The Future of American Jobs

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The Future of American Jobs

The nature of work in America is undergoing a radical transformation. As recently highlighted in The Futurist,1 it’s the most dramatic change since the Industrial Revolution. This new paradigm requires workers to be far more skilled in technical matters than in the past. The need for these talented workers will grow for at least another decade, and probably a lot longer.

As a result, we’ll have to rethink nearly everything, from the way we educate our children, to the way we go about looking for jobs, to where we look for them. Many of the jobs that we’ll be looking for — and especially those that our children will be seeking — don’t even exist yet. Many others that do exist are quite new.

We’re now in an economic recovery and, contrary to some reports, the future of the American economy looks bright. The Congressional Budget Office estimated recently that the real U.S. gross domestic product could grow from $14 trillion today to $20 trillion a year by 2019.2 But who will benefit from that — and what will the job market look like?

During the Great Recession, traditional measures of unemployment rose to roughly 10 percent. If you include people who’ve stopped looking for work and those who are under-employed, unemployment figures rise to at least 15 percent. But the paradox of the new jobs paradigm is this: There are really plenty of jobs out there. But the kind of workers those jobs require are in short supply, even while the type of work done by legacy employees is drying up. Consequently, we have an over-supply of low-skilled workers, and an under-supply of high-skilled workers. This “skills gap” is only going to widen as time goes by.

So far, the U.S. economy, despite its strong base of high-tech industries, has done a fairly poor job of educating the nation’s youth to prepare them for the coming wave of scientific advances that will be essential for highly technical industries. Right now, many of America’s high-skill jobs are going overseas to people in Europe, Japan, and Singapore, where the level of education in science, math, and engineering is higher. Simultaneously, U.S. industries are being forced to import talent from those places, as well as India, to fill existing jobs that too few American workers are trained to do.

In the meantime, China is churning out 600,000 new engineers a year and India graduates about 400,000. Today, the educational standards in those countries don’t stack up to those in the U.S. Experts estimate that only 10 percent of China's engineers are up to U.S. minimum standards. However, those standards are improving as India and China expand their own high-tech industrial sectors. At the same time, hundreds of thousands of foreign students are getting advanced degrees in the United States and often returning home to work for advanced technology companies or to start their own businesses. Going home is attractive, because a shortage of these high-skill workers, especially those with management expertise, has driven up wages. That means that U.S. firms are having a harder and harder time importing the talent they need. So even with an increased number of H-1B visas, there simply won't be enough skilled people to go around. That's why we desperately need more home-grown talent!

A snapshot of the U.S. employment picture is illuminating. Take early 2008, when the economy was still doing pretty well. Unemployment stood at just 5.6 percent, and there were 3 million jobs that were advertised and stood unfilled for more than six months. Those were not front-line jobs at McDonald’s. They were positions that required a good high-school education, plus two to four years of college or an apprenticeship of two to three years.

Fast forward to May of 2010: Unemployment stood at over 9 percent, with upwards of 15 million people out of work, and yet there were still 3 million jobs available and unfilled. The discrepancy is the result of a mismatch between the employment needs of companies and the educational system in which students grow into adults.

Education Does Matter! Age 25 and Over

Education Does Matter! Age 25 and Over

For example, in mid-2009 the unemployment rate for high-school dropouts was about 15 percent. Among high school graduates, 10 percent of them were unemployed. People with some college, but not necessarily a degree, suffered 7.3 percent unemployment. Meanwhile, only 4.8 percent of those workers who had earned a bachelor’s degree or higher lacked jobs. As recently reported in Fortune, Boeing, Google, Genentech, Cisco Systems, Ernst & Young, Booz Allen Hamilton, KPMG, and PriceWaterhouseCoopers all have plenty of jobs open for highly skilled people in specific areas that they can’t fill.3

In addition to this mismatch between the education of unemployed workers and the skills that employers need, demographics play a role in the growing talent gap. The United States, Europe, Russia, and Japan all have low birthrates and rapidly aging workforces. Even China and India, with their huge populations, will not be able to churn out enough skilled workers to meet their own demands, let alone ours.

