Can US Employers Close the Skills Gap With Higher Wages Alone? Probably Not.

Can US Employers Close the Skills Gap With Higher Wages Alone? Probably Not.

In a recent column at BloombergView, Michael Strain, an economist at the American Enterprise Institute, asserted that US businesses, particularly manufacturers, protest too much about the skills gap. Their inability to source skilled employees could be solved, he argued, if they were simply willing to pay higher wages for the talent they need:

Wage growth is picking up, but it is lower than what many economists expect in light of overall economic conditions, and it is not soaring for specific industries.

Simply put, if businesses can’t find workers — or can’t find workers with the right skills — they should raise their wage offers. Basic supply-and-demand logic suggests that doing so will broaden the pool of workers interested in the job, and will make the job more desirable to applicants. In addition, raising wage offerings would likely draw in some of the millions of Americans who report they want a job but are out of the labor force. So unless wage growth picks up, the warnings about labor shortages will fall flat.

Strain is not the first economist to argue that the skills gap is a simple supply-and-demand problem that could be solved by raising the price of labor, or that the problem is on the demand side (not enough attractive jobs) as well as the supply side (not enough skilled workers). Stagnant wage growth may be a factor in US employers’ labor market woes, but in focusing exclusively on wages rather than training and hiring barriers, Strain’s claim oversimplifies the challenge employers are facing. Years of research consistently tell us that while competitive compensation is a large component of what attracts candidates to jobs, there’s no simple formula by which you can convince any given candidate to take a job simply by offering a high enough salary.

It’s easy to point to “basic supply-and-demand logic” to criticize manufacturing companies when you don’t actually understand their experiences in local labor markets, but who says manufacturers aren’t trying to raise wages already anyway? A 2015 study by the Manufacturing Institute and Deloitte showed that 80 percent of manufacturing companies were already willing to pay more than market rates to reduce the skills gap—especially for more skilled labor, such as machinists, craft workers, and industrial engineers. Yet according to our own research at CEB, now Gartner, only 23 percent of heads of HR in the manufacturing industry believe they can close critical skills gaps over the next 12 months.

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The Case for Student Loan Benefits Is Much Stronger Than the Case Against

The Case for Student Loan Benefits Is Much Stronger Than the Case Against

In a recent post at the Atlantic, Amy Merrick cast a skeptic’s eye on the growing trend of student loan assistance benefits among US employers, arguing that these benefits may not be as helpful to employees as they seem. “For one thing,” Merrick notes, “the student-loan industry is notoriously opaque and difficult to deal with”:

By the time college students graduate, they may have accumulated loans from a number of different places. In contrast with credit-card companies, which typically provide in monthly statements what’s called a minimum-payment warning,student-loan servicers don’t have to tell borrowers how long it will take to repay their loans if they contribute only the minimum every month. … Last year, the [US Consumer Financial Protection Bureau] reported complaints from borrowers that student-loan servicers inexplicably returned payments from employers, applied funds to the wrong account, or made other servicing errors that took months or even years to resolve. In some cases, the benefit affected people’s eligibility for loan-forgiveness programs.

She also points out that student loan assistance is not tax-advantaged in the same way a 401(k) plan or a health savings account is. These payments are treated as regular wages for tax purposes, so employees have to pay income tax on them even as they go directly toward paying off their student debt. A bill that would introduce more favorable tax treatment for student loan benefits was introduced in the House of Representatives in February 2017 but has been stalled in the House Ways and Means Committee ever since and was not addressed in the tax reform package Congress passed last December.

Merrick leverages these points to question whether student debt benefits are really any more valuable to employees than a raise. There are obviously issues to be worked out in the implementation of these relatively new benefits, and of course Congressional action to improve their tax treatment would make them more valuable, but to dismiss them outright at this early stage is premature. For all the media attention they get, student loan benefits remain comparably rare: According to our forthcoming analysis of education benefits at CEB, now Gartner, just 7 percent of organizations offer them. Akhil Nigam, the head of emerging products for Fidelity’s workplace-investing division, tells Merrick that up to 90 percent of the employee student loan payments they process have no issues: Not a perfect track record, but hardly sufficient cause to throw out the baby with the bathwater.

