer. This technique is particularly effective with new graduates. A third possibility is to hire baby-boomers. Many of them have lengthy experience and are looking for part time work since their retirement has been affected by the stock market crash and drop in real estate values. Companies that put a hiring freeze in effect “until things turn around” run the risk of being forced to hire leftovers with weaker qualifications than they would like. The skills reservoir is as full as it will ever be – now is the time to get the sweetest water!

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