Dan Erwin

Fearful You'll Lose Your Job to Artificial Intelligence?

Two of MIT’s most knowledgeable guys on artificial intelligence, Andrew McAFee and Erik Brynjolfsson, will tell you to cool it. In fact, they argue that asking how many jobs will be killed by AI is the wrong question. Sure, Frey and Osborne’s 2015 analysis found that nearly 50% of current jobs are susceptible to AI. But by no stretch of the imagination is that the whole picture.

Like previous predictions about gains and losses, they’ve almost always been way off. Furthermore, nearly all these predictions have been about job destruction and not job creation...

When the Best is Actually the Least Worst

Sometimes there are no good options. An executive looks around and sees three managers who are no more than ordinary. But he has a high profile project. And so he selects the least worst employee for the project. It happens in business, in non-profits, in communities, in churches and in government far more than most want to admit. Why does this happen? And how can it be a good thing?

Before I answer the question, think about this situation reported in The Economist.

The least awful
The country of Nigeria goes to the polls on February 14^th to elect their next president. He will face problems that could break the country apart: rampant corruption, a jihadist insurgency...

Blistering Job Growth....

...but not a fair day’s wage.

America's labor market really boomed in 2014. In fact there were 3 million more people in work than a year earlier. According to a recent study reported in The Economist, the ratio of job seekers to actual job openings fell "from a peak of seven to one in 2009 to two to one in November 2014." Why is this? Or, What caused this?

In a fascinating piece of research from the non-partisan National Bureau of Economic Research, the failure of congress to....

Do Stingy Benefits Matter?

No question but what America's labor market really boomed in 2014. In fact there were 3 million more people in work than a year earlier. According to a recent study reported in The Economist, the ratio of job seekers to actual job openings fell "from a peak of seven to one in 2009 to two to one in November 2014." Why is this? Or, What caused this?

In a fascinating piece of research from the National Bureau of Economic Research, the failure of congress to reauthorize those benefit extensions that were introduced during the Great Recession evidently impacted the unemployed significantly. On the one hand 1.8 million jobs were created due to the....

Are You a Sprinter, Marathoner or a Middle-Distance Runner?

David Brooks’ What machines can’t do is a delicious statement about the future of work. The subtexts, that stuff not really stated, are loaded with caveats, half-truths, yes and no, probably, and maybe so. Still, if you understand the need to pay close attention to your career future, the article is an inflection point. In other words, it’s a highly ***valuable career reference.

Technology, Brooks writes, seems to reward a few traits: enthusiastic curiosity, strategic discipline, process architects, decentralized networks and creative “essentialists.” I’m inevitably skeptical about trait theories in most any form, but still, Brooks has his finger on some important stuff. First, though, I want to dig in a bit deeper into the issue with insight from some really, really smart and knowledgeable economists.

Baseline: what can machines do?
The answer to this question is what you need to keep in front of your nose. Thankfully, Frank Levy (MIT) and Richard Murnane (Harvard) answered this most fundamental career question about 10 years ago. Their response remains cutting-edge.

Building on an essay by Herb Simon (Nobel Prizewinner), Levy and Murnane pointed out what machines can do...

The Skills Gap Is Bunk

You name the business pundit or educator. They’re all saying that the US labor market has a skills gap, a gap that has a heavy impact upon the unemployment rate. But how accurate, really, are those statistics. And more significantly, when you drill down into the jobs data what does it reveal?

The basics are scary. Four years after the start of the Great Recession, US business is making record profits. But we have a “jobless recovery” with unemployment stubbornly high. Two-thirds of manufacturing employers decry the lack of qualified applicants. Fast-growing companies say that finding really qualified candidates is a huge impediment to growth.

On the flip side, there are stories about employers who can’t find qualified applicants. Here’s one intriguing story from Peter Capelli: One of my favorites is a job ad for a cotton candy machine operator—if you’ve never seen cotton candy made, it is not rocket science—where the requirement for applicants was demonstrating prior success operating similar cotton candy machines. To test whether his company’s hiring standards were too high, a Philadelphia-area human resources executive applied anonymously for a job in his own company. “I didn’t make it through the screening process,” he notes.

