TIME Economy

A Global Jobs Crisis Is Coming, Says World Bank

And a new report says there’s no immediate solution in sight for the problem

We are heading for a global jobs crisis, says the World Bank, warning that 600 million new jobs would have to be created by the year 2030 just to keep up with current levels of population growth.

A study released by the organization Tuesday at the G-20 Labor and Employment Ministerial Meeting in Australia indicates there are currently over 100 million people unemployed and around 447 million that live on less than $2 per day across G-20 member nations, reports Agence France-Presse.

“As this report makes clear, there is a shortage of jobs — and quality jobs,” said Nigel Twose, the World Bank’s senior director for jobs. He warns that although progress had been made in emerging economies like Brazil, China and South Africa, wage and income inequality continues to widen in several G-20 countries.

“There is no magic bullet to solve this jobs crisis, in emerging markets or advanced economies,” Twose said, adding that the creation of enough jobs to sustain the growing population calls for “a whole of government approach cutting across different ministries, and of course the direct and sustained involvement of the private sector.”

[AFP]

MONEY temps

Why Your Colleague Has the Same Boss, but a Different Employer

Temp nameplate
Jeffrey Coolidge—Corbis

As the economy recovers, companies are hiring more "temporary" workers who aren't all that temporary.

When Americans get back into the office after Labor Day weekend, they’ll probably see fewer empty cubicles than they have in recent years. New jobless claims have been falling, and as of May there are more people working than there were in early 2008, before the downturn.

But some of those people sitting next to you, or chatting with you by the coffee machine, might be working for a different company.

According to the Bureau of Labor Statistics, an estimated 2.9 million Americans work in the “temporary help services industry.” That means that while they show up at the office of one employer, they really work for the staffing agency that signed their contract.

Of course, “temps” are nothing new. Companies—especially in white-collar industries—have been hiring temporary workers since the 1950s, often for specialized tasks for a short period of time. But today, some “temporary” employees do the exact same tasks as permanent employees, and they stick around for a lot longer.

“‘Temp’ is kind of a misnomer,” says Catherine Ruckelshaus, general counsel and program director at the National Employment Law Project, a liberal advocacy group. “Staffing companies are acting like human resource departments. They’re placing permanent slots, if not permanent workers.”

The number of temp jobs really began to balloon in the early 1990s. And since temps are easy to hire and easy to fire, they’ve borne the brunt of the booms and busts of the last 25 years. Temps were hit particularly hard during the recession of the early 2000s. “More than 25 percent of all jobs lost during that period were in temporary help services, despite their accounting for less than 2 percent of total employment,” according to the BLS.

“Whenever there’s a recession, temp and staffing trails off early and picks up in the beginning as the jobs start to come back,” Ruckelshaus says. “Oftentimes employers start to fill up their payroll with temp and staffing jobs as opposed to permanent positions.”

temporary help

That’s exactly what has happened since late 2009. “It’s a little bit early to tell if that’s a long-term trend or if that’s a normal bubble,” Ruckelshaus adds.

Increasingly, blue collar industries like janitorial services, warehouse and logistics, and home care have started to make use of contract workers. So have white collar industries like legal services, accounting, records processing, and media. (Some journalists at Time Inc., which publishes this site, are employed by an outside staffing company.)

What’s in it for companies? They like the flexibility—which is another way of saying easy-to-hire, easy-to-fire. Research suggests that temps are generally paid less, get fewer benefits and face more health and safety violations than direct hires.

In a new case before the National Labor Relations Board, a union argues that a subcontractor relationship has weakened its collective bargaining power. Browning-Ferris Industries gets some of its workers at a recycling facility though Leadpoint, a temporary staffing company. The union wants both companies to be considered those workers’ employers. The case could change the way NLRB evaluates “joint-employer” relationships, the Wall Street Journal reports.

Even so, it’s unlikely to mean that employers will stop using outside staffing—at least not until the job market is strong enough for potential employees to demand a less “flexible” arrangement.

Related:
If Jobs Are Back, Where’s My Raise?
If You’re Looking for Work, the Outlook Is Brightening
5 Ways to Speed Up Your Job Search This Fall

TIME White House

Biden Celebrates Labor Day With Call For ‘Fair Wage’

A job's about a lot more than a paycheck. It's about your dignity, it's about your place in the community, it's about who you are."

Vice President Joe Biden celebrated Labor Day with a call for a “fair wage” at a union rally for workers in Detroit on Monday.

“Folks, the middle class is in real trouble now,” Biden said to an enthusiastic crowd. “A job’s about a lot more than a paycheck. It’s about your dignity, it’s about your place in the community, it’s about who you are.”

Biden’s 20-minute speech employed a populist and personal tone as he took on everything from the estate tax to American corporations that have moved operations overseas.

Biden, who is known for his blue collar roots, referenced his family roots and his ties to labor.

“‘Joey, you’re labor from belt buckle to shoe sole,'” Biden said his uncle told him.

