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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Vermont Will Pay Remote Workers to Move There

Vermont Will Pay Remote Workers to Move There

Vermont Governor Phil Scott on Wednesday signed a bill into law that will grant individuals working remotely for an out-of-state organization up to $10,000 to move there, as part of a suite of initiatives to improve the environment for digital work in the Green Mountain State and attract more residents.

The grant program, slated to begin next year, will be open to any full-time employee of a business domiciled outside Vermont who primarily works remotely from home or a coworking space, and will offer such workers up to $5,000 per year up to a total of $10,000 over the life of the program. These funds can be used to cover a range of expenses associated with moving to Vermont and setting up a remote work presence there, including relocation costs, computer software and hardware, broadband Internet access, and membership in a coworking space. The bill provides enough funding to cover as many as hundreds of these grants over the coming years, depending on the size of each grant, which would represent a significant number of new residents for a state with just under 624,000 people.

The law also instructs several state agencies to identify infrastructure improvements to better enable workers and businesses to establish a remote presence in Vermont, and to encourage the growth of coworking spaces, remote work hubs, maker spaces, and similar innovative work spaces. The state will also examine the potential for developing public-private digital work sites that will be available to both state employees and remote workers in the private sector. Finally, the law instructs agencies to submit recommendations for ensuring that broadband access is available in the downtown areas of Vermont’s municipalities to support these types of remote work venues.

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Construction Firms Use Signing Bonuses to Court Experienced Craft Workers

Construction Firms Use Signing Bonuses to Court Experienced Craft Workers

In the latest sign of the tight US labor market giving candidates the upper hand, many construction contractors in the US are now offering cash signing bonuses to skilled craft workers to sweeten the value proposition for joining their team, Jim Parsons reported at the Engineering News-Record this month:

“Signing bonuses are not new, but they are becoming more prevalent,” says Jeff Robinson, president of compensation consulting firm PAS Inc. Unlike the common practice of providing what he calls “mobilization pay” to compensate for relocation costs, contractors now are offering one-time bonuses ranging from a few hundred dollars to upwards of $1,500 per worker.

According to Robinson, a foreman might be offered as much as $3,000, although there may be an expectation that the person will bring other workers along to join the employer’s workforce. “The advantage of a bonus is that it’s a one-time payment that doesn’t affect base pay,” he says, adding that the incentives usually include a 60- to 90-day employment requirement before they can be collected.

The 2017 survey of workforce shortages by the Associated General Contractors of America reported that nearly a quarter of contractors used bonuses for craft personnel because of difficulty filling positions. The trend appears particularly strong in areas where labor demand is extremely high.

Construction is often thought of as a low-skill occupation where one’s qualifications depend more on strength and stamina than knowledge and experience, but in fact it employs a range of skills, while contractors, like most employers, prefer to hire experienced workers if they can, especially for delicate construction tasks that require high levels of skill and craftsmanship. Construction workers are in high demand as commercial and residential building is booming in many parts of the US, and so these workers are becoming harder to find and more expensive to hire.

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Morgan Stanley Offers Junior Bankers Higher Pay and Faster Promotion

Morgan Stanley Offers Junior Bankers Higher Pay and Faster Promotion

The investment bank Morgan Stanley recently announced a set of new policies for its junior associates, offering higher base pay and a faster track to promotion, while also underscoring its work-life balance policies, Preeti Varathan reported at Quartz last week:

According to its memo, Morgan Stanley is raising base pay for associates in investment banking and capital markets by 20% to 25%. It is also speeding up its promotion timeline for high-performing analysts—the entry-level position below associate—from three years to two. The memo also reiterated the bank’s current vacation and hours policies: two mandatory one-week vacations every year and limited staffing on Fridays and weekends.

Wall Street has long had a reputation for debilitating hours, consecutive all-nighters, and frequent weekend work. But even the most competitive firms are now grappling with a new generation’s insistence on rapid promotions and better work-life balance. “The ability to recruit, develop, and retain top talent by offering attractive career opportunities is a key priority,” the memo noted.

Indeed, at a time when the labor market is tight and employers in all industries are having to compete harder for talent, it’s unsurprising to see another large employer make investments in its most junior employees. The financial sector, however, has also been grappling for several years now with a particularly difficult employer brand problem. More than ever before, prospective employees now question whether the lucrative rewards of investment banking’s traditional high-stress, high-pay model are worth the costs to their quality of life.