I learned years ago that nobody, but nobody, understands the work marketplace from a macro/micro, employer/employee perspective better than Peter Capelli, Wharton’s GW Taylor Prof of Management and codirector of the National Center on the Educational Quality of the Workforce during both Bush and Clinton’s administrations. The statistics and the story above are from his brilliant, 100 page, readable analysis of what’s actually going on in the marketplace, Why Good People Can’t Get Jobs: The skills gap and what companies can do about it. If you’re in HR or a corporate exec, I recommend that you don’t let the sun set before you pick up your copy. You can read it in two hours.  Use your red pen, but be ready to find yourself more than a little unhappy with what he has to say about companies, execs and HR departments. Nobody comes out unscathed. Obviously, I’m going to have to revamp my thinking and some of my approach.  Aaargh!!

So why can’t good people get jobs? Among the conclusions which Capelli draws from his in-depth analysis of the data are the following:

• Higher productivity is a culprit. The simple math is that productivity was 6.7% higher at the beginning of 2012 than it was in 2008. Some of that is because companies work people harder—which has its limits. The new normal is partially impacted by higher productivity, which reduces employee need. And that's structural. 
• Population and workforce keep growing. US population is 4% (140,000 new people per month) higher now than in 2008. Fewer jobs and more people aren’t in sync.
• Employers are unwilling to pay the market wage. They shop around to see who’ll do the work for a lesser wage.
• Employers are defining job requirements in such a way that applicants have to have done the job previously before they can get hired. This is a distinct departure from the past, getting past the HR folk because of the downsizing of HR groups.
• Employers ask employees to move geographically to get a new job, but they won’t/can’t guarantee the job will last. Put yourself in the employee’s shoes. Who wants to relocate when the job may not last long, and up jobless in a community with no contacts?
• Hiring software sucks.  Really bad stuff. As Capelli’s anecdote above reveals, not a chance even in your own company.
• Employers now expect the feds, the states and the schools to do the training. In 1979, young workers on average received about 2.5 weeks of training with the company. By 2011, Accenture found that only 21% of employees had received any training whatsoever in the past five years. A huge proportion of training also used to be supplied by unions, but you know what business has done to the unions. 

So overall, employers can afford to be picky, applicants need to be overqualified, and employers focus on the skills associated with work experience, not education.

In sum, software driven hiring is a mess. And employers are unwilling to do the training that they once took for granted. It's a training gap, not a skills gap.

Capelli’s recommendations
This is too important a book for me to tell you everything Capelli has to say. Check the book list on the side of my blog to purchase it from Amazon.com. Capelli has built-in recommendations (very practical and feasible) for employers. And some very strategic recommendations for those in the job hunt.  

Capelli's little monograph grew out of a Wall Street Journal article where he ruffled more than a few feathers (441 comments, but thankfully, not all negative) by saying rather bluntly, “The real culprits are the employers themselves.”  So don’t pay too much attention to the business pundits or company representatives—about jobs or education.

Flickr photo: by Pat Rafferty

Big Is Beautiful

Small business may be beautiful, but it’s neither productive nor prosperous.

I’ve been suspicious for years about the hullabaloo from both Republicans and Democrats that small businesses are the drivers of the economy. It has crossed my mind on numerous occasions that this is merely a political calculation. There are hundreds of thousands of small business owners and they vote for tax and business policy issues. Furthermore, the small business lobby is very powerful.

But if you’re an HR person, I suspect you know the truth. Big business is the driver of the American economy. Not small business.

Think about it. If you really want an HR job (or any other function) so that you can learn the business, your first stop is at a large firm. The majority of small firms don’t even have an HR position. The office admin takes care of those matters. Don’t be too quick to occupy Wall Street. Just make sure the government gets it under control. That is, if you want a growth opportunity in HR or most any other function, and your name is not Zuckerberg. So make certain your crap detector is working the next time you hear all the bullshit about small businesses from the politicos and us small business owners. This is not a simple, straightforward issue. It’s highly nuanced, covert and subtle politics. Better reframe your mindset about big business—and small business!