 

TIME Education

Here Are the Crucial Job Skills Employers Are Really Looking For

483636127
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?

MONEY Federal Reserve

The Big Takeaway From Yellen’s Speech. It’s About Jobs

At Jackson Hole, Yellen is greeted by demonstrators who want the Fed to push for more jobs John Locher—AP

Fed Chairman Janet Yellen says the weak economy has room to improve. But many Americans may never get back to work.

Federal Reserve chairm Janet Yellen gave a much-anticipated speech at the Fed’s annual Jackson Hole, Wyo. symposium Friday. The transcript isn’t exactly beach reading. Fed officials, wary of spooking antsy stock and bond traders, can be almost maddeningly obscure. But anyone who’s following the stock market — or looking for a job — should pay attention.

Five years after the financial crisis, the Federal Reserve is still taking extraordinary measures to prop up the economy, including buying up bonds and holding interest rates near zero. Those measures can spur growth as long as the economy isn’t running at full capacity. But once it is, the fear is that they can spur too much inflation.

Officials at the Fed, including the presidents of the regional banks and members of the committee that sets rates, are split into two broad camps. Inflation “hawks” believe it’s time to start weaning the economy from aid. “Doves” favor continued intervention. Earlier this week the release of the minutes of a Fed meeting in late July showed the hawks pressing their point, emphasizing that the economy was improving and raising questions about whether the much-anticipated return to normal interest rates should begin.

Yellen is widely considered a dove. That means on Friday Fed watchers were looking for signs she might be trying to rebut the argument that the economy is running near full tilt. In the event, she seemed to give ammunition to both hawks and doves.

Here are the speech’s highlights:

Yellen starts off both cheering the recovery and reminding us how far we may still have to go.

The unemployment rate, at 6.2 percent in July, has declined nearly 4 percentage points from its late 2009 peak. Over the past year, the unemployment rate has fallen considerably, and at a surprisingly rapid pace. These developments are encouraging, but it speaks to the depth of the damage that, five years after the end of the recession, the labor market has yet to fully recover.

That’s pretty dovish.

But in the bulk of her speech she explains reasons why it’s hard to get a read on the labor market, starting with the fact so many people have been out of work for so long.

Consider first the behavior of the labor force participation rate, which has declined substantially since the end of the recession even as the unemployment rate has fallen. As a consequence, the employment-to-population ratio has increased far less over the past several years than the unemployment rate alone would indicate, based on past experience. For policymakers, the key question is: What portion of the decline in labor force participation reflects structural shifts and what portion reflects cyclical weakness in the labor market?

That’s subtly hawkish. Here’s why: Usually, when the unemployment rate falls more people start looking for work. This time that hasn’t happened to the extent one might expect. The worry is, if there’s a big group of workers who just aren’t going to come back into the work force—because they are just too discouraged, or they don’t have the skills for the current jobs on offer, or maybe because they’ve been replaced by new technology—then maybe there isn’t as much “slack” in the economy as the low participation numbers suggest. Even with a comparatively high number of people working, employers could start to feel pressure to raise wages (creating inflationary pressures) to attract and retain the workers who’ve stayed in the labor force.

Yellen doesn’t answer whether this “structural” worry is justified, but she does flesh out the problem further.

….the rapid pace of retirements over the past few years might reflect some degree of pull-forward of future retirements in the face of a weak labor market.

Translation: Many baby boomers who lost their jobs may simply have decided to retire, rather than seek to reboot their careers.

But then Yellen goes a bit dovish again. She points out that wage growth has in fact been sluggish. That suggests at least some extra slack.

Over the past several years, wage inflation, as measured by several different indexes, has averaged about 2 percent, and there has been little evidence of any broad-based acceleration in either wages or compensation.

In other words, the Fed is still playing wait-and-see. For investors, that suggests more of the fairly bullish status quo: low rates and a slow unwinding of the “quantitative easing” bond-buying program. For people hoping for the job market to come roaring back, the Yellen’s speech sounds a somewhat discouraging note. It suggests that the economy could have shifted into a permanently slower mode, with fewer jobs. Or, at any rate, that there are many at the Fed who are willing to live with that to ensure inflation stays low.

MONEY psychology of money

When Is It Okay to Ask an Unemployed Friend to Pay Up?

Have you ever wanted to be a personal-finance advice columnist? Well, here's your chance.

In MONEY’s “Readers to the Rescue” department, we publish questions from readers seeking help with sticky financial situations, along with advice from other readers on how to solve those problems. Here’s our latest reader question:

Is it okay for me to ask my unemployed friend to pay for his share of dinner sometimes?

What advice would you give? Fill out the form below and tell us about it. We’ll publish selected reader advice in an upcoming issue. (Your answer may be edited for length and clarity.)

Thank you!

 

MONEY Economy

WATCH: Job Growth Continues, But Unemployment Rises Too

The economy has added at least 200,000 jobs per month for six straight months, the longest such streak since 1997.