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Facebook Testing CV Feature in Further Push Toward Recruiting

Facebook Testing CV Feature in Further Push Toward Recruiting

Since Facebook launched its new job listings feature earlier this year, the social media giant has made what looks like a play for LinkedIn’s share of the online job search and recruiting market. Since then, Facebook has integrated job listings into its Marketplace platform, revealed that it is testing location targeting for advertising, and has been playing around with a mentor/mentee matchmaking feature. The Next Web spots what could be the company’s next move in its evolution into a job search tool, reporting that Facebook is testing a résumé feature that lets users add more detail about their work experience to their profiles:

The new addition expands on the standard ‘Work and education’ section, but won’t publicly display all information about your credentials. The dedicated resume field lets you conveniently list your professional and educational background in more detail. It also allows selecting the precise dates when you started and left each undertaking that appears there. …

Interestingly, the screenshots indicate the detailed information will not readily show up on your public profile. This could mean that Facebook is considering making the hidden resume details available exclusively to job hunters and talent seekers. … As with any other test feat, there is no telling whether and when the functionality will make its way to all users.

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Private Equity, an Employer of Millions, Turns Its Attention to Talent

Private Equity, an Employer of Millions, Turns Its Attention to Talent

As investors become more aware of how talent drives value at a company, they are looking for ways to measure that impact and demanding more information about talent issues from the companies in which they invest. But investors won’t always wait for companies to crack the code connecting talent to performance; some are going ahead with this themselves.

Take private equity firms for example.

If asked who the biggest private sector employers are in America today, many would think of companies such as Walmart, Amazon, or General Electric. Not according to Michael Milken, chairman of the Milken Institute. In a speech he delivered recently at the annual conference that bears his name, the Financial Times’ Gillian Tett reported, Milken produced a list of America’s top 10 private sector employers, as calculated by the institute. Walmart indeed tops this list, but the next eight largest employers, according to Milken’s data, are private equity (PE) firms. And while Milken refrained from identifying these entities, it is not hard to guess who they might be, as Tett explains:

Carlyle and KKR, for example, are each estimated to employ about 700,000 people through their portfolio companies, which probably ranks them just below Walmart. Blackstone has “around 600,000” employees, as Steve Schwarzman, its founder, told the Milken event. Apollo, another private equity group, has 300,000 workers in its portfolio companies, while Warburg Pincus, General Atlantic, and TPG are only slightly smaller. Lobbying groups estimate that private equity firms now employ 11 million people throughout the US (the data are not very transparent).

Over the past decade or so, PE firms have become more like conglomerates. In the traditional model, private equity makes money by boosting the value of portfolio companies, then selling them at a much higher price, but according to research by the RBL Group, many PE firms are increasingly pursuing a “buy and transform” model. In this model, RBL’s Dave Ulrich and Justin Allen explain at the Harvard Business Review, PE funds must behave more like employers and pay more attention to talent and leadership. This has led to the emergence of leadership capital partners (LCPs), who are responsible for ensuring that both the firm itself and its myriad of portfolio companies have the right talent, culture, and leadership. According to RBL, over half of PE firms now have an executive with the responsibilities of an LCP:

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CEOs Want HR to Communicate the Value of Talent

CEOs Want HR to Communicate the Value of Talent

When it comes to what CEOs want from HR to help drive business value, one of their main demands is that HR help communicate the value of talent to investors, whether that means Wall Street or a lone philanthropist. At a breakout session at last week’s ReimagineHR event in London, Brian Kropp, HR Practice Leader at CEB, now Gartner, explained that the reason CEOs want this help is not because investors believe in making employees happy for its own sake, but because they are increasingly acknowledging that talent is a leading indicator of business performance and growth. Below is an overview of some ideas HR leaders should think about when approaching this opportunity:

The Growing Value of Talent

According to PwC’s annual CEO survey, the percentage of CEOs concerned about the availability of key skills as a business threat to organizational growth has risen from 46 percent in 2009 to 77 percent in 2017. This year, CEOs identified “human capital” as the second most important investment to make to capitalize on new business opportunities, ahead of “digital and technology capabilities.” Various trends, from new technologies to demographic shifts, are uprooting the core assumptions of how companies and industries operate. In our analysis of earnings calls from 1,600 of the world’s largest publicly traded companies, we found that words like “change,” “transformation,” and “disruption” have become commonplace. (CEB Corporate Leadership Council members can see the full range of insights from our Investor Talent Monitor here.)

