When Ben Bernanke of the Federal Reserve announced QE3 on September 13th, he put an unusual spin on the reasons for the action. He specifically emphasized the importance of "returning to maximum employment." He spelled out his concern in this statement: "The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last many years."
Will QE3 have the intended effect on our nation's employment situation? Who knows?
What I do know is that the employment situation is not improving fast enough, particularly for those most affected -- those with little or no postsecondary education and those with only some preparation but no credentials. A recent Deloitte analysis based on Bureau of Labor Statistics occupational data spells this out clearly. And as stated in a recent Harvard Business Review blog post by Eggers, Hagel and Sanderson commenting on the Deloitte data, "... the demand for the next generation of talent is shifting: 28 percent of the most promising positions will require 'considerable to extensive preparation.'"
ACT data is largely consistent with that projection. Every year, we release data gleaned from the ACT test registration process. Our most recent report, containing career interest data for 2012 ACT-tested high school graduates and comparing that with projected job opening data from the BLS showed that:
- Education careers, projected to be one of the five fastest-growing career fields, will account for 17 percent of all job openings in 2020, but only about 7 percent of ACT-tested 2012 graduates indicated a career interest in Education.
- Computer/Information Specialties, also projected to be one of the five fastest-growing career fields, will account for 11 percent of all job openings in 2020, but only about 2 percent indicated an interest in pursuing this field.
So when you combine the data in these two bullet points, of these fast-growing career fields representing 28 percent of all job openings, only 9 percent expressed interest in pursuing those fields -- fields requiring considerable preparation. It appears that not only do we have a skills deficit, we have an interest deficit. Neither bodes well for our future, individually or as a nation, and it certainly looks bleak for our economic well-being.
Clearly we need to do a better job of helping our young people select and prepare for their futures based on the fields where jobs are most likely to be available. That aside, while job creation is becoming a focal point for the Federal Reserve, there are still hundreds of thousands of open positions that remain unfilled because workers lack the right skills.
In my state of Iowa, for instance, where we have 5.5 percent unemployment compared to the national average (for August) of 8.1 percent, the skills mismatch is profound. The folks at the Iowa Workforce Development (IWD) office report:
- 18 percent of Iowa jobs are low-skill positions, but 38 percent of Iowa workers have low skills.
- 50 percent of Iowa jobs are middle-skill positions, but only 33 percent of Iowa workers fit this category, generally defined as requiring more than a high school diploma but less than a four-year college degree.
So we have 20 percent more low-skill workers than we need and 17 percent fewer middle-skill workers than we need. That's a mismatch -- even one that someone without advanced macroeconomics training can see. If we can help upskill a good share of those low-skill workers to have middle-skill abilities, then we can make a dent in the unemployment rate that Bernanke warns could cause long-lasting structural damage to our economy.
How is Iowa tackling this problem? The "Skilled Iowa Initiative" is designed not only for the unemployed, but also for those who have been in the workforce several years and need higher skill levels to compete for 21st century jobs.
- One aspect is to certify the skills of at least 75,000 Iowa workers and entice at least 10 percent of Iowa's 70,000 businesses to participate by requiring a nationally recognized workplace skills certification for any worker applying for at least one position.
- A second facet is to offer unpaid internships to unemployed Iowa residents while they are still collecting unemployment benefits to give the individual a chance to learn on the job and give businesses a chance to try out new workers before they hire. Participating companies must submit detailed training plans and be approved by IWD. Military veterans are given preference for internship/training possibilities. IWD matches applicants to available positions. Interns work 24 hours per week for eight weeks -- unless they are hired prior to the end of the internship.
In Iowa, business owners are rolling up their sleeves to create these internship training plans and reaching into their pockets to help fund the certification initiative. That's the kind of participation that can really make a difference. If more states follow suit, maybe Bernanke won't need to announce QE4 -- the sequel.