TIME Education

Here Are the Crucial Job Skills Employers Are Really Looking For

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Tom Merton—Gety Images

'Soft skills' like professionalism and oral communication rank among the most valued, regardless of education level

Labor Day offers an opportunity for politicians and economists to offer their two cents on the state of labor. It’s a good bet that some of that commentary will focus on the so-called “skills gap” — the notion that millions of jobs in highly technical fields remain unfilled while millions of Americans without those skills remain unemployed.

The solution according to the pundits? Education and training that focus on technical skills like computer engineering, or on crucial but scarce skills like welding. Match these newly trained employees with open jobs that require those skills and, voila, the skills gap is gone — and the labor market is steadied.

If only it were so simple.

Yes, more American workers need to learn skills that are underrepresented in the labor market. And yes, those technology titans who advocate for more challenging school curricula, for greater funding for science and engineering education and for immigration reforms to bring more skilled workers are responding to a real problem. But that’s not all there is to it. The problem with the skills gap argument is that it accounts for only one set of skills that employers consider important.

I work at Books@Work, a non-profit organization that brings university professors to the workplace to lead literature seminars with employees. The employers with whom we work want to provide professional development opportunities for all members of their organizations, and — we like to think — are more creative in their approach to doing so than most. Yet even this group of employers has few ways of helping their employees to develop skills that aren’t about content or subject matter — skills like communication, critical thinking, creativity, empathy and understanding of diversity.

Such skills cut across sector, hierarchy and function – and are, according to employers, crucial to the success of their companies. According to research conducted by the Association of American Colleges and Universities (AACU), 93 percent of business and non-profit leaders who were surveyed consider critical thinking and communication skills to be more important than a person’s undergraduate major when it comes to hiring.

That’s bad news because, while many public programs try to bridge gaps in the knowledge of future workers, there are few programs to address the gap in skills that are more difficult to measure, like creativity and critical thinking. My colleagues and I often hear from hiring managers who are hungry for programs that will encourage their employees (at all levels of the organization) to think more creatively, communicate more effectively and become more adept at reacting to changing circumstances.

The gap in these “soft” skills is very real. Professionalism/work ethic, teamwork/collaboration, and oral communication rank among the top five skills valued by employers hiring candidates at any educational level, according to one study. Yet employers rank significant portions of those entering the workforce deficient on all these dimensions. The problem is particularly acute among those without a college degree. Employers rate those entering the workforce with a high school degree deficient on professionalism/work ethic, critical thinking/problem solving, and oral communication. Meanwhile, employers do not regard a majority of college graduates deficient in any of these areas.

The introduction at the K-12 level of the Common Core, which is supposed to emphasize critical thinking and problem solving, may produce changes in these figures in the years to come. But for now, those without access to a university education — and even some workers with college degrees — enter the workforce lacking the interpersonal, reasoning and thinking skills necessary for success. Unlike direct knowledge areas — like computer basics — that can be taught through employer training sessions, there is no set curriculum for critical thinking or applied reasoning.

There is no silver bullet for addressing this gap, though our approach at Books@Work, having employees read literature and reflect on it, is one example of an attempt to disseminate some of the benefits of a liberal arts education beyond the confines of the traditional university setting. We need many more such efforts. In discussing Macbeth or Frankenstein, workers explore complex (and timeless) interpersonal dynamics — an opportunity that a training on the latest operating system or review of safety regulations is unlikely to provide.

We’ve found that reading literature with colleagues can offer a new perspective on the practice of work itself, leading to greater professionalism and new ways of doing things. Themes of empathy in a powerful novella by May Sarton, As We Are Now, which is about a woman in a terrible nursing home, led workers in one hospitality company to reconsider their approach toward customers, resulting in a renewed awareness of customer needs and expectations. A conversation about the racial tension in the post-war Northwest in David Guterson’s Snow Falling on Cedars became a platform to discuss personal integration issues in a company growing rapidly through acquisition and organizational acculturation.

