When will we realize that the #Labor_Market “value chain” that served the industrialized world in the 20th Century cannot work in the 21st Century?
The Labor Market today looks like the mid-1970s auto industry in the US or Western Europe: spare parts missing, resources allocated randomly, inventories growing out of control, cars produced that don’t meet buyer requirements, quality optional, customers taken for granted.… until unexpected (really?) external forces came into play: oil prices skyrocketed and Japanese competition emerged forcing the western auto makers to streamline and improve quality. It was a matter of “do or die”.
Today a car factory is totally different. At any given time you know exactly where the resources are and where they are being allocated. Just-in-time manufacturing is a normal practice. Efficiency and effectiveness continuously improve… and now we are looking at the next leap forward with industry 4.0.
What happened since 1970? Real time resource allocation (ERP!), and a change in mentality combined with innovation reformed the auto industry and saved it from oblivion. Today the auto industry is robust and looking at the next qualitative leap (cloud, in-memory, IoT, etc.) embracing digitization & industry 4.0.
Auto industry executives will say that they still face enormous challenges but, objectively, the Labor Market is lagging significantly when you compare it to any other sector : finance, manufacturing, distribution , music , movies, photography & sports ! The situation in today’s Labor Market is very challenging- just like the auto industry in the 70 ‘s:
• Job seekers cannot find the right opportunities
• Employers struggle to find qualified talent: filling adequately a vacancy takes too long and is challenging.
• Unfulfilled vacancies drag down growth.
• The education system is not producing the talent that the job market needs
• The economy is blamed for not creating enough jobs
• Decision makers in the Government are at a loss for what to do …
• External forces, such as the hangover from the 2008 financial crisis , subsequent “jobless recovery” & recent disruptions such as “uberization” are bringing it to its knees.
The effects on today’s Labor Market are not pretty:
• Unemployment and underemployment are one of the greatest systemic risks that the world face today (WEF 2016 see graphic), apart from natural disasters & wars.
• A recent study by McKinsey estimated that 30-45% of the working population, ages 15-64, is underutilized: unemployed, inactive or working part time.
Let’s take a step back and look at Labor Market definitions. The demand side is employers and vacancies, the supply side is job seekers, and where they meet is the Labor Market. Economists discuss two types of #unemployment: Frictional & Structural.
• Frictional unemployment is the “inevitable” situation or natural situation where job seekers cannot find a job quickly enough. There is a “normal” delay such as recent graduates, people changing jobs, etc …and “nothing can be done about it”.
• Structural unemployment is when the economy is not creating enough jobs or there is a misalignment between supply and demand… and “nothing can be done about it”.
In both, “Analysis-Paralysis” has settled in.
What if we realized that the Labor Market “value chain” that served the industrialized world for a couple of centuries cannot work in the 21s Century ? The dysfunctional Labor Market, full of shortcomings and inefficiencies is the “Silent Job Killer”. It is time to transform it.
Why don’t we apply the same diligence we are applying in other industries and sectors to the Labor Market?
Why can’t we share the right information at the right time with the right people so that all labor market stakeholders can cooperate, collaborate and innovate? The Labor Market is a “human network”: its value grows exponentially with the number of nodes (Metcalfe’s Law), amplified by the state of hyper-connectivity. An inflection point would be reached and undoubtedly transformation will ensue.
The typical excuses for not treating Labor Market like any other main stream sector are numerous. There are too many stakeholders. People are more complex than cars (rightly so !), which means you cannot just apply the same techniques. We should just let market forces take care of the problem. Government should not intervene. Who will make the investment in labor market transformation anyway? And so on……
First and foremost, the role of Government is critical. Private sector cannot do it alone. Dan Apscott the thought leader who coined the term “Digital Economy” 10 years ago says it very clearly. To successfully ride the wave of digital transformation, “market forces alone cannot meet the needs of today’s connected citizens”( Wikinomics, Dec 2006). The role of Government is essential.
In truth, you need to mobilize the private, public and people sectors. You need a movement not a program. You need people from various walks of life, to stand up and all move in the same direction. Arguably elected officials and leaders can make that happen. We are looking for civil servants who first of all realize the situation and see the opportunity and then are ready to associate their name to such a movement, innovate & undertake what was never done before and risk … losing their job !
Do you know anyone that fits this description?
Silver lining: #Digitization offers a unique opportunity to re-imagine the Labor Markets and re-platform its processes. Furthermore #Millenials will not allow this situation to continue. All you need to do is simplify, scale and personalize.
Any other suggestions? We welcome your ideas and comments.
It is a matter of “do or die”.
- INSEAD (May 2015) : Re_dynamizing_the_Job_Machine_CEG_INSEAD_SAP.pdf
- Mc Kinsey Global Institute (June 2015) : employment_and_growth/connecting_talent_with_opportunity_in_the_digital_age
- The Economist Corporate Network (February 2016): Shaping Future of Work