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Walmart Testing New, Less Restrictive Dress Code

Walmart Testing New, Less Restrictive Dress Code

Walmart is piloting a new dress code in some of its US stores that will give employees more options for what they can wear to work, Bloomberg’s Matthew Boyle reported on Thursday:

Employees … will now be allowed to wear shirts of any solid color, rather than just blue or white, according to an employee manual obtained by Bloomberg News. Blue jeans are also permitted — as long as they’re solid blue — whereas previously only khaki-colored or black denim pants were allowed. Visible facial tattoos are forbidden for those hired after April 14, the manual said. …

Some Walmart workers embraced the dress code changes, with one saying on an employee message board: “I would love this! I hope it comes to my store.” Others were skeptical that it would get past the testing phase, which began in fewer than two dozen stores this month.

Walmart last adjusted its dress code in 2015, when it gave its US employees permission to wear black or khaki-colored denim pants and let workers with more physically-intensive jobs wear t-shirts to work instead of collared shirts. That change came after a new dress code the company adopted the previous year—requiring white or navy collared shirts, khaki or black pants, close-toed shoes, and a new design of the big-box store’s branded blue uniform vest—was poorly received by employees, Hayley Peterson adds at Business Insider.

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Study: Alcohol at Work Doesn’t Necessarily Attract College Graduates

Study: Alcohol at Work Doesn’t Necessarily Attract College Graduates

Companies that allow or provide alcohol in the workplace often do so in order to attract young talent with an image of a fun, friendly, work-hard-play-hard culture, but a recent study suggests that booze might not be as attractive a perk as many startup founders seem to think it is. Oregon State University’s Michelle Klampe presents some new research from OSU business professor Anthony Klotz and Serge da Motta Veiga of American University that investigated the reactions of college students and recent graduates to the availability of alcohol in prospective workplaces. finding that in fact, drinking cultures often turn them off:

“Students preparing to enter the workforce ask a lot of questions about alcohol and job interviews and the best way to navigate those situations,” Klotz said. “And generally, people are confused about how to deal with alcohol in the workplace. Not everyone finds it appealing.” …

In both studies, participants were also asked questions relating to their level of political skill, which refers to the a set of social abilities that helps them effectively understand others at work, influence others in ways that enhance their own objectives and navigate social situations with confidence. Klotz and da Motta Veiga predicted that those with high political skill are more likely to be comfortable at alcohol-based events, while those with low political skill may be unable to take advantage of the social benefits that the combination of alcohol and work provide.

The studies showed that participants with lower levels of political skill were less likely to see themselves as fitting in and wanting to work at the company when the recruiting advertising and dinner out included alcohol. “This is a specific condition where alcohol is harmful in recruiting prospective employees,” Klotz said. “However, we didn’t find any significant upside to including alcohol for the participants that showed high levels of political skill.”

The authors don’t take a position on whether a culture of drinking at work is good or bad in general, but recommend that employers be up-front with candidates about the role of alcohol in their culture in order to avoid hiring employees whose interests and values don’t align with it.

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Wisconsin Pitches Quality of Life to Lure Millennial Workers

Wisconsin Pitches Quality of Life to Lure Millennial Workers

Facing a shortage of talent and a surplus of unfilled jobs, the state of Wisconsin is pulling out all the stops to attract millennials from other parts of the midwestern US to the state to work, Shayndi Rice reports at the Wall Street Journal. In January, the Wisconsin Economic Development Corporation launched a $1 million ad campaign in Chicago, while the state legislature is soon expected to pass a proposal from Governor Scott Walker to spend another $6.8 million to advertise the state throughout the midwest.

Too many jobs and not enough workers may sound like a luxury problem compared to what some parts of the US have reckoned with in the past decade, but Wisconsin policy makers fear that the slow growth of the labor force (just 1.4 percent from 2010 to 2016) could hinder economic development in the state. That low growth—a product of demographic aging, low birth rates, and negative net migration—has left Wisconsin with an unemployment rate of 3 percent and a projected 45,000 unfilled jobs by 2024, Rice reports.

Along with the abundance of job opportunities, the ad campaigns tout the low cost of living in Wisconsin cities (compared to Chicago), easier commutes and higher quality of life. Cities like Milwaukee and Madison are also running social media campaigns to advertise themselves as fun, vibrant places for young professionals to live. Critics of the campaigns, however, contend that these funds would be better spent on public services.

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