Programs like Books@Work are not an adequate substitute for public policy solutions to the gap in thinking and interpersonal skills. We do not address disparities in such skills among job applicants — only among those who are hired. And they place the burden for addressing the problem squarely with employers. But programs that address the significant divide in soft skills are a first step toward realizing that solving the so-called skills gap requires more than teaching kids to code, retraining the unemployed as welders or encouraging college dropouts to complete technical degrees. We all need to continue to improve the most important skill of them all – our thinking.

Rachel Burstein, Ph.D. is Academic Director at Books@Work. This piece originally appeared at Zocalo Public Square.

MONEY Jobs

If Jobs Are Back, Where’s My Raise?

Empty pockets of businessman
Dude, where's my raise? Jeffrey Coolidge—Getty Images

Despite good jobs numbers, wages aren't growing much. The reason why is the biggest debate in economics right now

Today’s strong jobless claims data, which show that applications for unemployment benefits dropped again, is one reason to be cheerful heading into the Labor Day weekend.

Yet despite this, and the fact that the unemployment rate is now down to 6.2%, the economy still has this glaring weak spot: Workers aren’t getting serious raises.

Here’s how two important measures of wage growth have done since the recession. (The Brookings Institution keeps a running tab of these and other key economic indicators in the excellent interactive graphic here.)

fredgraph

Basically, what you are seeing is that pay to workers, whether measured as hourly wages or salaries plus benefits, has been running neck-and-neck with inflation of a bit under 2%. As Fed chair Janet Yellen pointed out in her recent speech at a Fed symposium in Jackson Hole, Wyo., wages are also growing less than workers’ productivity.

Why is this happening? Yellen, for one, likely thinks there’s some remaining “slack” in the economy. Employers are still wary about whether there’s growing demand for their stuff, and so they remain slow to hire. The low unemployment figures leave out a large number of workers who have become discouraged after a long time out of work. But if the slack explanation is right, as companies continue to hire, more of those labor-force dropouts will be drawn back into the employment pool. You won’t see companies under serious pressure to raise wages until that process has played out and companies start competing for a scarcer pool of job-seekers.

Yellen points to (though doesn’t endorse) another possible explanation. Many economists believe wages are downwardly “sticky”—even when companies want to cut costs, they’d rather lay people off than reduce the pay of the people they hang onto. That means that for people who kept working after the recession, wages were higher than they’d otherwise be. And now that the economy is (fitfully) coming back, maybe that means there’s also less room for wages to rise.

Another factor, of course, is that both corporate managers and workers are human, and people can take some time to adjust to new economic signals. Back in July, I sat down with a stock fund manager, who talked about what he was seeing going on at the companies he kept in touch with. More than five years after the financial crisis, he said, the corporate culture among top managers had changed. The people in the C-suite got their positions not by expanding their companies and finding great new hires, but by cutting costs. And they got used to a slack labor market. The manager used the specific example of truckers: You always know you can get a guy to drive a truck from your warehouse to your customer on a moment’s notice. So why worry about hiring more truckers?

As it happens, at the New York Times Upshot blog earlier this month, Neil Irwin wrote that this may be changing. A trucking company called Swift told investors it was having hard time finding enough drivers. The company says the problem is that there aren’t enough skilled people, but Irwin wonders if the problem is really that companies just aren’t paying enough. Trucker pay has fallen, in real terms, over the past decade. Irwin writes:

The most basic of economic theories would suggest that when supply isn’t enough to meet demand, it’s because the price—in this case, truckers’ wages—is too low. Raise wages, and an ample supply of workers should follow…. But corporate America has become so parsimonious about paying workers outside the executive suite that meaningful wage increases may seem an unacceptable affront.

The question now is, how strong does the economy have to get before employers are forced to change their thinking?

Related:
If You’re Looking for Work, the Outlook is Brightening
Why the Fed Won’t Care About Higher Prices Until You Get a Real Raise
What’s the Deal With America’s Declining Workforce?

