Match Americans to Opportunities

If it was functioning well, the American labor market would do a reasonably good job of matching Americans to opportunities. Employers would be able to signal what skills they need. Job applicants would be able to signal clearly what they can do. Educators and trainers would respond quickly to gaps.

But the American labor market does not work nearly as well as it should. Credentials are out of date and often not very meaningful to employers. Job applicants have trouble knowing what skills are desired and finding flexible ways to learn them. Educators and trainers are out of sync with a fast-changing economy.

As an illustration, consider a common and important middle- skill career path: work in information technology. These IT middle-skill jobs are in firms all over the economy.

A typical entry-level job in this field, the one with the most openings, is at a help desk (in New York City, which has higher than average salaries, the average advertised annual salary for such a job was about $66,000). Studies of the career paths of IT professionals make it clear that the entry-level job does not necessarily require a college degree. The help desk entry-level needs certain basic skills, none of which are necessarily correlated to a BA degree program.

That help desk job could then lead to roles in advanced computer or network support (average NYC salary of about $80,000 and higher) and on up to network and database administrators — with even higher salaries. Different skills are needed to advance along the career path. For instance, a help desk worker who wanted to be a network support specialist might learn to master software tools like Solaris and Apache web server.[1]

This is not an unusual example. Another key entry-level point in the business world is in sales work, such as retail sales. Again, few of the formal skills for this job are necessarily correlated to a BA degree program.

Yet, more and more often, employers looking for an IT entry- level employee, like a help desk worker, require applicants to have a bachelor’s degree. Why?

From the employer’s perspective, the existing educational system usually does not train people with the specific skills the employer needs. The menu of credentials to choose from is pretty limited — a high school diploma, an associate’s degree, or a bachelor’s degree. Not knowing what this signifies for their needs, a usual default approach for the employers is to just require the bachelor’s degree as a recruiting filter. This gets coded into the human resources (HR) department software. It becomes a routine. This practice is called up-credentialing. For now, employers can often get away with up-credentialing a job and still acquire someone because, at this moment in history, labor supply is relatively abundant, including the supply of college graduates looking for work.

The old labor market system, with its credentials, was designed in its basic elements more than a hundred years ago. It worked reasonably well in serving the older world of training “blue-collar” factory workers and “white-collar” office workers. But that world has been changing rapidly. It is becoming a “no-collar” world with fast-changing skills and job categories.

Now the employers have trouble signaling what they really need. The available credentials do not signal well what people actually know or can do. The applicants do not know how much education they really need to buy. All overcompensate. Or they try to overcompensate, since most Americans do not complete college. The majority who try fail to earn a degree. They are often left with only large intractable debts to show for the effort.

It is worth breaking down some of the ways the now out-of- date labor market system sets up failure:

• Employers are often unhappy that they are not getting someone with the right “hard” skills (technical training) that are needed. It is not easy to identify those skills and attach them to established academic credentials.
• Employers are also often unhappy that they are not getting someone with the right “soft” skills, in speaking or writing. They find it is hit or miss as to whether the usual academic credentials will mean the person has such skills.
• The job applicant has trouble figuring out just what the employer needs, how to get those skills, and how to demonstrate credibly that she or he has what it takes.
• Most Americans (about three-quarters between the ages of 25 and 64) do not have a bachelor’s degree.[2] So up-credentialing redoubles their sense of failure, of being shut out.
• For the Americans who do have a bachelor’s degree, returns are good in many cases. But a large fraction now find themselves underemployed, doing work that does not require such a degree, or just unemployed.[3] Their degrees are often in subjects that do not line up well with the labor market, so they merely join the pool of good people with no particular skills.

An unusual combination of researchers and scholars recently studied the problem of “middle skills” in America. They were consultants from Accenture, analysts of labor market data from a firm called Burning Glass, and scholars from the Harvard Business School. Their conclusion is ominous.

Underemployment is rampant for both middle-skills workers and recent college graduates. Too few have highly marketable skills; too many have pursued courses of study for which there is little demand. Ballooning student debt threatens the future of graduates and looms over the federal budget. Employers find it hard to fill occupations ranging from healthcare technicians to technical sales and service. Companies cite fears about the availability of skilled labor as a major deterrent to their growth plans.

The Labor Market as an Ecosystem: The Worker-Trainer-Employer Triangle

Working with a group from the Markle Foundation, the PCAST study of workforce training offered a useful way of visualizing a whole system of interactions that should occur in America’s labor market. In the figure below we show a triangle in which each corner is trying to signal the other about needs and capabilities.[4]

Right now this interaction does not work well. There are several matching services, but few integrate all three angles. They do not have a common vocabulary or common platforms. The platforms are sometimes proprietary and closed off to the general public. The platforms do not “learn” from what happens in the interactions.

