We’re back! Stock markets are trending in a positive direction as companies realize productivity gains and begin to invest in future growth. Large Northeast Ohio employers like Cedar Fair, FirstEnergy, and Smucker’s all have announced impressive numbers for their most recent reporting periods. Further, it appears that the jobs are starting to come back:
- A report by Dice.com, a leading tech careers website, lists Cleveland as the 3rd fastest growing market for technology and engineering jobs.
- A similar report by Monster.com lists Cleveland as the 7th hottest overall job market in the country in terms of open positions per job seeker in the market.
- A quick search on OhioMeansJobs.com confirms both reports. Within a 50 mile radius of Akron there are over 30,000 open positions listed! These are not low-wage, low-skill jobs either. Of those open positions, more than half pay $50,000 or more annually (well above Ohio’s average annual wage of $41,000).
- Unemployment in NEO has dropped faster than the national rate, from a peak of 11.6% a year ago to 9.1% (vs. 9% nationally from a high of 10.1%).
Even President Obama joined the rally and gave NEO a big shot in the arm last month when he visited and said, "big things are happening here." The comeback train is rolling. So let’s celebrate, right? Right? Economically, things are certainly improving and reports such as these confirm that NEO companies are creating the high-pay, tech jobs of today’s industries – IT, healthcare, advanced manufacturing, and engineering. Our research institutions are global leaders in their respective fields and the public and private sector are working together to turn technologies into thriving businesses.
But 9% unemployment is still 9% unemployment, and likely doesn’t include those who’ve chosen to drop out of the labor pool altogether. How can 175,000 workers in NEO (among the 15 million nationwide) be out of work when there are 30,000 unfilled jobs out there?
The Great Talent Divide This is not a new trend. An article published in the Wall Street Journal last August called attention to growing concerns that while unemployment rates remain high, employers are struggling to fill positions with skilled talent. In fact, talent consultant and writer Ed Gordon wrote a whole book on the topic in 2005 entitled, The 2010 Meltdown: Solving the Impending Jobs Crisis. An annual survey by Manpower, a global staffing company, reports that the talent mismatch started well before the most recent recession as employers have had persistent challenges finding qualified candidates in the same top job categories (skilled trades, sales reps, nurses, technicians, and engineers) for the last four years. What is most surprising, however, is what the WSJ article found: among the sectors where employers were struggling the most to fill positions is manufacturing. Manufacturing! Wait, I thought that manufacturing jobs were leaving the country fastest, never to return (especially, in Northeast Ohio). How is it that the manufacturing sector is struggling to find enough workers? Well, it turns out that manufacturing is no longer a low-skilled endeavor. Modern manufacturing, the sort that still happens all over the U.S., involves complex, highly technical equipment and processes. So work that used to require 10 low-skilled people now needs only one high-skilled technician.
The bottom line, according to Jonas Prising of Manpower: “Unemployment levels remain high in the United States, yet employers continue to have difficulty filling select positions. The issue is not a lack of candidates, but rather a talent mismatch. There are not enough sufficiently skilled people in the right places at the right times.”
The Elephant in the Room 
We hear a lot of talk about how tax increases, federal deficits, and civil unrest in the oil producing parts of the world are a threat to our fragile economic recovery. However, nothing presents a greater roadblock to a sustained recovery than the talent mismatch between the skills that employers need and the skills our workforce has on supply. How did things get so bad? Nearly all analysis on the topic points to two primary causes: the poor state of our education culture and our failing immigration policy. With education, I deliberately use the word “culture” instead of “system”. It’s too easy to blame our schools and teachers as the reason why a quarter of 9th graders fail to graduate in four years and many of those that do finish are woefully deficient at science and math. Much of our culture still thinks it’s 1950, when a 19 year old with a high school diploma could expect to earn a living wage. Yes, our primary and secondary education systems need serious reform. But sensible reform is only possible when our culture A) is willing to pay good teachers as much as we do bad lawyers; B) remembers that educating our children happens in the home as well as in the school, and; C) accepts that it’s no longer 1950, and those low-skilled jobs are never coming back. With immigration, we’ve become the training ground for the world’s most talented young people, especially in science, technology, engineering, and math (the famed STEM subject areas).