TIME nation

Detroit: America’s Emerging Market

How the city can teach us to reinvest the rest of the U.S. economy

In August, a year after I wrote a TIME cover story on Detroit’s bankruptcy, I visited Motown again. This time I found myself reporting on a remarkable economic resurgence that could become a model for other beleaguered American communities. Even as Detroit continues to struggle with blight and decline–more than 70,500 properties were foreclosed on in the past four years, and basic public services like streetlights and running water are still spotty in some areas–its downtown is booming, full of bustling restaurants, luxury lofts, edgy boutiques and newly renovated office buildings.

The city struck me as a template for much of the postcrisis U.S. economy–thriftier, more entrepreneurial and nimble. Many emerging-market cities, from Istanbul to Lagos to Mumbai, share similar characteristics, good and bad. The water might be off on Detroit’s perimeter, but migrants are flooding into its center, drawn by lower-cost housing and a creative-hive effect that’s spawned a host of new businesses.

Much of the resurgence has been led by Quicken Loans founder Dan Gilbert, who a few years back decided to relocate his company’s headquarters downtown, moving from the suburbs to take advantage of the city’s postcrisis “skyscraper sales,” as well as the growing desire of young workers to live in urban hubs. “If I wanted to attract kids from Harvard or Georgetown, there was no way it was going to happen in a suburb of Detroit, where you’re going to walk on asphalt 200 yards to your car in the middle of February and have no interaction with anyone in the world except who’s in your building,” says Gilbert, 52.

Since 2010, Gilbert has created 6,500 new jobs downtown, bought up tens of thousands of square feet of cheap real estate and brought in 100 new business and retail tenants, including hot firms like Twitter, as well as a bevy of professional-services firms. Lowe Campbell Ewald, one of General Motors’ advertising agencies, recently moved back downtown after years in the suburbs, citing better client-recruitment possibilities there. Companies of all types are catering to a growing number of young entrepreneurs who are making the most of cheap real estate (Quicken subsidizes rents and mortgages) and local talent (southern Michigan still has one of the nation’s highest concentrations of industrial-product designers) to create new businesses. For instance, there’s Chalkfly, a dotcom that sells office and school supplies online, and Shinola, the cult-hit watch company that advertises $600 timepieces as “made in Detroit.” Their success is already raising rents–per-square-foot rates have doubled in the past four years–and bringing in tony retail brands like Whole Foods.

The question now is how to spread the prosperity. The answer starts with better public transportation. Motown has always been a disaster in this respect. It used to be that nobody wanted to go downtown; now nobody wants to leave. The M-1 Rail, a new public-private streetcar due to be completed in 2016, aims to link neighborhoods. GM, Penske, Quicken and other firms are contributing the majority of its $140 million cost, and the rail will be donated back to the city within a few years. Studies show that a similar project in Portland, Ore., has generated six times its cost in economic development. In the past few months, officials from New Orleans and Miami have visited Detroit to study the project.

Reinventing Detroit’s manufacturing sector is the next step. That means connecting the dots between the public and private sectors, businesses and universities, and large and small firms. Detroit’s old industrial model was top-down: the Big Three dictated terms to thousands of suppliers, who did what they were told. The new model will be more collaborative. Many of the innovations in high-tech materials, telematics and sensors are happening on campuses or at startups, with the aid of groups like the Michigan Economic Development Corp. The University of Michigan has become a test bed for driverless cars. A new federally funded $148 million high-tech manufacturing institute just opened in Detroit’s Corktown neighborhood.

One could imagine the automakers playing a key role in this resurgence by investing more broadly in local innovation, via their own venture-capital arms. Ford, which acquired a local digital-radio technology startup last fall, is beginning to do just that. It would provide a much needed injection of cash into the city’s innovation economy and offer the automakers a new line of business.

Ultimately, it will take all that and more to ensure that Detroit’s downtown rebirth grows into a boom that is more broadly shared.

MONEY Economy

Is Inflation Really Dead?

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Joe Pugliese

We put the question to Pimco Chief Economist Paul McCulley, who explains why you don't have to worry about rising prices—and why Forrest Gump was a great economist.

Paul McCulley, 57, retired from Pimco in 2010 but returned as chief economist in May. Pimco runs almost $2 trillion, including Pimco Total Return, the world’s largest bond mutual fund. McCulley coined the term “shadow banks” in 2007 to explain how Wall Street could trigger a financial panic.