One of the more innovative developers, Felix Ortiz, founder of Viridis Learning, suggests that few evidence-based employment decision-making tools currently exist on the market. It seems to him that employers might have no better than an estimated 50 percent success rate at hiring qualified middle-skill workers.[5]

One cause of this skills disconnect appears to be that the three major players — employers, job seekers, and training and education providers — are not adequately engaged with each other.

• The system fails most employers. In a substantial McKinsey study of education to employment, less than a third of employers felt they were successful in getting the talent they needed. Those were the employers who connected with education providers and with youth. Others were not so engaged or tried to connect but found the existing structures did not work for them.
• The system also fails most young job seekers. Although their perspectives were of course very different from those of the employers, the majority of them — regardless of whether they went to college — felt that the education system had not prepared them for an entry-level position in their chosen field.
• The only contented group was the educators. They thought they were doing a fine job and producing graduates ready to learn. The McKinsey researchers found that the educators seemed to be living in a “parallel universe.”[6]

To be fair, as Dennis Yang, president and chief operating officer of Udemy, points out, “Universities weren’t designed to change curricula and introduce new classes at the pace required by changing industry requirements.” After all, he notes, “we now live in a world in which half of today’s jobs didn’t exist 25 years ago.”[7]

We believe that Americans should consider deep innovation and redesign in the way we have approached problems of personal development for the last hundred years and more. Those approaches, like the spread and standardization of today’s high schools and colleges, were radical changes that transformed America. Those approaches worked well in their time. The times really are changing. It is our turn to do what Americans did when they coped with the second economic revolution: rethink the system.

Much of the current debate about education reform occurs in the framework of the existing system. In that system a critical variable is the classroom teacher. So Americans have been locked in heated debates about how to improve teacher quality and teacher accountability.

We respect those arguments. Many of us have participated in them. Teachers matter. But our aim is to look beyond the teacher as miracle worker and more to the system in which teachers and many others try to help people live the life they want.

Thus, we call for five kinds of actions:

1. companies should better define the skills they need and join in private-public alliances to develop the human talent they will need;
2. develop a broader, more flexible, and useful system of credentials to show what Americans know and can do;
3. reverse the modern trend toward disconnection of “academic” from “career and technical” secondary and post- secondary education;
4. build a much more interactive and functional digitized labor market to improve the functioning of the worker- trainer-employer triangle; and
5. help Americans move more easily to where they can find opportunities.

More Flexible and Useful Credentials

Employers often want to find someone who can take “book” skills and apply them constructively in some practical setting. These skills might not be calculus, for example, but they might just involve “numeracy,” the ability to understand and work with materials that are presented in numbers or some abstract forms, like shapes and graphs. Such a credential might reveal the kind of adult job skills that the OECD surveyed, but might not necessarily line up with all the skills, including those for college prep, that are meant to be represented by a high school diploma.

The existing certificates tend to be too rigid or narrowly oriented. They may point to the quality of college prep (e.g., grades or AP test scores in particular subject disciplines like calculus). Or, less often, some have vocational courses or tests for a specific kind of job. But graduation from a multiyear secondary school in vocational education in some particular field may also be too rigid. Most students may need or want to shift their career pathway in these early years, often more than once.[8]

We would welcome a more open-ended system in which individuals who took the equivalent of a year or two of postsecondary education, perhaps not enough to earn a degree, could actually get value for their investment by showing what they had learned, at least up to that point, in some widely valued skills. The process therefore does not have to require the completion of college or the expenditure of excessive time or money. Already able to get recognition for some of their skills, learners could tackle the next stage when ready and able.

The building up of such alternatives poses some big challenges, of course. We can call them the three Cs — content, credentials, and a compact.

Content. Working with the private sector, developers of new credentials must base them on well-understood definitions about what skills most importantly make up something like “numeracy.” The work should be open and evidence based, inviting evolutionary revision.

We want to repeat that opening clause: “working with the private sector.” That will be key to the “compact” part, described below.

Credentials. Any credential should be digitally portable, at least as secure and movable as a person’s money. It should be backed by credible assessments that could involve simulations and other state-of-the-art techniques, not necessarily the traditional paper tests.

Compact. The only concrete proof that employers buy into the system is for a number of firms to join a compact promising to respect the credential in their HR policies in a way that job seekers will hear about, notice, and understand. That is why the employers have to be brought into the conversation, the process of developing the credential. It is why the content must continually evolve, just as employers’ needs evolve.

The most-needed credentials are those that would show that the person has good, practical skills to embark on a career pathway, offering maximum flexibility to show value to more than one kind of employer. Since the credentials should signal significant value to many employers, it is reasonable to ask companies to back up that judgment, concretely, in their hiring processes. Not all employers would need to join in. A critical mass would be enough. Indeed, a healthy competition may develop among rival credentials, each arguing that it is better judged, of broader use, of greater credibility.

Such new credentials could work outside or inside of the traditional context of college degree programs. Many colleges might eventually regard credentials like these as useful or revealing mile-stones within their more elaborate degree programs. All of these attainments should be a “ladder” for each person’s goals and career pathways.