Demographics alone could lead to a global talent crisis without any of the other factors being considered. The live-birth replacement rate for human populations is 2.1 children per female.

According to the CIA World Factbook, Germany is producing just 1.4 children per woman, while Russia and Japan are at 1.4 and 1.2, respectively.4 This not only leads to a shrinking talent pool, it puts the additional burden on workers of supporting an ever-growing number of people who have retired.

This year, some 79 million Baby Boomers began reaching the traditional retirement age. In the next decade, two-thirds of the vacant jobs will be the result of Boomers retiring, and some companies will face having to replace their entire workforce in the course of 10 years.

Another factor is the impact of young people’s attitudes toward work and education. Generation X and Y produced a population that is not as focused on work as the Baby Boomers were. Members of these generations want to balance a “good life” with their work. While lots of female professionals are graduating now, many of them want to take time off from work to raise children.

Moreover, there seems to be a cultural bias against learning science and math, which will typically become requirements for good jobs going forward. From the mid-1950s to the ‘70s, there was a great deal of emphasis placed on learning science, math, and engineering, as the U.S. struggled with the space race, the arms race, and the Cold War. Many government programs were in place to produce a highly technical culture full of people with advanced degrees. This resulted in a high-tech revolution that continues today.

But the Cold War ended, space exploration was marginalized, and the emphasis on science and math began to wane. Consequently, the next two generations suffered an “educational slowdown.”

Today, the rate of high school dropouts in the U.S. is 30 percent. Half the students in the 50 largest cities in the United States do not graduate. Those that do graduate are not even prepared for many entry-level jobs.

In 2008, the Alliance for Excellent Education found that only half of high school seniors who took the ACT tests were ready to read at a college level. As a result, 20 to 40 percent of college freshmen had to take remedial courses in reading, writing, and math because their high schools had not prepared them to go to college.5 While a lot of high school graduates go on to college, only one-fourth of U.S. college students actually earn a degree.6 That’s the lowest rate among the developed countries.

A picture of the future emerges in the experience of executives at Advanced Micro Devices, who wanted to build a new plant in the late 1990s and went in search of a location. California seemed an obvious choice, since it is home to Silicon Valley and AMD. But they couldn’t find enough skilled technicians to run the plant there. Texas, with its high-tech nexus in Austin, was another candidate. Once again, all the good high-tech people were already spoken for.

The company eventually built its plant in Dresden, Germany, in 1999. AMD went through the same exercise again in 2004, finally building a second plant in Germany. The lesson? The educational system in Germany is a pretty good match for the future of employment worldwide. The one in the United States is not.

According to a study of medical technology called MedTech 2020, the United States is poised to lose out on many of the great advances in medical technology that are set to take place in the next few years.7 Among them, imaging technology will represent the largest market; but Asia is expected to lead in that technology, leaving both Europe and America behind.

Meanwhile, Europe is expected to take the lead in telemedicine. The U.S. will also lag in regenerative medicine, prosthetics, active implants, and lab-on-a-chip technologies, as well as countless other high-tech medical advances, if it does not work to correct the situation.

Between today and 2020, it is expected that 74 percent of all jobs created in America will be high-paying jobs for high-skilled workers. While there will be a need for 123 million of those talented people, only 50 million Americans will qualify. By contrast, low-paying, low-skill jobs will shrink to just 26 percent of the total jobs in the U.S. Worst of all, just 44 million people will be needed for those jobs, but 150 million or more candidates will be seeking those jobs.

To resolve this mismatch, companies, individuals, and governments at the federal, state, and local level need to launch aggressive measures to increase the number of students who will graduate with advanced degrees in science, math, and engineering. Meanwhile, they’ll need to provide technical skills for many of the 150 million people who are now expected to have only marginal skills.

This will require a substantial investment of money and time, but it must be done. Models for this already exist in places like Santa Ana, California; Fargo, North Dakota; Danville, Illinois; and Mansfield, Ohio, where community-based and nongovernmental organizations are working to forge partnerships between businesses and educational institutions to align the talent pipeline with the jobs that will need to be filled.

In light of this trend, we offer the following five forecasts for your consideration:

First, dramatic changes will unfold in the U.S. educational system by 2020.