MONEY assistant managing editor Pat Regnier spoke to McCulley in late July; this edited interview appeared in the September 2014 issue of the magazine.

Q: Is inflation really dead?

A: Inflation, which is below 2% per year, may very well move above 2%. In fact, that is very much the Federal Reserve’s objective. So it will move up, but only from below 2% to just above 2%. But in terms of whether we will have an inflationary problem, I don’t think we have much to worry about. Back in my youth, in the days of Paul Volcker at the Fed in the early 1980s, inflation was considered the No. 1 problem. Now I’m not even sure it’s on the top 10 list, but it for darned sure ain’t No. 1.

Q: What’s holding inflation down?

A: First, we’ve had very low inflation for a long time, and there’s inertia to inflation. The best indicator of where inflation will be next year is to start from where it is this year. We won the war against inflation. It’s that simple.

Second, we still have slack in our economy, in both labor markets as well as in product markets. Companies have very little pricing power—as an aside, the Internet is a reinforcing factor because consumers can find the price of everything. And we have too many people unemployed or underemployed for workers to be running around demanding raises.

Finally, the Fed has credibility, so expectations of inflation are low. Unmoored expectations could foster higher inflation, as companies try to anticipate higher costs. Fed credibility is a bulwark against that. Unlike 30 years ago, the Fed has had demonstrable success in keeping prices stable by showing it is willing to raise short-term rates to slow growth and inflation.

Q: What about quantitative easing, in which the Fed buys bonds with money it creates? Doesn’t that create inflationary pressure?

A: I’ve been hearing that song for the last five years. And inflation has yet to show up on the dance floor. People say, “The Fed’s been printing money. It’s got to someday show up in higher inflation.” My answer, borrowing from the famous economist Forrest Gump, is that money is as money does. And it ain’t doin’ much.

Q: You mean money isn’t getting out of banks into the broader economy to drive up prices?

A: Yeah. I mean the Fed has created a lot of money, but it’s done so when the private sector is in deleveraging mode, meaning people are trying to get out of debt. There has been low demand for credit, so the inflationary effect of money creation has been very feeble.

Q: You’ve said that a low-inflation world also means low yields and low fixed-income returns. Why?

A: People my age—I’m 57—remember the days of double-digit interest rates and double-digit inflation. But as the Fed’s fought and won its multidecade war against inflation, interest rates have come down. And it has been a glorious ride for bond investors from a total-return perspective because when interest rates fall, bond prices go up, so you earn more than the stated interest rate.

But now inflation is actually below where the Fed says it should be. So there’s nowhere lower that we want to go on inflation to pull interest rates down further. Now what you see is what you get, which is low stated nominal yields. In fact, rates will drift up in the years ahead, which is actually negative for the prices of bonds.

Q: What does this mean for how I should be positioning myself as a bond investor?

A: First and foremost is to set realistic expectations that low single digits is all you’re going to get from your bond allocation.

New normal

Q: Is there anything I can do to get better yields?

A: For bond investors, what makes sense right now is to be in what Pimco Total Return Fund manager Bill Gross calls “safe spread” investments. These are shorter-duration bonds—meaning they are less sensitive to interest rate changes—that also pay out higher yields than Treasuries do. These could be corporate bonds or mortgage-related debt. They can also be global bonds.

Q: Pimco says investors should also hold some TIPS, or Treasury Inflation-Protected Securities. Why would I own an inflation-protected bond in a low-inflation world?

A: It’s a diversification bet in some respects. But also, the Fed’s objective is 2% inflation, higher than it is now. What’s more likely? That the Fed misses the mark by letting inflation fall to 1%, or by letting inflation hit 3%? I think 3% to 4% is more likely. TIPS protect you against the risk of 3% to 4% inflation. The Fed has made clear that if it’s going to make a mistake, it wants to tilt to the high side, not the low.

Q: Why wouldn’t the Fed just aim for the lowest possible inflation rate?

