In today’s volatile post-recession era, emerging trends are forcing companies to redesign business models and enhance value propositions. At the same time, access to talent, which is in short supply, is becoming just as critical as access to capital.

With elevated unemployment levels in the United States and abroad, an abundance of qualified labor should be available to employers. However, in our ever-changing hyper-competitive global business environment, this is not the case as new realities are making old assumptions invalid.

The news that U.S. gross domestic product (GDP) growth reached 2.5 percent in the third quarter is good. It’s well above the sub-1 percent growth rates during the first half of 2011, and reduces concerns of a double dip recession. However, it’s far from what’s needed to significantly reduce the high U.S. unemployment rate, which stood at 9 percent in October.

To drive it down, the U.S. economy must produce many more jobs than it has in the past. In fact, according to a McKinsey Global Institute report, “To return to pre-recession employment level by 2020 and accommodate the new entrants into the labor force, the United States needs to create 21 million net new jobs this decade.” This tall order, which has never been achieved before, will be very difficult at best for a variety of reasons.

To fully grasp the complexities, it’s helpful to understand American job churn: the overall number of jobs gained and lost in the economy. Thus, with the exception of recessions, on average, the United States loses approximately 30 million jobs each year, but gains slightly more, the Bureau of Labor Statistics estimates. The problem: net job gains have been falling for some time.

Throughout the 1970s, 1980s and 1990s, the Department of Labor says the net gains or total number of people employed in the United States rose by 20.9 million, 18.5 million and 16.1 million, respectively. In the last decade, the number of employed rose by less than 5.6 million, according to the Department of Labor’s Household data. What’s worse, from 2007 through October 2011, the total number of people employed fell from a high of 146 million to 140 million.

Moving forward, what will drive American growth and create jobs?

For decades, a major contributor to American job growth was consumer spending. Defined as Personal Consumption Expenditures by the Bureau of Economic Analysis, it represented $10.2 trillion or 70.5 percent of GDP in 2010. The good news: it topped its last high in 2008. But when accounting for inflation, it’s slightly less than in 2008. And when considering the steep decline in purchases of newly-built residential homes, which is categorized as Gross Private Domestic Investment, the picture becomes even worse. Purchases of newly built homes declined by half from 2004 through 2010.

Consumer demand has slowed for a variety of reasons. These include less use of credit cards, tighter home mortgage restrictions, higher consumer savings, the desire of individuals to pay off debt, and of course, higher numbers of unemployed Americans. In turn, less demand has translated into less output from businesses, which require fewer employees.

Replacing this loss of demand is difficult as demonstrated by several stimulus programs that did not achieve anticipated results. Moving forward, some analysts believe the output in new alternative energy sectors that produce “green jobs” will pick up much of the slack. Unfortunately, the technologies required to make this a reality still may be years away. Although not a panacea, in the short term, the U.S. may help boost output by giving green cards or permanent residency status to more foreign investors and brilliant foreigners studying at American universities.

What do foreigners contribute? “In a quarter of the U.S. science and technology companies founded from 1995 to 2005, the chief executive or lead technologist was foreign-born. In 2005, these companies generated $52 billion in revenue and employed 450,000 workers. In some industries, the numbers were much higher; in Silicon Valley, the percentage of immigrant-founded startups had increased to 52 percent,” says Vivek Wadhwa, Visiting Scholar at UC-Berkeley.

According to The Wall Street Journal columnist L. Gordon Crovitz, former Apple CEO Steve Jobs stressed to President Obama that the United States needed more trained engineers and suggested foreign engineering students be given visas to remain here. A policy that educates the world’s brightest and then sends them home to compete against us is a failed policy.

Today’s only sustainable competitive advantage is knowledge—the driver of innovation. Unfortunately, the United States has one of the lowest high school graduation rates in the industrialized world. As a result, it’s essential to attract the world’s sharpest minds, as well as expand investment in research and development, and enhance corporate training and life-long learning programs.

And since companies need to increasingly specialize in their core competencies in order to retain leadership in their ever-more competitive industries, their employees need to continually enhance their skills. If not, many workers risk becoming unemployable in an environment where a growing number of jobs require a minimum of a college education.

Quoted in Time Magazine, Louis Gerstner, former CEO of American Express and IBM, said, “Most jobs that will have good prospects in the future will be complicated... They will involve being able to juggle data, symbols, computer programs in some way or the other, no matter what the task. To do this, workers will need to be educated and often retrained.”

Jobs that require left-brained routine quantitative functions increasingly will be automated or moved offshore. Those that require critical thinking and reasoning, as well as abstract analytical, intuitive and creative problem solving skills increasingly will be demanded. The problem: there are too few to satisfy demand in the United States and abroad. Stated in September 2011 by Fareed Zakaria, an Indian-American journalist and author, “There are over three million job openings in America today. Many workers simply lack the skills to qualify.”

Others agree. “Almost one-third of U.S. manufacturing companies responding to a recent survey say they are suffering from some level of skill shortage,” a recent McKinsey Quarterly report indicates. The Manpower Group, a world leader in innovative workforce solutions, says 52 percent of American respondents cited difficulty in filling jobs in the first quarter of 2011. Many employers attribute the problem primarily to a lack of skills or knowledge.

This isn’t only an American problem. Employers in India, China and Germany also report the most dramatic talent shortage surges compared with last year, the Manpower Group says. Plus, one in three employers surveyed in 39 countries report difficulties in filling positions. These shortages will become even worse once the global economy picks up.

The costs of the American skills shortage are steep. According to a McKinsey & Company report, if the United States had raised its academic performance to the levels between 1983 and 1998 to those of Finland and Korea, U.S. GDP would have been between $1.3 trillion and $2.3 trillion higher in 2008.

Simply put, the future success of American businesses very much will depend on their ability to find talented employees who can quickly learn new skills and implement increasingly sophisticated technologies. And it must develop creative strategies to retain them. Due to the corporate trend of focusing on core competencies and outsourcing the rest, the depth and range of skills required of employees only will increase.

Consequently, employers will need to establish more attractive working conditions, invest more in employee training programs, continually refresh and upgrade employee skills, and work with local universities and community colleges to ensure courses offered satisfy market demands.

Even if we overcome current biases against increased spending for public education, those investments may require two decades to fully bear fruit. Until then, we need to supplement our current supply of home-grown talent by making it easier to hire and retain foreign-born skilled workers and professionals.

This article appeared in Impact Analysis, November-December 2011, and The Buffalo News, December 4, 2011
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, emerging risks, and the latest economic trends. He's also founder of both the ManzellaReport.com and Manzella Trade Communications, Inc. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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