Recently a little known statistic was released and showed the relationship between job openings and unemployment. The Beveridge Curve is a classic economic measure of the employment situation. It shows on its Y-axis the vacancy rate as a percent of the labor force. The X-axis shows the unemployment rate in percent. This relationship is one way economists evaluate the labor market. Plotting data from November 2007 to the present shows an interesting pattern. There appears to be a mismatch between the types of jobs available and the skill set of unemployed workers. Normally, the Beveridge Curve slopes downward and is concave to the upward and right of the graph. This slope makes sense. If there are a lot of unfilled jobs, unemployment must be relatively low. Conversely, if unemployment is high there must be fewer job openings. However, if the entire curve shifts to the right, it signals increasing inefficiency in the labor market. This shift has been noted in recent data.
This rightward shift in the Beveridge Curve is believed by many economists to show structural unemployment due to a skills mismatch. This mismatch raises the question: Are unemployed workers, especially those who have been out of work for a long period of time (over 52 weeks) unqualified or unskilled for current job openings? Empirical evidence from my client companies, would suggest that this is true. Many of my client companies need workers. Yet, they can not find workers with the necessary skills or abilities to fill the vacancies in their work force. The end result is that these manufacturing companies have to either subcontract the work, or simply do without the needed skills. Both of these options cost more money than hiring a qualified worker would cost.
We are not talking about programmers or software technicians. The skills needed are typically those required by a manufacturing firm: machinist, maintenance workers, technical draftsmen, CNC programmers, and designers. Where have these skills gone? A more important question for manufacturing firms, is how to find skilled workers to fill their needs. These are all well paying jobs, but the pay rate is not attracting the necessary talent. Many people apply for these jobs but they do not have the skills to perform the work. Perhaps it is time to be more creative in filling these jobs.
If you can’t find skilled workers, you may have to “grow them”. There have been instants of companies that have developed training programs to provide the necessary skills to those workers with the aptitude for learning a new trade. I’m not talking about “on-the-job” training. These training programs are more like apprenticeship programs. In some cases the companies have been able to use local high school shop instructors or community colleges to provide a portion of the training. In these cases, the employee attends class after work, but the company pays for the instruction. If the employee fails to maintain an acceptable level of classroom performance, he can’t continue the training program. The classroom instruction can be augmented by plant training. Upon completion of the “apprenticeship” the employee is assured of a better paying job and the company has a qualified worker to increase its productivity.
The first step in establishing a program of this sort is to identify the skills and education level necessary for a worker to achieve. Then you can take this criteria to a local shop class or community college to get their help in developing a curriculum. Screening your current employees for aptitude and desire will be the task of your human resources team.
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