As published in Business2Business, December, 2002

Why Johnny Can`t Work: A brutal audit reveals critical planning problems ahead for area employers.

By Ira S. Wolfe

The joke goes something like:

Contractor: You need to replace your roof. It has a leak.
Homeowner: It’s not that bad. It only leaks when it rains.

And so goes the labor shortage. With the unemployment rate threatening to blast through the six percent ceiling, the labor shortage doesn’t seem so bad anymore. Admittedly hiring has slowed for many businesses, but the shortage of qualified workers has not only not stopped but worsens by the day.

If the labor shortage truly had passed, why is customer service so bad and continually getting worse? Checkout lines everywhere get longer and longer. Fast food is no longer fast and telephone customer service hotlines are all but useless - unless of course, you have the patience to “hold the line” for hours at a time.

If labor supplies are ample, why is our entire health care system struggling to find enough workers? Hospitals are stealing - sorry, recruiting away - nurses from other hospitals. Long term care and assisted living facilities are recruiting from hospitals. Staffing agencies and pharmaceutical companies are recruiting health care worker wherever they can find them. Health care has gone half-way around the world to recruit nurses and still the national vacancy rate exceeds 13 percent and is climbing. Other positions such as pharmacists and radiology technicians are even higher.

Health care is not alone. Over the weekend an MBA student from one of the major

employers in Central Pennsylvania told the class how his company laid off dozens of employees from one department and attempted - and attempted is the operative word - to hire dozens of new employees in another department. Instead of re-training, re-deploying and retaining incumbent employees, management had the misguided impression that high unemployment and the availability of skilled workers was synonymous. The department is now coming up empty-handed, the vacancies still exist and already one contract has been lost.

Have you tried to call a plumber, electrician, or HVAC contractor lately? And you can just forget about expecting a call back from a roofer or handyman. Contractors are so busy and short-handed that they are turning down work and are planning projects into 2004.

Education is getting caught with its pants down, too. California and dozens of other states are actively recruiting teachers from Pennsylvania while many Pennsylvania schools go wanting for teachers. With the largest school age population in U.S. history just a few years away and a massive efflux of teachers approaching retirement, over 1 million new teachers will need to be trained and hired by 2010. Channeling more students into teaching is only half the battle. Teachers churn over at a rate of 16 percent a year and 46 percent of teachers leave the profession in less than 5 years.

Are the unemployment numbers misleading management? Are employers getting sucked into an Enron-WorldCom-Xerox world of hocus-pocus numbers? Could it be that the unemployment rate as a reliable

monitor from an industrial economy is no longer a viable gauge in the service/information age?

College graduates - 3%

High School graduates - 4.8%

Managers and professionals - 3 %

White females - 3 %

White males - 2.8%

No, these are not unemployment numbers from the boom of the late 90s or the forecast for the future. These are actual numbers reported by the U.S. Department of Labor for October 2002.

Most organizations only got a taste of the Perfect Labor Storm in the late 1990s. The full force of this storm has yet to arrive. The Perfect Labor Storm will pack so much force that it will rip gaping holes into the human capital roof, if not peel it off completely, and expose an organization’s entire human resource and customer base to the competition. The cost to put the lid back on retention and to rebuild a workforce will completely drain bottom lines and drive many businesses out of existence.

Employees can no longer be considered the largest item in the expense column. Instead talent is the pure play to defining a unique competitive edge. To the winner who acquires - and keeps - the talent will go market share and customer loyalty.

Just a little over 20 years ago, the United States had approximately 7,637,000 more people available to work than there were job available. In less than 2700 days, there will be more jobs than people - 10,033,000 to be exact.

Using the unemployment rate as a barometer to gauge the strength of the storm and forecast the availability of labor is misleading at best. It’s like being on the Titanic and using the icebergs as your navigation sites. Yes, the overall unemployment rate has climbed from 4.1 percent in December 1999 to 5.7 percent in October 2002. But so has number of employed.

In December 1999, the total number of employed reached 134,420,000. Going back even further to December 1995, the total employed labor force was 124,904,000. Today, despite continuing layoffs, bankruptcies, downsizings and a faltering economy, the U.S. economy supports 134,914,000 jobs - over 10 million more than just 7 years ago and half a million stronger than just 3 years ago!

True there were 4.4 million people looking for jobs in October 2002 compared with 2.3 million in 1999 and 3.1 million in 1995 but hold onto to your help wanted ads. What credentials and education do these 4.4 million hold for the jobs available?

More than 1 million of those looking for a job hold less than a high school degree, almost equal to the number of college graduates who are job-hunting. But wait just a minute. The unemployment rate for college graduates is 3.1 percent compared to a whopping 8.8 percent who don’t hold a high school degree. Even the unemployment rate for high school graduates drops to 4.8 percent, below full employment.

The Bureau of Labor Statistics predicts that the number of jobs requiring a college degree or post-secondary degree will increase over 42 percent before the end of this decade. Bad news for any industry hoping to entice workers with the strategy that a college degree isn’t necessary!

And if anyone has sought to recruit a manager, senior level executive or top-performing salesperson and your response was weak, you won’t be surprised to find out that the unemployment rate for these positions is 3 percent.

Unemployment is not a white man (or woman’s ) problem either. Unemployment for white workers is 3.5 percent, 5.9 percent for Hispanics and an astounding 7.9 percent for black job seekers.

Now you have it. You place an ad. The number of applicants is double, triple, quadruple and even 10 times the response from two years ago. You sift through the applications and screen out 25 percent of the available labor pool by requiring a high school degree or equivalent. (Unfortunately this also means that you screen out a lot of minorities since the highest number of non-high school graduate workers are black or Hispanic, exposing you to adverse impact (employee discrimination).

You de-select another 25 percent because they are “over-qualified” with a college degree - you’re afraid they won’t stick around if something better comes around. You ‘re down to 50 percent of the labor pool and then hit these hurdles - dependability, substance abuse, integrity, personality, technical skills, flexibility, a willingness to learn and whatever other competencies - hard and soft - that you deem necessary for an individual to be hired in your company.

You now are left with about a one-in-three chance that the candidate you are about to hire (as well as the employees you already hired) will be functionally workplace literate for today’s jobs. According to the US Department of Labor, 6 out of 10 jobs as early as 2006 will require skills held by just 20 percent of the population. Just for the record, functional literacy goes beyond simple reading and math. Today job literacy includes reading simple directions, writing a report, doing arithmetic (like giving the correct change), and demonstrating the most basic computer skills.

Labor shortage does not just imply quantity but quality. The current labor pool is flush with people without high school degrees and without even the most basic job literacy skills. Many other job seekers have excellent skills and years of experience at doing things that are no longer needed in today’s job market.

It doesn’t matter anymore if you set goals, plan your strategies, spend a day climbing ropes to get everyone on board, launch a mentoring program or introduce a generous incentive program for your employees. Organizations can no longer function at the highest levels of productivity, profitability and performance if all the employees on your team do not collectively possess all the skills and share the commitment you need to reach your goals.

Quick fixes, tough talk and planning aren’t enough anymore. You have the option to improve and optimize the way your company acquires, manages, and retains employees - or not. Heed the warnings. Buckets and pails and tarps won’t prevent the devastation wrought by the fast approaching Perfect Labor Storm. It’s time to bunker down or get out of town.