Carl Camden and Michael Spence on the future of employment

The most recent McKinsey Quarterly (registration required) has a very interesting pair of interviews entitled The US Employment Challenge: Perspectives from Carl Camden and Michael Spence. Both of these relate to the question I have posed in  several posts - how do we need to be educating our students so that they can excel in this rapidly changing world?  

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Carl Camden, CEO of Kelly Services brings a though-provoking perspective to the subject of the changing nature of work and employment. He argues that we have generally not recognized the myriad implications of the increasingly short job cycle - the time for a job to appear and disappear, either in terms of a location or a whole category of jobs.  One of the major consequences is an increase in free-agent workers:

So jobs aren’t permanent, locations aren’t permanent, and workers are returning back to what I would call a free-agent type of work style. Independent contractors, part-time employees who move in and out of the workforce, temporary employees, consultants who move in and out of the workforce—that group of individuals in most of the industrialized world is already 25 to 35 percent of the workforce, on its way to becoming 50 percent of the workforce, I think, over the next decade.

As a consequence of the changing work composition, Kelly Services has re-imagined what its real job is - it now provides talent supply chain management, with several annual contracts passing $1B per year. 

Most individuals aren’t aware, but large global corporations generally have two to three times as many people working on their behalf as they have working directly for them. And we, Kelly, are providing an ability to manage that external workforce in a holistic fashion on a global basis....

The skill sets are amazing. We employ more PhD scientists than most universities around the world and deploy them as temporary employees. Lawyers, biotech engineers are all people that we provide on a temporary basis. There’s a firm in our industry who provides CEOs.

For many workers, Camden sees significant benefits with some of these changes. Part time workers, for example, can be better brought into the talent chain, enabling a life style that achieves a better work-life balance. 

There are also important policy implications of this change:

The United States is operating under a model that actually was an aberration in history. It’s only been a very modest period of time that the majority of individuals work in large enterprises that would be stable enough and where jobs would persist long enough that the government could use companies as the delivery mechanism for benefits.

Thus, our tying of medical care and retirement benefits to corporations is increasingly out of step with the evolution of the workforce. Similarly, the tax structure if focused on work for employers, not independent contractors.

And finally, on education:

.. we need to think about the fact that individuals need to receive the support to rapidly move from one type of skills to another type of skills, and that means that we need to look at the education, especially tax-supported education infrastructure, and to say, “How do we extend it to provide rapid, intense training for individuals who move out of one job into a different type of job, and how do we extend those skills?” That should be a function of all of the tax-supported education infrastructure, from high schools through the community colleges and to the state college system.

All in all, a very powerful depiction of a workplace that differs greatly from the one we have known and for which we currently prepare our students. 

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Michael Spence, 2001 winner of the Nobel  Prize in Economics, brings a very different perspective to the study of employment.  Most of what I say here about his perspective comes from this McKinsey article (all quotes are from the McKinsey article), but I have added a few bits from a much longer article The Impact of Globalization on Income and Employment published in the July/August 2011 edition of Foreign Affairs (registration required).

Spence argues that the structural evolution of the global economy has produced permanent changes in the employment structure in the United States. His analysis involves dividing the economy into "tradable" and "nontradable" sectors :

So the tradable part is goods and services that can be produced in one country and consumed in another, and the nontradable side, which is the lion’s share of the economy in most advanced economies, is a whole set of goods and services that have to be produced domestically, like government, healthcare, construction, et cetera, much of legal services because of legal differences in the systems across countries.

Over the period 1990-2008, 98% of the jobs created in the US were in the nontradable sector, with only 2% in the tradable sector. On the other hand, value added, defined as the difference in value of outputs and the costs of the inputs, grew at similar rates for both sectors. Since employment was growing in the nontradable sector, that meant that value added per employee increased only slightly over this period in this sector. Because value added per employee is correlated closely with income per employee, this meant that average income in this sector has been relatively flat. In the tradable sector, on the other hand, since employment growth was small, the value added per employee increased almost 5 times as much over this period as in the nontradable sector - with corresponding larger increases in average income.  

Within the tradable sector, there was considerable movement that is not obvious from the data that shows that overall employment did not grow very much:

And when you look specifically at the tradable sector, what you find is it divides into two parts. There’s a set of sectors like finance, like consulting, like computer design, and in those sectors, value added increased, employment increased, and value added per person increased. So it’s all good. You could say those are sectors in which we were highly competitive.

The second set tend to be what we call manufacturing, and they are long value-added chains that can be decomposed and moved around the global economy. What happened there is that employment went down, but value added went up, so value added per person went up enormously.

In other words, in the manufacturing sector, companies were moving rapidly to the more highly value added components of the value chains, and moving out of the lower value added components.  Overall, these data indicate that highly educated people in the high value added components of the tradable sector are finding jobs that pay increasingly well, and less well educated people in the lower value added components of the tradable sector are finding jobs increasingly difficult to find.  

Spence's major concern is that the job growth we have seen in the nontradable sector is not sustainable: 

When you look closely at that, what you discover is that we had big growth in government, in health care, and substantial growth in other labor-intensive sectors like construction, retail, hotels, food services, restaurants, that sort of thing. And we had, of course, excess consumption for ten years at least coming into the crisis because we had an asset bubble. We thought we were rationally consuming some of our wealth each year, only it turned out not to be real.

Thus, the tradable sector must grow more robustly if sufficient new jobs are to be created to meet employment goals.  But what is needed to enable that growth? Spence considers several aspects, among them improvements in education. However, he is not specific about how education needs to be improved, although his Foreign Affairs article emphasizes K-12.  

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To me, Spence's relative silence on what changes are needed in higher education in order to cope with the changing employment patterns introduced by globalization just reinforces my impression that we in the education world have a significant issue that we are not addressing with creativity - what should a college education look like so that we are educating students for the future, not the past? (see also The real crisis in higher education?)

Comments

[Mervelle Sage]

The economy is in bad shape and more students are seeking education because they feel that it will help them get jobs with higher salaries. However for so long we have taught everyone that education is the key. So many are doing it because it is what they have been taught with hopes that they can tap into that American dream. Now as for the Global economy being educated allows you opportunities anywhere and many are using education to give them the opportunity to work in varied fields ensuring a job in more than one market.

[cynthia minor]

I also agree that students pursue education in this global economy, in hope to obtain a job with an increase in salary. With the country being in an economic crisis, the question is,"Will we be able to obtain a better paying job, after pursuing higher education"?

[Kymia Dozier-Kessee]

I would have to agree with both writers in regards to the preparation of students, education in today's global economy. It appears that today many students are spending so much time seeking some form of education to increase their skills. Only to find themselves possessing a higher education in a minimum wage economy.

[Lindel Bell]

Undoubtedly globalization has affected the way we do business and the way we study. It as affected society at micro, messo and macro levels:individual, community and countrries. Are the true impacts understood?

Lindel Bell

Lloyd responds: The impacts certainly are not understood - and are evolving. Changes described by Camden and Spence were not anticipated just a few years ago when it appeared that, with US dominance in so many areas, globalization was a great way for us to expand that dominance. Now we see many negatives as our competitors grow. Continuing evolution in the process will certain change balances in ways hard for us to imagine today.