What Companies Should Know About Underemployment
by Josh Bays, on Oct 24, 2017 2:03:24 PM
Whether you are locating a new manufacturing plant, distribution center, call center, back office operation or corporate headquarters, one of the most difficult challenges that a company will face is assessing the availability of a qualified workforce.
In an economy that is close to full employment, finding adequate talent is the most influential site selection driver. Site Selection Group, a full-service location advisory, economic incentive and corporate real estate services firm, provides a comprehensive suite of workforce analytics for our clients as they expand, consolidate or relocate their operations. Given the perceived skills gap that is pervasive in the United States, accurately assessing the supply of a qualified workforce is a complex matter.
Two essential components to a comprehensive workforce assessment
When companies expand in — or relocate to — a new market in which they do not have operational experience, they are faced with two workforce challenges: 1) immediately hiring qualified talent in bulk to commence operations, and 2) ensuring a pipeline of talent exists to sustain operations over time. Both require a significant investment, but the risks associated with each can be seriously mitigated through sound workforce analyses.
This particular blog will focus on a key aspect associated with immediately hiring talent, which is quantifying and profiling underemployment. (Please see SSG’s previous blog that discusses assessing the pipeline of talent.)
Where are companies finding talent in bulk?
Most would agree, especially corporate executives, that the U.S. labor market is especially tight. Therefore, companies that need to ramp up headcount to commence operations have two sources for workers: 1) those who are unemployed, and 2) those who are currently employed but eligible for a better opportunity, also referred to as underemployed. (Site Selection Group recognizes those not currently in the labor force that could be enticed into employment, but that subset is largely irrelevant to this topic due to the small number of working age people that fit into this category.)
Based on our extensive corporate site selection experience, it is rare for companies to find a meaningful pool of qualified talent from the ranks of the unemployed. Many share the opinion, myself included, that the majority of the unemployed population in the U.S. today is unemployable without further training and skills development. And this issue does not discriminate by industry. Anecdotally, it is difficult to find a large pool of unemployed welders, machinists, financial analysts, accountants or software developers. In today’s job market, those with marketable skills likely have a job.
National Unemployment Rate
Therefore, companies are forced to ramp up new operations with talent recruited from other companies by hiring from the ranks of the underemployed. However, profiling and quantifying the underemployed population is not a straightforward exercise. Like any workforce analysis, a solid underemployment assessment is built with balanced data sources and proven statistical methodologies. However, a subjective element exists that requires companies to interject personal experiences as well.
There are three fundamental reasons why a worker can be classified as underemployed:
- They are employed in a part-time job but prefer full-time employment.
- They are working in a non-permanent position but prefer a permanent position.
- They are overqualified.
In most markets across the United States, the majority of underemployed workers fall into the overqualified classification. There are several factors that contribute to a worker being classified as underemployed such as their current compensation compared to market compensation for their skill sets, their skill sets relative to the work they are performing, tenure, and overall education.
The challenge for companies is this: Assessing the overqualified subset of the underemployed population is difficult. In Site Selection Group’s experience, there are several data sets that can provide limited insight into this type of analysis such as industry and occupational data provided by the Bureau of Labor Statistics (e.g. Quarterly Census of Employment and Wages, Occupational Employment Statistics) or models and estimates from third-party vendors. While this type of data provides a good baseline understanding of the skills and industries present in a community, it does little to understand their capabilities relative to the work they are currently performing.
Along with traditional data, more and more stakeholders and advisers (Site Selection Group included) are leveraging data sets that monitor real-time workforce demand in a community via online job postings. This data helps identify the specific positions and skill sets that are in high and low demand in a community right now. Using that data as another factor to compare with available talent and/or the employment pipeline in a community can focus in on critical talent surpluses and deficits.
But more than any “off-the-shelf” data set, a comprehensive underemployment assessment requires time and investment in primary data collection. That means interviewing both large and small employers across a diverse set of industries. Speaking with education stakeholders is another critical factor and includes four-year colleges and universities, two-year institutions, and increasingly high schools, which many employers are using to fulfill their workforce needs. And above all, it requires surveying the workforce itself to understand their professional and educational backgrounds, their current employment circumstances, and their desires for enhanced career opportunities.
There is no silver bullet for underemployment assessments
In summary, there’s no single “silver bullet” data source that answers the question about underemployment in a community – that’s what makes underemployment studies challenging. Instead, it requires a careful blending of data and analysis from a number of primary and secondary data sources to clearly paint the picture of the challenges and opportunities that arise from underemployment. As a result, whether hiring an outside vendor to perform a discrete study, or monitoring workforce trends in a community, it’s absolutely critical to leverage the right data sources and methodologies to ensure an accurate and up-to-date workforce picture.