Weekly Report – June 18, 2016 – The 21st Century at Work Forces Shaping the Future Workforce and Workplace in the United States

Part One

The Rand Corporation recently released a report prepared for the U.S. Department of Labor entitled The 21st Century at Work Forces Shaping the Future Workforce and Workplace in the United States.

The report states that in the next 10 to 15 years work in the United States will be shaped by the following:

Shifting Demographic Patterns

The U.S. workforce will continue to increase in size, but at a considerably slower rate, while the composition will shift toward a more balanced distribution by age, sex, and race/ethnicity. Slower workforce growth may make it more difficult for firms to recruit workers during periods of strong economic growth, although greater participation in the workforce by the elderly, women with children, persons with disabilities, and other groups with relatively low labor force participation could cause the workforce to growth faster. Immigration policy offers another lever for changing the growth and composition of the workforce. Many of the trading partners of the United States are undergoing slower workforce growth and population aging on a more dramatic scale, thus offering a new comparative advantage to the United States.

The Pace of Technology

The pace of change – whether through advances in information technology (IT), biotechnology, or such emerging fields as nanotechnology – will almost certainly accelerate in the next 10 to 15 years. Synergies across technologies and disciplines will generate advances in research and development (R&D), production processes, and the nature of products and services. Further technological advances are expected to continue to continue to increase demand for a highly skilled workforce, to support higher productivity growth, and the change the organization of business and the nature of employment relationships.

The Path of Economic Globalization

The future reach of economic globalization will be even more expansive than before, affecting industries and segments of the workforce relatively insulated from trade-related competition in the past. The new era of globalization-marked by growing trade in intermediate and final goods and services, expanding capital flows, more rapid transfer of knowledge and technologies, and mobile populations-is partly the result of inexpensive, rapid communications and information transmission enabled by the IT revolution. Globalization will continue its record to date of contributing economic benefits in the aggregate. Although market share and jobs will be lost in some economic sectors with short-term and longer-term consequences for affected workers, the job losses will be counterbalanced by employment gains in other sectors.

Rapid Technological Change and Increased International Competition

These changes will place the spotlight on the skills and preparation of the workforce, particularly the ability to adapt to changing technologies and shifting product demand. Shifts in the nature of business organizations and the growing importance of knowledge-based work also favors strong nonroutine cognitive skills, such as abstract reasoning, problem solving, communication, and collaboration. Within the context, education and training become a continuous process throughout the life course involving training and retraining that continues well past initial entry into the labor market. Technology mediated learning offers the potential to support lifelong learning both on the job and through traditional public and private education and training institutions.

A Movement Toward More Decentralized Forms of Business Organizations

A number of forces are facilitating the move toward more decentralized forms of business organization, including the transition away from vertically integrated firms toward more specialized firms that outsource noncore function and more decentralized forms of organization within firms. Some sectors may be comprised of “e-lancers,” businesses of one or a few workers linked by electronic networks in a global marketplace for products and services. More generally, we can expect a shift away from more permanent, lifetime jobs toward less permanent, event nonstandard employment relationships (e.g. self-employment) and work arrangements (e.g., distant work). These arrangements may be particularly attractive to future workers who seek to balance work and family obligations or such workers as the disabled and older persons who would benefit from alternative arrangements. These changes call attention to the importance of fringe benefits that are portable across jobs, or even independent of jobs (in the case of freelancers, for example.)

In order to adjust to these changes policymakers must start focusing on developing sound labor policies and that will require an understanding of how those trends will evolve and affect the size and composition of the labor force, the features of the workplace, and the compensation structures provided by employers.

Part Two

Following up on my own research below are four things that require special attention in regards to the size and composition of the labor force.

Aging workforce: The number of workers over 65 stood at 5,161,000 in January 2006, and rose to 8,992,000 in the most recent May 2016 numbers. This increase reflects more than the aging of the baby boom population. The percentage of adults over 65 who are employed or looking for work has increased significantly since the turn of the century. In 2000, 12.9 percent of all adults over 65 were in the labor force. In the most recent BLS data on labor force participation by age groups, that percentage had climbed to 18.9 percent. The increase was greatest among women over 65, who climbed from 9.4 percent to 15.3 percent (men increased from 17.7 percent to 23.4 percent).

