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s2smodern

Attend almost any gathering of business people and the topic is sure to come up: finding good workers. After more than a decade of economic growth that has featured strong hiring and steadily falling unemployment rates, labor markets across the country and certainly across Montana are tight. For some businesses the trickle of suitable workers for their openings has shrunk to the point where they are questioning how they can continue to fill orders, let alone capitalize on new opportunities.

The data agree with this assessment – at least to a point. The Montana unemployment rate has been below 4 percent for more than two years, with jobless rates for fast growing places like Gallatin County down to an incredible 1.9 percent. At the height of the recession there were more than seven unemployed workers for every job opening in the western region of the U.S. – now there are fewer than one.

As economic problems go, you might say this is a good one to have – too many jobs, shall we say. But it is a problem nonetheless, and some solutions (e.g., offshoring, turning down business) are worse than others for the economy. Understanding how and why it has come about is critical to crafting strategies and solutions that grow the economic pie. 

What can businesses do right now to address this?

Of course they can boost salaries. What would you expect an economist to say? Nationally there is some evidence of this with faster growth in hourly wages. In Montana the evidence is less clear – wage growth is more erratic, but showing faster growth in the last year. Higher wages are not a zero sum solution as they pull more people into the labor force.

That solution is not available for many employers who lack the ability to pass on cost increases to their customers.  That’s why they’re doing other things, like reorganizing roles in the workplace, redefining some jobs to fill the gaps created by unfilled vacancies.  Or hiring less qualified workers, investing in training to bring them to the required level of skill, even at the risk of losing their investment when they take jobs elsewhere.  Pursuing automation as a way to reduce staffing requirements, or outsourcing or offshoring tasks once performed in-house are other options.

The “solution” of turning down work that is offered, or even cutting back on current operations, is another kind of adjustment that is clearly on the menu of choices as well. And some Montana employers have doubtless gone down this path.

Is it time for fresh thinking on recruiting and retaining good workers? Nothing fuels innovation like scarcity. Some solutions to finding good workers for openings are hiding in plain sight, although making them work might be more than an individual company can take on. Perhaps policy could help.

Some of these ideas are different. Some might even be considered dead on arrival. Yet they address a real problem and could offer some relief. They include:

* Tapping the teenaged labor force. Teenager participation rates are down almost 20 percentage points from 2000, when more than half of those aged 16-19 worked;

* Reconsidering drug testing. With recreational cannabis gaining public acceptance, is it time to revise our thinking on drug testing as an absolute requirement for employment?

* Convicts and ex-convicts – with 4 percent of the world’s population, the U.S. has 22 percent of the world’s prisoners. Is this an opportunity?

Other ideas are perhaps less controversial, yet no easier to implement. The most straightforward is devising better tools and policies to accommodate fuller participation of young women in the workforce. While narrower than some other countries, in the U.S. women have participation rates that are 10 percentage points lower than men. And they work fewer hours. Child care is ferociously expensive when it is available, which in many places it is not.

It is also a time for employers of all kinds, but especially for those requiring skilled trades employees, to start reaching out to potential workers at a younger age. A recent survey reported that a large fraction of high school students would not consider a career in construction even for a six-figure salary. That’s a daunting challenge that should spur employers to action to dispel perceptions that may pose a dire threat to their pipeline of new workers.

And then there are older workers. They are already more numerous in the workplace, with a quarter of the workforce aged 55 and older in 2024, compared to just 12 percent in 1994. Abolishing mandatory retirement ages and pushing up the Social Security and Medicare ages would strengthen the incentive to work, certainly. But only if employers want them – and there is evidence that older workers’ higher costs and relatively lower motivation to learn new things makes them less attractive. Addressing these challenges wouldn’t be easy, but there are clearly rewards to doing so.

 

Patrick M. Barkey is director of the Bureau of Business and Economic Research at the University of Montana.