Why Underemployment Assessments are More Critical than Ever
by Josh Bays, on Nov 21, 2016 2:29:16 PM
Whether you are locating a manufacturing plant, distribution center, call center, back office operation or corporate headquarters, it is well documented that the availability of a qualified workforce is the most influential site selection driver. Site Selection Group, a full-service location advisory, economic incentives and real estate services firm, conducts a comprehensive suite of workforce analytics on behalf of our clients. Given the perceived skills gap that is pervasive in the United States, accurately assessing a workforce in order to mitigate future hiring risks can be a complex matter.
Two essential components to a comprehensive workforce assessment
When our clients are expanding or relocating 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 in order to commence operations, and 2) ensuring a pipeline of talent exists in order 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. Simply stated, there are two sources for employees: 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.)
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. is unemployable without further training and skills development. And this issue does not discriminate by industry. Anecdotally, it is largely impossible 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.
Therefore, companies are forced to ramp up new operations with talent acquired 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 sound data sources and intuitive methodologies. However, there is a subjective element as well.
There are three fundamental reasons why a worker can be classified as underemployed: 1) They are employed in a part-time job but prefer full-time employment, 2) They are working in a non-permanent position but prefer a permanent position, or 3) They are overqualified.
For those employees who are overqualified, the typical assessment compares their current compensation to market compensation for their skill sets, or compares their skill sets relative to the work they are performing.
In Site Selection Group’s experience, there are several data sets that are critical to an accurate underemployment assessment. Many economic development stakeholders are familiar with the traditional sources of industry and occupational data provided by the Bureau of Labor Statistics (e.g. Quarterly Census of Employment and Wages, Occupational Employment Statistics) or further modeled and estimated from third-party vendors. Those data sets provide a good baseline understanding of the skills and industries present in a community. The Integrated Postsecondary Education Data System is also a very useful source to quantify the educational output in a community. These are just a couple of the publically available data sets that can be leveraged, but it’s critical to understand all their strengths and weaknesses before relying on them.
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 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 looking 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.
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-data workforce picture.