MONEY

Report: U.S. Adds 209,000 Jobs in July, Unemployment Rate Remains Steady

The U.S. added 209,000 jobs in July, but the unemployment rate remains steady

The U.S. economy added 209,000 new jobs in July, according to the latest employment report from the Bureau of Labor Statistics. The number is slightly lower than the 233,000 jobs some analysts expected. Despite the increase, unemployment ticked up slightly to 6.2%.

The report also showed that the labor force participation rate—the percentage of the working-age population either employed or looking for a job—moving up only slightly to 62.9%, virtually unchanged since April. The number of long-term unemployed, who make up 32.9% of the total unemployed population, also changed little, moving from 3.1 million to 3.2 million.

The BLS revised upwards its May and June employment growth figures, reporting 15,000 more jobs were added in those months than previously reported.

Job growth is always a closely-watched indicator of economic performance, but investors will be paying especially close attention to today’s numbers and what they might mean for interest rates. The Federal Reserve has shown increased confidence in the economy, and recently began phasing out its bond buying program known as quantitative easing.

While Federal Reserve Chair Janet Yellen announced on Thursday that the Fed still had no plans to increase interest rates, citing concerns with the housing market’s slow recovery, many economists believe that strong GDP growth in the last quarter combined with persistent job growth may soon force the central bank’s hand as it seeks to keep inflation from creeping over 2%. The beginnings of a return to pre-recession interest rates would be good sign for the economy as a whole, but some investors may stand to lose money if interests rates rise earlier than expected.

MONEY The Economy

For the Fed, There’s Only One Excuse Left to Keep Rates Low

Aerial view of housing development
David Zimmerman—Getty Images

The economy and inflation have now risen to levels where the Fed has to start thinking about raising rates. The only excuse left: the weaker-than-expected housing market.

The pressure is mounting on the Federal Reserve to start raising interest rates — and Fed chair Janet Yellen is running out of excuses.

On Wednesday, the Fed announced that it would keep short-term interest rates near zero and would continue to gradually taper its stimulative bond-buying program as the economy improves. No surprise there.

But the chatter for the Fed to stop coddling the economy really heated up Wednesday morning.

That was when a new government report showed that, after hitting a speed bump in the snowy first quarter, the economy really sped up between April and June. Gross domestic product grew at an annual rate of 4.0% in the second quarter.

What’s more, the government went back and revised some of its estimates for prior quarters. Uncle Sam now believes the economy grew well above the normal 3% rate in three out of the past four quarters.

“With this morning’s GDP release,” says James Paulsen, chief investment strategist and economist at Wells Capital Management, the “is-the-Fed-behind-the-curve fears among investors are increasingly evident.”

The GDP report included preliminary measures of inflation that might not sit well with Wall Street’s inflation hawks.

In the second quarter, the so-called personal consumption expenditure index, which is the Fed’s preferred measure of inflation, grew 2.3%. If you strip out volatile food and energy costs, core PCE still rose 2%. UBS economist Maury Harris notes that this represents a big jump from the 1.2% pace of core inflation in the first quarter. Plus, 2% is the target that the Fed has openly set for inflation.

While the actual level of inflation today may not be so worrisome, the ability to fight inflation after the fact is, says Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott. “The challenge with inflation is that there’s a very long lag between policy and price pressures, so a Fed concerned with inflation 12 to 24 months down the road needs to start acting now to protect against the prospect.”

Three years ago, the Fed drew another line in the sand. The Fed back then said that it would not think about raising rates until the national unemployment rate fell to 6.5%. Back then, policy makers thought that this would not transpire until around 2015. However, the unemployment rate fell below this level in April and is threatening to fall below 6%.

US Unemployment Rate Chart

US Unemployment Rate data by YCharts

In recent months, as the Fed has tried to explain why it won’t hike rates soon despite rising inflation and falling unemployment, Yellen introduced a new reason altogether: housing.

In mid July, in a monetary policy report delivered to Congress, Yellen said:

The housing sector has shown little recent progress. While it has recovered notably from its earlier trough, activity in the sector leveled off in the wake of last year’s increase in mortgage rates, and readings this year have, overall, continued to be disappointing.

Later on in the report, Yellen noted that the lack of traction in the housing sector is probably preventing the labor market from reaching its full potential:

Even after rising noticeably in 2012 and the first half of 2013, real residential investment remains 45 percent below its pre-recession peak. The lack of a rapid housing recovery has also affected the labor market: Employment in the construction sector is still more than 1.6 million lower than the average level in 2006.

In announcing its rate decision on Wednesday, the Fed’s Federal Open Market Committee reiterated that while economic growth in general appears to be returning, “the recovery in the housing sector remains slow.”

The irony is that the two things that are likely to get the housing market on track are low mortgage rates and an improving job market.

To achieve the latter, the Fed is keeping rates low. Yet to achieve the former, the Fed needs to show the bond market that it is serious about combatting inflation. And the worst way to do that is keep rates low.

There, in a nutshell, is Janet Yellen’s conundrum.

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