Higher education is still something that we do better than anyone else in the world. According to the Academic Ranking of World Universities (ARWU), all but 3 of the top 20 universities are in the U.S. Over half of the top 100 are U.S. universities, including Ohio State and Case Western Reserve Universities. As a result, international students flock to our college campuses every year. In a report written by the Institute of International Education (2009), 670,000 foreign students enrolled at U.S. colleges and universities for the 2008-2009 academic year, an 8% increase over the prior year and the third consecutive year of similar growth. Universities love this because international students pay full boat tuition. Never mind that foreign students are estimated to inject $17.6 billion into the American economy each year as well. However, foreign college graduates must obtain an H1B visa to work in the U.S. beyond their first year after graduation. H1B visas allow foreigners to work on a temporary basis in the U.S. in an occupation that generally requires a bachelor’s or higher level of education for up to 6 years. However, current law only allows for 65,000 of these visas to be issued each year by private employers (universities and non-profit research facilities are exempt) plus another 20,000 for foreign workers with advanced degrees. That’s the same number as was allowed 20 years ago, when the annual quota was rarely met. Today, applications greater than this quota are typically received within hours on the first day of filing. So our universities give foreign students the skills our economy sorely needs, then send them back to their home countries to compete against us.
How Do You Eat an Elephant? One Bite at a Time. I don’t pretend to be an expert on any of this. These are big, macro, messy issues – the sort that won’t be fixed easily or quickly. But there are some great organizations that are taking a small bite out of the talent crisis by addressing education and immigration challenges locally. On the education front, NEO is home to some of the most innovative (and successful) charter schools in the country. E Prep, The Intergenerational School, and The National Inventor’s Hall of Fame School in Akron (among others) are creating new educational models to increase attainment of college degrees within economically challenged student populations. Meanwhile, Global Cleveland, is an initiative that hopes to re-establish Cleveland as a city that welcomes industrious immigrants. According to a recent article in Plain Dealer, “The plan identifies high-skill immigrants and their families as Cleveland's best hope for a transformation. It calls for an agency that would try to attract people with the talents that local employers say they need to compete and grow.” But we still have those 30,000 unfilled jobs and all of those out-of-work Northeast Ohioans to deal with today. Employment Connection, a federally funded jobs office, is addressing the near term talent challenge through a new model of workforce development. Instead of training job seekers and then hoping that they can find jobs, Employment Connection is finding jobs, then matching them to candidates like a recruiting agency. Then they pay for on-the-job (OTJ) training after the hire is made. This model is proving to work much better than the old one (the one still practiced in most regions today). In fact, in the second half of 2010, the organization successfully placed as many job seekers as it did the entire previous year… when the agency’s staff was twice as large.
Manpower suggests a similar strategy for employers in the paper, Teachable Fit: A New Approach for Easing the Talent Mismatch. In it, the staffing company recommends that companies broaden their hiring criteria to identify candidates who are “teachable”, even if they do not have the desired skills to start. So U.S. employers are doing what we’ve been asking them to do for years – creating more, highly-skilled, better paying jobs. This is definitely cause for celebration, as it means that our companies are globally competitive again. However, while we debate over reforms to our education and immigration policies, employers and entire regions will find themselves waging a two-front war for talent – fighting to attract new talent while keeping the talent they already have.
That’s why it’s so important to make talent a critical part of your company’s overall strategy. Further, employers that have spent the last few years sticking it to their employees (because the economic downturn prevented them from leaving) are about to learn a very tough lesson. As for technology startups, it’s always been a needle-in-a-haystack exercise when recruiting. Only now, the haystack is a lot larger.
Robert Hatta is the Vice President of Entrepreneurial Talent for JumpStart Ventures. He has worked at several startup companies in Northeast Ohio and Silicon Valley, as well as other high growth, technology companies across the U.S. and Europe. Through these experiences, Robert has gained an extensive understanding of the culture and needs of high growth companies with a particular focus on talent.