Four years after the Great Recession, jobs remain scarce and unemployment painfully high.
Yet good jobs that do exist can go unfilled for lack of qualified workers, employers say.
The best jobs – jobs that pay well with benefits – are in health care, high-tech manufacturing, social services, finance and construction. All require sophisticated training or years of school.
The challenge is to find workers with the right skills, or quickly provide those skills, to nurture the economic recovery and lift the long-term unemployed out of a deepening hole. So far, that challenge is not being met.
One bright spot – public and private partnerships for job retraining – offers some hope for a solution, at least anecdotally. But the commitment to an overall solution is necessary to reverse some alarming trends.
Long-term joblessness was at a six-decade high in August, nearly 38 percent of all unemployed, according to the Center on Budget and Policy Priorities in Washington, D.C. The federal government defines long-term as 27 or more weeks without work.
The longer people remain unemployed or underemployed – working in low-paying jobs without benefits or opportunities for advancement – the harder it will be for them to land a good job. National studies of hiring practices show just six months of unemployment can hurt prospects for good job offers. And workers 55 and older have less time to recover in what should have been peak earning years before retirement.
Without aggressive public and private investment in job retraining, experts warn of a permanent underclass of workers trapped in low-skill, low-wage jobs. Long-term costs to the economy, health care, social services and communities will be high, according to private and government forecasts.
Federal spending on unemployment benefits alone was estimated at $99 billion for the federal fiscal year ended Sept. 30, 2012. About half was for emergency and extended unemployment benefits, according to an analysis by Pew Charitable Trusts. Similar spending was running at $33 billion prior to the start of the recession in 2007, and rose to $159 billion at the height of the economic crisis in 2010.
Long-term unemployment forces workers to postpone the very schooling needed to improve job skills. Research also shows the long-term jobless are especially at risk of chronic unemployment or underemployment. Families are at greater risk of falling into poverty. Small businesses are less likely to expand and hire when consumer demand is soft.
The Great Recession was unlike any other since World War II, said William Dickens, interim chairman of the economics department at Northeastern University in Boston. The usual pattern of recovery followed by a hiring surge did not happen. As of August, the nation still was 1.9 million jobs short of pre-recession levels.
Older and better-educated workers were least likely to be laid off in past recessions and were the first to return to work when recessions ended. The numbers of unemployed have continued to rise for both groups this time.
Older workers still on the job are staying longer to make up for the losses from the financial crisis.
Low-wage retail, restaurant and service jobs have accounted for much of the job growth since the end of the recession, according to federal data. Millions more are working part-time who would prefer to work full-time. Demographers say underwater mortgages have made it difficult for workers to follow the jobs.
“We had a big shock,” Dickens said, “that was different than shocks we had before.”
The sheer depth of the Great Recession shattered the old patterns. Jobs disappeared fast and for good as technology left industries struggling to adapt. Even as the economy picked up and callbacks began, the work-force numbers were smaller than before the recession.
Jobs moved where workers could not – in some cases overseas -- and the good jobs that remained required new skills.
Rick Christie, 40, was forced to close his martial arts and fitness business in Decatur, Ill. when many of his students lost jobs. Fitness training was a luxury they would no longer afford.
He said he still entertains the idea of self-employment. But Christie, too, is back in school, studying machine-tool operations.
“At a certain point, I just had to close it down and recoup from that,” said Christie. “I decided to go back to school and complete my education.”
The federal government has placed new emphasis on job training and education at community colleges as one way to provided targeted help quickly. Federal spending on community colleges runs about $9.9 billion per year. In 2010, another $2 billion in federal funding was approved to help community colleges retrain workers displaced by the recession. Early this year President Barack Obama proposed spending another $8 billion.
Federal job training money helps, educators say, but is a relatively small component. The largest portion of their college budgets comes from state funding. Money for education was cut by states struggling with post-recession budgets.
Public-private partnerships have emerged as another source of support for retraining workers. Companies will help colleges offer job training specific to their industry, and often hire the graduates. Microsoft Corp. Caterpillar Inc., Burlington Northern-Santa Fe railroad, McDonald’s, the Gap Inc., United Technologies Inc. and energy giant PG&E Corp. are a just few of the companies involved in job training.
Community college job-training programs take months, not years, to ready workers for the most promising fields. Displaced workers must be willing to commit time and money, and often switch to new lines of work. Assembly line workers become nurses. Former small businesses owners learn high-tech manufacturing. Older workers facing retirement study bill coding for health-care providers.
The future of many workers, communities and entire regions, will depend on how quickly people seeking new careers can make the transition.
At the end of 2012, The Urban Institute policy research center in Washington, D.C., studied the demographics of the long-term unemployed – people without a job for 27 weeks or more. The findings presented a new portrait of the unemployed as older and better educated compared with past recessions.