Lack of Skilled Workers: Employers across industries and regions have complained for years about a lack of skilled workers, and their complaints are borne out in U.S. employment data. In July, the number of job postings reached its highest level ever, at 5.8 million, and the unemployment rate was comfortably below the post-World War II average. But, at the same time, over 17 million Americans are either unemployed, not working but interested in finding work, or doing part-time work but aspiring to full-time work. A Harvard Business School survey of CEOs shows that the fault appears to be diffused: Employers expect qualified workers to be available on demand, most educators have only a vague understanding of the job market, and policymakers propose merely incremental improvements to a system that is wholly outdated.

Entrepreneurial Trends: Millennials are on track to be the least entrepreneurial generation in recent history,” John Lettieri, the co­-founder of the Economic Innovation Group, recently testified before the U.S. Senate. Additionally, according to a Wall Street Journal analysis of Federal Reserve data, the share of people under 30 who own a business has fallen by 65 percent since the 1980s and is now at a quarter-century low. What does this mean? Older generations are doing most of the work. The average age for a successful startup-founder is about 40 years old, according to the Kauffman Foundation, a think tank focused on education and entrepreneurship. (In their words, one’s 40s are the “peak age for business formation.”)  The reality is that the typical American entrepreneur isn’t that hover-boarding kid in a hoodie; it’s his mom or dad. In fact, the only age group with rising entrepreneurial activity in the last two decades is people between 55 and 65. There is also some evidence that young people’s appetite for risk-taking has declined at the same time that their student debt (The number of student borrowers rose 89 percent between 2004 and 2014) has grown. More than 40 percent of 25-to-34-year old Americans said a fear of failure kept them from starting a company in 2014; it 2001, just 24 percent said so.

Lack of Competition: Although venture-capital investment has grown in the last decade, the majority of “startups” are really what most people consider “small businesses.” A new bodega, coffee shop, or small construction firm doesn’t seem like a radical act of innovation. But the government considers such companies to be startups, and they’re getting rarer as a handful of large firms dominate each sector of the U.S. economy. Three drug stores—CVS, Walgreen’s, and Rite Aid—own 99 percent of the national market. Two companies—Amazon and Barnes & Noble—sell half of the country’s books. If it is not quite a new Gilded Age for America’s monopolies, it is certainly a new dawn for its oligopolies. That’s a problem, because an economy dominated by older firms tends to be less efficient. Companies that are 10 or more years old now account for nearly half of all firms and employ more than 80 percent of workers; both of those figures are up more than 10 percentage points since 1990. The growth of these industrial giants has squeezed out smaller competitors. Even in tech, the sector synonymous with innovation, the frontier is closing. Facebook owns four of the five most downloaded apps—Whatsapp, Messenger, Facebook, and Instagram. It tried to buy the other, Snapchat. All of the 20 most downloaded apps, including Uber, Spotify, and Pinterest, were founded since 2012, according to Nomura research. There is, however, cause for optimism. First, Gates and Zuckerberg notwithstanding, most successful founders begin their careers as devoted employees. Their start-up ideas germinate in office daydreams before blossoming into something worth pursuing outside the comforts of the company. Second, the slow recovery has stalled some would-be entrepreneurs, but 2015 was one of the strongest years this century for job and wage growth. Third, the next generation may be better prepared to start a company (or, at least, better educated in an academic setting about the challenges of such an endeavor). The number of entrepreneurship classes on college campuses has increased by a factor of 20 since 1985, so it’s possible that there are thousands of future startup founders who are currently employees sifting through ideas for their own firm. The Millennial generation may be like a dormant volcano of entrepreneurship that will erupt in about a decade.

All of these trends could have lasting consequences for the competitiveness of the American economy.

What is the L.A. Coalition doing?

I have been working with the co-founder of 3D Veterans (http://www.3dveterans.com/), and organization that is working with the Department of Defense to close the skills gap in U.S Manufacturing by training a large number of unemployed veterans in fast emerging technologies such as additive manufacturing.

By leveraging the Coalition’s growing network, I have been able to connect 3D Veterans with Coalition member CSUDH and their nationally recognized Prothestics and Orthotics Education Center, which is housed in a 12,000 square foot facility in Los Alamitos, containing both class rooms and several laboratory spaces. Faculty and students alike have the opportunity to rotate into VA prosthetic, orthotic, and other medical clinics to enhance their patient care skills.

The 3D Veterans non-profit and the CSUDH Center has begun to collaborate around using the CSUDH lab space/program to train veterans, and also work with the VA medical facility that is nearby.