A: When the next recession hits, do you want a starting point of inflation in the 1% zone? No. A recession pulls down inflation, and then you are in the zero-inflation or deflation zone.

Q: And deflation is bad because … ?

A: Because then people with debt face a higher real burden of paying it off.

Q: How much time does Pimco spend guessing what the Fed will decide? Pimco Total Return lagged in 2013 when the Fed signaled an earlier-than-expected end to quantitative easing.

A: You’ve asked me a difficult question because I wasn’t here. But I was here for the entire first decade of the 2000s, and I know a lot about the firm. I can tell you the firm spends a huge amount of time and, more important, intellectual energy in macroeconomic analysis, including trying to reverse-engineer what the Fed’s game plan is. Fed anticipation is a key to what Pimco does. You don’t always get it right, but not for a lack of effort.

Q: You argued the 2008 crisis was the result of good times making investors complacent. With Fed chair Janet Yellen talking about high prices for things like biotech stocks, is complacency a danger again?

A: I don’t worry too much about irrational exuberance in things like biotech. It doesn’t involve the irrational creation of credit, as the property bubble did. Think of the Internet and tech bubble back in 1999. It created a nasty spell, but it didn’t lead to five years in purgatory for the economy either.

TIME energy

Dropping Oil Prices Threaten Moscow’s Budget

Oil refinery in Ufa, Russia, seen in April 2014.
Oil refinery in Ufa, Russia, seen in April 2014. Andrey Rudakov—Bloomberg/Getty Images

Russia has seen its economy boom with the price of oil. But if the cost of crude falls, Moscow could struggle to make ends meet

This article originally appeared on OilPrice.com

Oil and gas are at the heart of the Russian economy and are largely responsible for keeping Moscow’s government budget in balance. But the recent decline in the price of oil from the North Sea and Texas has now spread to Urals crude, giving President Vladimir Putin one more economic headache.

The price of Urals crude fell just below $100 per barrel on Aug. 18, an 18-month low. On Aug. 19, it dropped to less than $97 per barrel. These declines coincided with similar drops in the price of Brent crude from the North Sea and U.S. oil.

The reasons are fairly easy to recognize. First, the United States has been on a drilling tear, extracting oil at record levels to increase its supply at a time when demand is waning. Second, though more tentative, is that conflicts in North Africa and the Middle East are so far not interfering with oil production in these regions.

This oil production boom raises problems for Moscow. Two-thirds of Russia’s exports are oil and gas, accounting for fully half of the central government’s revenues. That means that so far this year, every dollar drop in the price of Russian oil means a cut of about $1.4 billion in revenues.

This comes as Russia’s oil industry joins its defense and finance sectors as targets of sanctions by the European Union and the United States over Moscow’s unilateral annexation of the Crimean peninsula in Ukraine and its suspected role in the fighting between Ukrainian forces and pro-Russian separatists.

Some analysts say the effects of the lower oil prices may not be lasting unless the drop in oil prices fall further in coming years. Vladimir Kolychev, the chief economist at VTB Capital, a global investment firm with headquarters in Moscow, says brief dips have less of an impact on Russia’s budget than the average cost of oil over an entire year.

“The first thing to remember is that the oil price projected by the finance ministry is … $104 average for the year – that still looks conservative,” Kolychev told Reuters. “Even if the oil price falls to $90, we’ll still have $105 average.”

As an example, Kolychev calculates that Russia’s budget would balance if oil’s average price fell to $103 per barrel.

Even if Moscow can tame its budget, it seems clear that Russia’s oil sector will feel the pain from the one-two punch of Western sanctions and lower prices. Vedomosti, a Russian financial journal, reported Aug. 14 that government-owned Rosneft, Russia’s largest oil company, has asked Moscow for more than $40 billion in debt relief because of the sanctions.

That’s a sharp reversal from just a month ago. Western sanctions were imposed on July 15, and three days later, Rosneft officials shrugged them off, saying the company would continue to pursue its plans and reap profits. In fact, a week after that statement, Rosneft CEO Igor Sechin boasted that the company’s revenues were soaring.

 

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