The study collected demographic data from 2007, at the start of the recession, to the end of 2012.
The young, poor, minorities and the less educated – traditionally the most vulnerable groups -- were hardest hit by the recession.
But there were also a growing number of older workers among the long-term unemployed.
Comparing education levels among the long-term unemployed also revealed new trends. According to the Urban Institute study:
The percentage of long-term unemployed with less than a high school education fell from 23.5 percent in 2007 to 18.1 percent in 2012.
The percentage of long-term unemployed with some college education rose from 24.2 percent in 2007 to 28.6 percent in 2012.
The percentage of long-term unemployed with a bachelor’s degree rose from 11.4 percent in 2007 to 12.7 percent in 2012.
People with more education were having a harder time finding work, in contrast to previous recessions where education was an advantage. Urban Institute analysts felt faster growth in low-wage jobs drove the disparity.
Getting people back to work has been hard. As of August, joblessness among workers 55 and older remained lower than the general population at 5.2 percent, according to the U.S. Bureau of Labor Statistics. But the number of unemployed 55-and-older workers continues to rise.
Older workers also have more trouble finding a new job. Again, as of August, the median duration for unemployed people 55-to-64 years of age was 22 weeks, compared with 14 weeks for all age groups. This despite surveys that show employers consider older employees more reliable and less likely to jump jobs after training.
Also in August, teen unemployment was at 22.7 percent compared with the 7.3 percent overall rate, according to the U.S. Bureau of Labor Statistics. Unemployment for blacks was at 13 percent, Hispanics at 13 percent and whites at 6.4 percent.
Without aggressive intervention in job retraining, the trends threaten to tip entire classes of workers – older, better educated, the young, poor and minorities -- into a long-term cycle of unemployment and underemployment. Even worse, they give up.
The job market
Troy Neal says two manufacturing layoffs in three years and a futile yearlong job search left him no choice but to retrain. At age 41, is back in school at a community college in Decatur.
Neal expects to graduate from a two-year program in 2014 qualified to operate automated machine-tooling systems that have taken over the assembly line work he once performed.
“It’s kind of hard out there,” said Neal, “but I found I’m good at this.”
National surveys and individual employers say good jobs are available, but sufficient numbers of qualified workers are not.
Express Employment Professionals, one of the nation’s largest private staffing firms, released a report this summer estimating 3.8 million U.S. jobs were unfilled for lack of qualified workers.
Pay ranged from $11 to $30 an hour in hard-to-fill jobs that included manufacturing engineers, welders, machinists, accounting, sales, commercial truck drivers, information technology, engineers, health care and social services, and office administrative assistants.
The company based its estimates on federal employment data.
“If we had 10,000 welders, we could probably put them to work tomorrow,” said founder and CEO Robert Funk.
The U.S. Bureau of Labor Statistics predicts millions of new jobs will be created in health care, social services, construction, education, high-tech manufacturing and retailing in the next decade. Nearly all require training beyond high school.
Funk, who served in 2006-07 as chairman of the Kansas City Federal Reserve Bank, said community colleges have more flexibility than four-year institutions to provide the short-term training required for new jobs. Local colleges, he said, often work directly with employers and high schools to design curriculums tailored to specific industries or jobs.
In his call for $8 billion in job training funds, President Barack Obama set a goal of 5 million additional community college students by 2020 to meet the skills demands.
Filling jobs can create more jobs. The National Manufacturing Institute this summer estimated filling 600,000 openings nationwide would create 406,000 additional support jobs.
The institute also warned that failure to provide American workers with the right skills could result in billions of dollars in economic losses to foreign competition.
Not all economists and work-force experts agree there is a skills gap. Employers, according to critics of the theory, say the notion of a skills gap is just an excuse to postpone hiring, hold down wages and shift training costs to taxpayers.
Marc Levine, founder of the University of Wisconsin-Milwaukee Center for Economic Development – a research and policy center for regional economic development -- has released a series of papers on the topic. He argues that a real skills gap would force employers to compete for scarce workers by raising wages.
The true culprits, according to Levine, are slow economic growth, offshoring of U.S. jobs and corporate unwillingness to invest in workers.
Looming over the debate is the threat of individuals and families trapped in a cycle of unemployment and underemployed, unable to contribute significantly to the local, state and national economies.
“Unemployment can become a self-fulfilling prophecy,” said Josh Mitchell, a researcher at The Urban Institute, “where being unemployed makes it less likely employers will even consider you.”
Rapid retraining and return to the work force is vital for workers with obsolete skills and the long-term unemployed, say workforce experts and educators. And the sooner those workers are back on their feet, the faster the larger economy will recover.
At Spoon River Community College in Canton, Ill., diesel-mechanic students can earn certification to work on train engines in just two semesters. The program started this fall through a partnership with Carl Sandburg Community College in nearby Galesburg.