In a recent earnings call with Volkswagen, Chairman and CEO Matthias Mueller said that “Volkswagen needs to transform. Not because everything in the past was bad, but because our industry will see more fundamental changes in the coming 10 years than we have experienced over the past 100 years.” Highlighting the value of talent is becoming one way in which organizations can gain the trust of their investors that their business still has what it takes to outperform a rapidly changing, volatile market. Jean-Paul Agon, CEO of L’Oreal, mentioned in their earnings call that they were going through a “digital transformation” whose success “stems from our very decentralized agile approach in execution with a significant investment in talent.” Conversations like these are only growing, and investors are pushing for more. Private equity firms are even taking matters into their own hands, appointing executives to oversee the talent strategies of their portfolio companies.

As we’ve observed in our Investor Talent Monitor, 46 percent of the largest public companies talked about issues related to talent during their earnings calls in 2010, but by 2016, this number had topped 60 percent. This should not be surprising: Investment firms and activists have been making the news recently for taking an active interest in companies’ talent strategies, pushing firms for greater gender diversity on boards of directors as well as for firms to publish employee compensation and pay gaps.

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ReimagineHR: 6 Shifts in the Digital Age and Their Implications for HR

ReimagineHR: 6 Shifts in the Digital Age and Their Implications for HR

At our ReimagineHR summit in London on Thursday, CEB (now Gartner) Principal Executive Advisor Clare Moncrieff led a session on creating a common vision of digitalization for the business and HR. After examining hundreds of trends, our research councils serving chief HR officers and chief information officers have identified six deep shifts in the business environment that will result from digitalization. These shifts should act as the framework for heads of HR to:

  • Ensure talent conversations with the line are grounded in business context
  • Identify the current talent implications of these shifts, project future implications, and partner with the line and C-suite peers to prioritize and respond to each
  • Improve their teams’ business acumen (to underscore the importance of this, 58 percent of HR business partners indicated in one of our surveys that building business acumen was their top development goal in 2017)

(The case studies we link to below are available exclusively to CEB Corporate Leadership Council members)

1) Demand Grows More Personal

As customers seek personalized products that align with their preferences and values as individuals (rather than as segments), companies will rely on digital channels and digital innovations in logistics and customer service to achieve personalization at scale. Customers will continue to expect lower-effort, nonintrusive service.

This could, for example, affect how HR functions look for new talent. Attraction of critical talent now requires differentiated, customized branding and career coaching. Candidates will demand a more effortless, personalized application experience. AT&T approached this shift by creating a more personalized “Experience Weekend” to show the innovation of its brand to campus candidates and make top talent more likely to accept job offers.

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ReimagineHR: For CHROs Today, Change and Disruption Are Top of Mind

ReimagineHR: For CHROs Today, Change and Disruption Are Top of Mind

At the ReimagineHR summit in London on Wednesday, Brian Kropp, HR Practice Leader at CEB (now Gartner), led a benchmarking and discussion session with over 150 chief HR officers, almost half of whom manage businesses with over 10,000 employees. The group shared their thoughts on the growing challenges heads of HR face today, and one theme remained constant throughout the conversation: change.

1) Disruptive Trends Changing the Pace of Business

As heads of HR look forward to 2018, the number one priority for many in the room will be change management. One HR executive, for example, said her organization’s major challenge currently was in managing multiple, overlapping acquisitions that were doubling the size of their workforce practically overnight—and both the pace and intensity of that form of change will only increase. Historically, organizations would make one acquisition and then wait several years before the next. Over the past several years, however, organizations have begun to face acquisitions or mergers one after another. Today, however, many businesses are struggling as they confront multiple changes at the same time.

One consequence of this, as another head of HR pointed out, is that organizations can no longer manage change using the same strategies they learned through their previous experiences. Every change is different, deserves its own unique response, and must be dealt with as if it were the first time the organization was doing it. There is no “one size fits all” approach to change.

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