The American labor market is going through a phase of turmoil. Thomas Kochan is an expert on the topic. He is the George Maverick Bunker Professor of Management, a Professor of Work and Employment Research and Engineering Systems, and the CoDirector of the MIT Sloan Institute for Work and Employment Research at the MIT Sloan School of Management.
Swati from the MBA Crystal Ball team caught up with Professor Kochan to find out more on what’s troubling American companies & employees and what can be done to improve the growth prospects.
MBA Crystal Ball: In what way has the demand for skills in the American workplace changed over the last decade?
Professor Kochan: Demand for skills grew rapidly in the 1980s and 1990s and remarkably overall it has not been growing as strongly in recent years. Every expectation is that it will continue to grow in the future.
The skills growing most rapidly are ones what are called “hybrid” skills—those that require a combination of analytical-computer based skills and a deep understanding of how to apply them in specific industry settings.
So people who can communicate, work together to find new ways to use advanced computer and analytic technologies and put “big data” to use in solving problems will have bright futures. So will those who have good technical skills gained through apprenticeship and related training programs, especially if they keep their skills current throughout their careers.
MCB: How have companies responded to these changes?
Professor Kochan: Well led firms that are willing to invest in training have done well in adapting to changing technologies. Too many, however, have sought to use contractors to get the skills they need and thereby are only meeting short term needs, not investing adequately for the long run benefit of their companies or for the overall economy.
MCB: Do employees and unions still have an influential voice in the decision-making process in the current U.S. economy (vis-à-vis the industrial era)?
Professor Kochan: Employees have lost a great deal of bargaining power due to the decline of unions. There are multiple reasons for union decline including, outdated labor law that constrains worker organizing, heightened management opposition to unions, slow response of unions to changes in the workforce and economy, and changed in industry and occupational mix from manufacturing and blue collar work to white collar occupations.
MCB: What are the big issues facing the American labor market today?
Professor Kochan: The biggest challenge is to get wages moving upward again. Unless this problem is addressed successfully, the anger and divisions in society laid bare in the recent election will continue and may get worse.
MCB: Are any other countries managing the employee-company dynamics better?
Professor Kochan: Countries such as Denmark, Sweden, and Norway have better fitting institutions for a global economy. Corporations are less prone to short term focus on shareholder value and invest more in public and private training and related labor market programs.
MCB: Where does the onus really lie on identifying skill gaps and training?
Professor Kochan: All parties—employees, individual firms, the business community more generally, labor organizations and government have to focus on life long learning. None can solve this problem on their own.
MCB: Do you think we have come out of the shadow of the previous recession?
Professor Kochan: We still have not generated enough jobs to make up for those lost and to keep up with the growth in the labor force. Moreover, wages are not moving upward at a fast enough pace. These are our twin challenges.
MCB: You’ve been a proponent of high productivity and high wages. What do you think of the practice adopted by American companies of hiring skilled international employees (immigrants) who can give them high productivity for low wages?
Professor Kochan: I have no problem with hiring highly skilled international employees if they are hired with the intention of making them permanent employees and residents with the option to move to US citizenship.
I am opposed to the use of our temporary visa program we called the H1 visas because employers and some international consulting firms have misused the program to replace US workers and/or to bring employees from other countries on a short rem basis only to train them to move back to their home country to compete against US firms. So that program needs careful reform.
MCB: The Trump government’s recent proposals and policies have come under fire for being protectionist. What are your views?
Professor Kochan: The Trump Administration does not have a workable job growth strategy. Protecting industries with trade barriers or claiming we will bring large number of manufacturing jobs back to the US or reducing regulation on the coal industry will not build large numbers of sustainable or high quality jobs.
We need investments in infrastructure and clean energy and education as our top job creating policies. Perhaps we will get these some day from this Administration or the next one.
MCB: What are the top three areas that companies should focus on independently to prepare themselves for the next decade.
Professor Kochan: 1. Investing in the workforce to attract, develop, and retain the best talent available.
2. Simultaneously invest in advanced technologies and the workforce so that technology augments work, rather than just see technology as a tool to reduce reliance on labor.
3. Work together with other institutions— peer business organizations, labor, education, local and regional governments, and community organizations to build a strong workforce capacity and to promote regional economic development.
Image credit: mitsloan.mit.edu