Burlington Northern-Santa Fe railroad donated mock engines, pieces of locomotive engines, special tools and replacement components to the colleges. College president Curt Oldfield said the railroad donations covered about half the $300,000 to $400,000 start-up cost.
Most importantly, he said, jobs should be waiting for graduates.
“They (BNSF) said we’re going to have a pretty massive turnover pretty soon, once the economy picks up and people start retiring again,” said Oldfield. “It’s really industry wide.”
Spoon River is just southwest of Peoria, Ill., home of Caterpillar Inc., and about 80 miles south of Moline, Ill., home of John Deere Co. Oldfield said diesel-mechanic training traditionally focused on heavy construction and agricultural equipment produced by Caterpillar and John Deere.
Oldfield said, in addition to traditional students, the diesel mechanic classes are popular with laid-off manufacturing workers from the region.
The value of community college job training programs was also on the mind of U.S. Sen. Dick Durbin, D-Ill., in September, when he paid a visit to a Decatur, Ill., community college to promote the president’s proposed $8 billion increase in funding for job training programs. Durbin said the additional money would allow businesses and two-year schools to retrain 2 million workers for high-demand jobs.
The central Illinois community of 75,400 has been hit by a series of manufacturing layoffs this year, including Caterpillar. The 13.1 percent unemployment rate in July was the highest in 30 years and seventh highest among 372 metropolitan areas nationwide.
John Jackson is vice president of operations for Barton Manufacturing in Decatur. The company provides machine tooling, fabrication and assembly work for major manufacturers such as Caterpillar. Barton also partners with the local community college for classes in technical skills needed by the company.
Jackson said the partnership works well in providing workers trained for jobs at Barton. But he said the private and public sectors must do more to reach workers in need of new skills.
“We can be better than we are,” Jackson said.
Along with more community college programs, the federal government wants to help support technological innovations that can be quickly turned into new businesses.
In Youngstown, Ohio, Darrell Wallace is vice president of the National Additive Manufacturing Innovation Institute. The not-for-profit institute is coordinating research into the use of 3D printer technology that would transform 3D designs into finished products. The process would further speed replacement of traditional assembly lines.
The president has proposed a network of 15 such research institutes nationwide to move technical innovations from the lab to commercial production and create more jobs.
Wallace said long-term economic recovery requires a new workplace model. The old concept of the workplace as a fixed location with fixed production processes can be replaced, with the right technology, by more fluid processes and decentralized production, even mobile production. Products designed in Ohio can come off the line as finished goods in Illinois.
Wallace said the fastest job growth based on new technology likely would be at small- and medium-sized suppliers to major manufacturers. No smokestacks or sprawling production facilities required.
“It might be some guy named Bob with three printers in his garage,” Wallace said.
Denise Kirgan is a human resource manager for Cook Medical Inc. The family-owned medical device manufacturer, based in Bloomington, Ind., has 15,000 employees worldwide. The company makes 16,000 products for 40 medical specialties. She said the manufacturing work has become very detailed, with workers needing the ability to interpret technical manuals. Competition for new jobs is tough, with 1,000 applicants vying for 30 jobs when a new plant opened.
The cost of delay
The challenges of retraining workers in a rapidly evolving, global economy are difficult, say work-force experts, and time is short.
Consistent state and federal funding is a major challenge. State budgets have begun to stabilize, according to the National Conference of State Legislatures, but the return to pre-recession levels of education funding will take time.
The federal government, meanwhile, lurches from budget crisis to budget crisis.
Changes in technology and global competition seem to come faster than new training programs can be designed. But waiting adds to the cost of catching up.
Some analysts believe the permanent class of unemployed and underemployed workers is already a reality, and is hurting the economic recovery.
Research at Northeastern University in Boston found workers fall off an “unemployment cliff” after six months out of a job. Among 4,800 fictitious resumes submitted to prospective employers, workers identified as out of work for six or more months seldom were considered, regardless of qualifications.
The National Manufacturing Institute study estimates that failure to fill 600,000 jobs due to a lack of qualified workers would cost the economy $67.8 billion in exports, $47.4 billion in foreign investment and $8.5 billion in lost research and development investment.
Add that to that the $10.3 billion in unemployment insurance claims, $17.6 billion in lost income taxes and $6.6 billion in lost corporate taxes.
Two-year and shorter programs are an interim solution for putting the unemployed back to work as quickly as possible, according to work-force experts. Partnerships shown to work must be expanded.
But there must be a fundamental, long-term rethinking of jobs and job training – accompanied by a strong public and private commitment – to reverse the costs of millions of workers already falling behind.
Tim Landis is business editor for the State Journal-Register in Springfield, Ill. He spent four weeks researching the skills gap for a GateHouse Media national reporting project.
Job skills gap widens at high cost to U.S. economy
Four years after the Great Recession, jobs remain scarce and unemployment painfully high.