He didn’t lay out the statistics, but James Surowiecki added a lot of information to the subject in a recent article, beginning with the fact that Americans have always been ambivalent about big business. Take the grocery business. In the first 50 years of the 20^th century A & P was the biggest and most important chain store. My family like most, enjoyed the low prices. But those low prices came at a cost to the small grocer. Until 1936 and the Robinson-Patman Act, suppliers could offer chain stores better deals than other retailer. That congressional act made it impossible for suppliers to legally provide the chains with better deals. The result, of course, was that prices increased for the public at large. In other words, it wasn’t consumers the government was trying to protect—but small business.

The global meltdown has surfaced still another intriguing insight about small businesses. The developed countries with the highest percentage of workers employed by small business are Greece, Portugal, Spain and Italy. Guess whose economic woes are wreaking the most havoc on financial markets. And guess which countries have the lowest percentage of workers employed in small business—Germany, Sweden, Denmark, and the U.S.—some of the strongest economies in the world. This is an intriguing set of correlations.

In his article, Surowiecki ticked off the economic advantages of big companies:

• Significantly higher productivity growth
• Economies of scale and scope
• Ability to invest in productivity-enhancing technology
• R & D spending

It has been ever thus.

In a new book, Marc Levinson shows that A & P, like the future WalMart, was able to invest in its own warehouse-and-delivery system, improve inventory management and make the supply chain more efficient. All investments not possible for the small business.

So why do people like me go into business? Well, as a recent study by Erik Hurst and Benjamin Pugsley shows, we have no interest in becoming big-business owners or even in bringing a new idea to market. Instead, most of us simply want to run a small company, do work we enjoy and have control over our financial lives. In commenting on these small business ideologies, James Surowiecki concludes his article with this:

Those are admirable goals, but they’re not going to make companies more productive. And that matters, because greater productivity is the main driver of long-term economic growth and higher living standards. Because big companies are more productive, they offer workers, on average, better wages and benefits—or, as in the case of Walmart, they offer consumers significantly lower prices. And the impact of these things on living standards is not trivial. It’s hardly a coincidence that in the decades after the Second World War, when ordinary American workers became part of the middle class, very big companies employed a huge percentage of the workforce: in the early seventies, one in five non-farm workers worked for a Fortune 500 company. Small may be beautiful. It’s just not all that prosperous.

And in a parting shot, Felix Salmon says it’s start-ups that create jobs and that the lionization of small businesses is “unhelpful.”

Quotation of the Week: President Theodore Roosevelt

Far and away the best prize that life offers is the chance to work hard at work worth doing.

               --Teddy Roosevelt, Labor Day, September 7, 1903

As the latest Economist points out, the billions who seek that prize are finding both feast and famine.

Why is that true in the US? The consensus is that there are two causes: globalization and technology. But Michael Spencer, the Nobel winner, argues, rightly, that globalization is the more potent cause.

Tyler Cowen, the economist and compulsive blogger, also agrees, but adds a different twist in his book, The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will Eventually Feel Better. (The title is classic Cowen.) Cowen argues that for much of our history, we enjoyed the benefits of free land, immigrant labor and powerful new technologies. Those advantages have faded, and now we need to start over again. In the meantime, there are winners and plenty of losers. And some of the problem is not fixable.

What do we do in the meantime?

The Economist answers that question with the obvious.  Lowering this new natural rate of unemployment will require structural reforms, such as changing education to ensure that people enter work equipped with the sort of skills firms are willing to fight over, adjusting the tax system and modernising the welfare safety net, and more broadly creating a climate conducive to entrepreneurship and innovation. None of these reforms is easy, and all will take time to produce results, but governments around the world should press ahead with them.

[I’ll add a not-too-welcome caveat. When voting time comes this means that you’d better make certain that jobs and education (a sub-topic of jobs) are a higher priority than fixing the deficit today. The deficit needs to be fixed, but it doesn’t have to be fixed today. On that, ninety-percent of those in the know are agreed. Too often fixing the deficit is more an ideological issue of downsizing government than taking care of our own backyard.]

What do we need to do for our careers?