A Truly Digitized, Networked Labor Market

All through this post, we have emphasized our impression that today’s labor market is full of mismatches. People do not know just what skills they need. Employers do not know just how an applicant relates to their needs. Educators and trainers are not sufficiently plugged into the labor market at all.

In a better-networked labor market, each part of the employment triangle would interact with the others in multisided plat- forms. For that to work best, a job applicant would need to be able to represent, digitally, what she or he has done and can do. Some of the new credentials we are advocating would facilitate that. An employer would have to digitally represent its needs too. And we emphasize the ingredient missing now from the standard two- way matching platforms: the educators and trainers.

Building on the hundreds of millions of member profiles already in its databases, LinkedIn has begun working on ways to digitize all the inputs to the labor market, to create what the company calls an “economic graph.” Over time the platforms can then become much more sophisticated in identifying and suggesting possible ways to match Americans to opportunities.

Our vision is that, aided by such platforms and perhaps by capabilities sponsored in the nonprofit or public sector, Americans can look at the condition of the labor market as well as a farmer can look at a daily weather report, and find it just as up to the minute. (We have no view on the forecasting.)

On the basis of an early analysis of how a more connected labor market might improve employment, one analyst recently estimated that the positive impact could be very large — boosting employment by 700,000 to as many as 1.8 million workers. “This would involve both better matching of workers to existing jobs as well as creation of new jobs through better exploitation of business opportunities.”[9]Creating such digital platforms is a challenging task. But we believe it is doable.

Many such platforms are possible, not just one. As with weather reports, there are local ones and national ones. Like farmers looking for rain, Americans looking for work will be most attentive to their local conditions, even as they study what is going on else- where. Here again there is a potential role for local or regional private-public partnerships to make sure everyone has as much information as possible to plan for the future.

Actions Needed

• Companies should better define the skills they need, giving as much attention to developing and assuring the supply of human talent as they do to the rest of their supplier network. They should help foster private-public alliances to develop the human talent they will need.
• Alliances that include leading employers should develop more flexible, low-cost, and useful systems of credentials to show what Americans know and can do. Employers, or groups combining them, should update and maintain sets of credentials that they respect.
• Educational leaders, public and private, should reverse the modern trend toward segregation of “academic” from “career and technical” secondary and postsecondary education. Instead, they should evaluate ways to mainstream combinations of theory with practice.
• Alliances with employer participation should build platforms to create a much more interactive and functional digitized labor market that represents constantly updated data from all parts of the worker-trainer- employer triangle.
• Policymakers should make benefit systems and occupational licenses more portable in order to help Americans move more easily to wherever they can find their best opportunities.

This text is adapted from an excerpt of Chapter 7 in our recent book America’s Moment: Creating Opportunities in the Connected Age.

[1] Materials provided by Burning Glass, 2014. Burning Glass analyzed New York City job postings between July 2013 and July 2014 and also the characteristic middle-skill IT career ladder.

[2] In one set of numbers for late 2013, unemployment among bachelor’s degree holders between 20 and 29 years of age was 11.5 percent; more than 40 percent of those who had jobs were doing work that did not traditionally require a college degree. Nearly half of the underemployed recent graduates were working only part-time or in low-wage jobs. Accenture (Jennifer Burrowes and Alexis Young), Burning Glass Technologies (Dan Restuc- cia), and Harvard Business School (Joseph Fuller and Manjari Raman), Bridge the Gap: Rebuilding America’s Middle Skills, November 2014, p. 5, at http://www.hbs.edu/competitiveness/Documents/bridge-the-gap.pdf.

[3] Ibid., p. 2.

[4] PCAST report, “Information Technology for Targeting Job-Skills Training and Matching Talent to Jobs,” fig. 1, p. 4.

[5] Felix W. Ortiz III, “The Middle-Skill Issue,” Huffington Post, September 25, 2013.

[6] Mourshed, Farrell, and Barton, Education to Employment, p. 18.

[7] Linsey Sledge and Tiffany Dovey Fishman, “Reimagining Higher Education: How Colleges, Universities, Businesses, and Governments Can Prepare for a New Age of Lifelong Learning,” Deloitte University Press, May 22, 2014, at http://dupress.com/articles/reimagining-higher-education/.

[8] See, e.g., Corinne Alfeld and Sharika Bhattacharya, “Mature Programs of Study: A Structure for the Transition to College and Career?,” International Journal of Educational Reform 21 (2012): 119–37 (finding that even when career-oriented programs of study were available to support the transition from high school to college-level work, less than one-fifth of such students remained in the same program of study that they had begun in high school).

[9] Michael Mandel, “Connections as a Tool for Growth: Evidence from the Linkedin Economic Graph,” November 2014, p. 3, at https:// southmountaineconomics.files.wordpress.com/2014/11/mandel-linkedin- connections-nov2014.pdf. The research was supported by Linkedin, which gave Mandel access to its data.