The December 2017 Job Openings and Labor Turnover (JOLTS) report contains data highlighting an important change in the labor market that isn’t yet fully reflected in state and local economic development and workforce training policies.
The report contains two metrics of importance to the issue: hiring and quit rates. The quit rate is considered by some to be a good indicator of labor market health because it, in part, represents worker confidence to leave salaried employment with the confidence that they will be able to find better opportunities and more work.
Industries with significant hire and quit rates create lots of opportunities and a lot of job churn, meaning many people are constantly looking for new work. However, this doesn’t mean that Americans are physically moving more than before. As such, state and local lawmakers have an opportunity to connect their local workforces with these expanding opportunities. Two industries stand out on both metrics in the latest report: Professional and Business Services, and Leisure and Hospitality.
| NAICS Industry | Total Hires | Hiring Rate | Quite Rate |
|---|---|---|---|
| Professional and Business Services | 1,145 (22.4%) | 5.5 | 3.6 |
| Leisure and Hospitality | 1,019 (19.9%) | 6.4 | 3.2 |
| All Private | 5,110 (42.3%) | 4.0 | 1.9 |
The JOLTS data do not report at a more detailed level, but by total employment the Business and Professional Services sector is comprised of technical services like computer systems design and research, at about 50 percent, enterprise management services (accountants, financial managers, lawyers, etc.) about 40 percent, and janitorial services at about 10 percent.
Thus, roughly half the hiring in this sector occurred in technical and technology occupations, representing nearly 10 percent of total hiring, a fact easily overlooked by glancing at the BLS report. But why is this relevant to workforce training and economic development?
For economic development, it is due to the primary and ancillary economic effect of having technology jobs which are high wage and have globally tradeable products. Economist Enrico Moretti demonstrates in his research that tech jobs specifically have a multiplier effect on the hospitality and entertainment industry, as tech employees tend to spend portions of their disposable income with local merchants.
For workforce development, the JOLTS report and other industry research suggest that there is a legitimate skill and labor shortage in STEM-related industries. Creative, cognitive, non-routine, and constantly changing tasks are on the rise in technology, and workers need education and certification programs to match that reality.
There are a plethora of technology-related work certifications that exist on the market that can directly plug workers into technology-related positions. States have generally addressed this demand in two ways — by adding computer science classes to universities and community colleges and providing grants/tax credits to firms for training.
States could increase the prevalence and relevance of tech certifications with some policy changes. The first would be a shift from credit hours to competency certification models. In other words, one should be able to get a degree from a community college via the traditional route or by demonstrating they have sufficient mastery over the material. With certifications, students take as much time as they need at every step on the educational path towards gaining mastery of the material. Whenever they are ready to demonstrate mastery, they are welcome to do so.
The second would be partnerships with places like JOLT to provide micro-learning centers to facilitate certifications. Employers have expressed an understandable skepticism of private online certifications because there is no official oversight. By partnering with learning centers, states could, for a fraction of the money they spend now, create a distributed network of proctors who could verify certifications.
Third, states should make local technology companies greater stakeholders in the educational process. Every city and state will generate its own unique ecosystem of firms. One city may have more software engineering while another may have more digital marketing, for example. The skills and certifications both fall under “technology” generally, but supplying engineers where marketers are needed is not helpful. Economic development and workforce boards could consider ramping up the role of technology companies and their desired STEM skills.
And finally, states could consider more portable, worker-side tax credits. Firms face a tricky economic problem when it comes to investing in worker training in today’s rapidly changing skills economy because they risk high sunk costs by training workers who will eventually leave in the short run. Thus, it may make more sense for governments to supply training credits to workers, who then fulfill them at a wide array of third-party training institutions, rather than trying to entice firms into a risky economic calculation.
In conclusion, the more economic data is examined, the more analysts accept the continued increasing economic importance of the computer and technology industries. Not only do they support themselves but their productivity spills over into other areas of the economy. The nation’s hire and quit rates indicate high labor churn and, thus, lots of opportunity for worker training and re-training to occur at a more rapid pace than current public policies can handle.