Education and learning are an inevitable prerequisite for success and security. Or, as Laura Pappano has argued in a summary: The Master's as the new Bachelor's. Nearly 2 in 25 people age 25 and over have a master’s degree. That’s about the same proportion that had a bachelor’s in 1960. That’s not just the MBA, but includes such degrees as the M.S. in supply chain management, the M.S. in technology and etc. 

In her research she finds that the degree of the moment is the professional science master’s, or P.S.M., combining job-specific training with business skills. Where only a handful of programs existed a few years ago, there are now 239, with scores in development. Florida’s university system, for example, plans 28 by 2013, clustered in areas integral to the state’s economy, including simulation (yes, like Disney, but applied to fields like medicine and defense). And there could be many more, says Patricia J. Bishop, vice provost and dean of graduate studies at the University of Central Florida. “Who knows when we’ll be done?”

All of this means that your kids should do at least one of two things: go to an elite college where the major doesn’t matter (liberal arts, including the humanities are just as marketable from those schools), or major in one of the STEM areas (science, technology, engineering and math).

Although I’ve always thought that Teddy Roosevelt was the first master of spin, I started this blog with his statement because it is just as relevant today. For fun, Mark Twain once grumbled that Teddy Roosevelt, “would go to Halifax (that century’s Timbuktu) for half a chance to show off” and “to hell for a whole one.” Still, Roosevelt’s comment couldn’t be more prescient.

Have You Been Given an "Invisible Promotion?"

By that I mean have you been given more assignments and and wider responsibilities, along with an additional number of reports, all without a significant raise or formal promotion?  That's the focus of an intriguing and spot-on article in the February issue of Fortune Magazine. 

With unemployment at an all-time high, you may feel fortunate to still have a job after all the lay-offs.  But with that staff shrinkage many firms have brought a piling-on of responsibilities to an all-time high.  Sure, you remind yourself, productivity is high--but so is unemployment. 

So what can you do when you find yourself more and more in the throes of an "invisible promotion," and dealing with a lot of unwanted stress?  It is quite possible to make that extra work work for your career in the long run. The article in Fortune (see link above) makes a number of useful suggestions. 

Unemployment Claims DOWN for the Week Ending November 20

To the great surprise of nearly everyone in government and economics, initial unemployment claims went way down last week.  The adjusted figure was 407,000.  That's a whopping 34,000 fewer than the previous week.  There were 542,492 initial claims in the comparable week in 2009.  Now that's significant.

Typically, I would be skeptical of these figures this time of the year, considering them to be a response to holiday hiring.  But most importantly, the Department of Labor said nothing about the typical Thanksgiving/Christmas holiday.  Instead, it looks as though many firms are cutting back on layoffs.  That's real good news.

Again, it's important not to pay too much attention to a single week.  So it's appropriate to be cautious about those figures for several more weeks.  Remember from previous analyses that Mark Zandi is probably the best predictor (along with Larry Summers) of the economy and has written on numerous occasions that initial unemployment claims is the best statistic for the state of the economy. 

Again, the statistical summary from Zandi can be interpreted in this fashion:  Only when claims head down to 400,000 will the economy be creating enough jobs to maintain stable unemployment.  Closer to 350,000 will lower the unemployment rate and mean that the recovery is evolving into an expansion.  When we get to initial weekly unemployment claims of 300,000, boom times are back.

 

However, I've also noticed that there is an emerging consensus on the part of most of the leading economists of all stripes that by the middle of next year the economy should be on the way upward. 

One of the more intriguing insights I've gained over the past couple weeks is that economies that are doing well, especially Germany and China, build their domestic product out of exports.  In striking contrast, the U.S. economy builds its domestic product out of internal consumerism.  If you've got more insight on that issue, I'd appreciate your comment, and even some references.

There is also an exceedingly thoughtful article in the latest Fortune  on the highly influential Jim Chanos--the guy who called the Enron bust early on--who's betting that China's economy is about to implode in a spectacular real estate bust.  Although emotionally, there are a few who'd like to see China slow down, or even fail, a real estate bust and its aftermath would hurt a lot more than the Chinese.

Whatever, the economic news ought to support Thanksgiving shopping and make for a Merry Christmas for all.