As history shows, America is imbued with both flexibility and resilience. Spurred by high unemployment and a shortage of qualified applicants, businesses and government will enable a grassroots movement to overhaul the educational system and bring it in line with the employment needs of the future. This movement will place a new emphasis on science and technology in schools with added incentives for students to stay in school long enough to qualify for genuine “entry-level jobs.” For an analysis of how this might be achieved, please refer to our discussion of the trend titled “Disruptive Innovation Meets the American Education Crisis,” which was included in the June 2008 issue of Trends.8

Second, in the meantime, companies and individuals will be forced to adapt to the evolving employment environment.

Companies seeking to hire from the limited talent pool will find new ways to attract it. They’ll rethink the old model of having everyone in the same place at the same time to get work done. The eight-hour workday will take many new forms, such as a 14-hour window in which any worker can put in his time from any location. Because of mobility and always-on communications, Generation X and Y workers will be much more able to balance work and life. A possible model for change is an experiment by the city of El Paso, Texas: By adding two hours to the workday, the city is operating with a four-day workweek, saving $100,000 in energy bills and pleasing workers because they always have Fridays off.

Third, many American workers — whose skills are no longer in high demand — will become multinational, going where the jobs are.

For example, in 2009, when business in the U.S. slowed, IBM instituted a program under which employees who were going to be laid off anyway could elect to move to other countries where IBM was hiring. According to InformationWeek,9 the effort, called Project Match, paid the employees’ moving costs. While the pay was often less in foreign countries, many people gravitated to it for the adventure and the change of scenery.

Fourth, companies will grow smaller.

As previously highlighted in Trends, large industrial firms won't be needed in such large numbers in a knowledge economy. That will allow small firms to control much larger resources, as a core group does the core work and an ever-shifting cast of contractors, part-time workers, and free-lancers does everything else. Company affiliations will be ephemeral. Roving high-tech teams will hire out to companies as a unit to come in and tackle specific work on a project-by-project basis. New industries will evolve out of this situation, specifically those that can broker this sort of temporary, mobile workforce.

Fifth, companies will play a more proactive role in people’s education.

With each wave of technology becoming shorter and more disruptive, employees will have to be retrained repeatedly. Learning a job once — right out of school — will become rare. Life-long learning will become a critical success factor for most corporations and for most individuals. Much like today’s doctors, technologists and engineers will engage in on-going education to stay abreast of developing trends. Corporate universities, traditional educational institutions, and new online educational providers will all play crucial roles in shaping this revolution.

References

  1. The Futurist, September/October 2009, “The Global Talent Crisis,” by Edward Gordon.  © Copyright 2009 by the World Future Society.  All rights reserved.  http://www.imperialcorp.com
  2. To access the GDP growth forecasted by the Congressional Budget Office, visit their website at: http://www.cbo.gov
  3. To access the Fortune report about a number of companies still looking to fill job positions, visit the CNNMoney website at: http://money.cnn.com
  4. For more information about the live-birth replacement rate statistics for human populations, visit the Central Intelligence Agency website at: https://www.cia.gov
  5. For more information about the preparedness level of college-bound high school seniors, visit the Alliance for Excellent Education website at: http://www.all4ed.org
  6. The Futurist, September/October 2009, “The Global Talent Crisis,” by Edward Gordon.  © Copyright 2009 by the World Future Society.  All rights reserved.  http://www.imperialcorp.com
  7. EE Times Europe, September 7, 2009, “Massive Shifts in Medical Technology Ahead, Study Says,” by Christoph Hammerschmidt.  © Copyright 2009 by TechInsights, a division of United Business Media LLC.  All rights reserved. http://www.eetimes.com
  8. Trends, June 2008, “Disruptive Innovation Meets the American Education Crisis.”  Copyright 2008 by AudioTech Business Book Summaries, Inc.  All rights reserved. http://www.audiotech.com
  9. InformationWeek, February 2, 2009, “IBM Offers to Move Laid Off Workers to India,” by Paul McDougall.  © Copyright 2009 by United Business Media LLC.  All rights reserved. http://www.informationweek.com

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