The Hollowing-Out of the Workforce

One of the most important trends affecting your job prospects is what is often called the “hollowing-out” of the workforce: High-skill and low-skill occupations continue to grow, but middle-skill occupations are shrinking. This means that if you want to live a middle-class lifestyle (or better), it is increasingly important for you to acquire and maintain a high level of skill. An average level of skill won’t bring decent rewards in the emerging labor market.

Here is a graph I created showing the change in workforce size for occupations at three levels of skill at three points in time, 2000, 2007, and 2011. At each point, you can see the change from the previous year in the percentage of the workforce.

What are the reasons for this trend? Blame automation and offshoring. Many medium-skill occupations consist of routine physical and decision-making tasks that can easily be programmed into a computer and/or robot. I can remember when tall buildings still employed elevator operators. Since then, we’ve seen automation replace human workers who used to route phone calls, take phone messages, drive airport trolleys from one concourse to the next, make travel reservations, format business letters, ring up retail sales, and weld automobile bodies, to name just a few work tasks.

Offshoring has eliminated other jobs consisting of routine physical and decision-making tasks or jobs where the physical proximity of the worker is not needed. The most obvious example is manufacturing. The next time you’re in a big-box store, try to find a manufactured item that was made in the United States. When you’ve had problems using your computer, you may also have encountered a foreign help-desk worker. The highly labor-intensive work of making animations from hand drawings--as opposed to making them from computer images, Pixar-style--is being farmed out to foreign shores. (The next time you watch “The Simpsons,” note the names in the ending credits.) Airplanes can easily be flown to foreign hangars for routine mechanical inspection and repair.

So what jobs resist automation and offshoring? Some involve physical effort that must be done on-site and that involve unpredictable physical settings and nonroutine tasks--unlike an automobile assembly line. Most construction jobs fit this description. So do automobile service jobs. With regard to the latter, note the bifurcation of the workforce into low-skill, low-wage workers, such as those who change your oil at Jiffy Lube, and high-skill, high-wage workers who do the more difficult diagnostic and repair tasks--and who require initial training that takes two to four years, followed by continual training updates as the technology changes. You can observe a similar bifurcation of wages and training requirements in health-care jobs, with home health aides and orderlies at the low end and technicians and professionals at the high end. It’s no accident that job prospects are not increasing as rapidly for licensed practical nurses and for registered nurses with only a two-year degree compared to registered nurses with a four-year degree. Even in our fastest-growing industry, health care, the middle-skill jobs are being hollowed out.

Another category of jobs that resist automation and offshoring are those that require high-level decision-making or people skills. Although the concourse-to-concourse airport trolley is now robotized, the airport van that threads its way through city traffic is still driven by a human (so far). Red-light cameras can detect one form of careless driving without human intervention, but we still need police officers for many other complex decisions about what is legal or illegal behavior. (They also are needed when lawbreakers must be physically arrested.) An automated questionnaire can elicit structured responses from an interviewee, but for employment interviews, businesses still want to use human workers, who can make judgments about which questions do and do not need follow-up and about the interviewee’s body language.

Work that is highly collaborative or creative often resists automation and offshoring. For example, routine computer programming can easily be offshored, but development of a new smartphone app will probably be done by American workers. Locations such as the Silicon Valley allow programmers, computer graphic artists, marketers, electronic engineers, and venture capitalists to come together rapidly for a collaborative project and to shoot ideas back and forth.

Jobs that require a knowledge of American language and culture also resist automation and offshoring. Many companies refuse to offshore their help desks to foreign countries (or at worst locate them in Canada) because customers complain about the difficulty of conversing with foreign workers. A story on the radio program “This American Life” recently revealed that some highly routine newspaper articles--covering real estate transactions or city council meetings, for example--are being written by foreign workers and printed under fake, American-sounding bylines. Nevertheless, most of the news stories you read have been created by American workers. Automation has made it easier to aggregate links to news stories, but when you follow the links, the actual writing has still been done by humans.

So some jobs are relatively secure despite these trends. Robots are not yet capable of taking over everyone’s job, and many American workers cannot be replaced by some low-paid drudge on a foreign shore. What the secure jobs tend to have in common is either a high or a low level of skill. If you are not content to earn the low wages that come from a low-skill job, you’re going to need to acquire and maintain a high level of skill.

Health-Care Jobs that Don’t Involve Providing Health Care

It’s well known that the health-care industry is the field that is growing fastest and will offer the most job openings in the near future. If you’re facing a career choice, you may have heard many times that you should consider working in this field. But maybe you don’t want to work with patients. If you don’t like working closely with people, if you have no interest in the workings of the human body, if the ick factor of some patient-care work turns you off, you may have decided to avoid the health-care field. But let me try to change your thinking by pointing out the many good jobs in this industry that don’t involve patient care.

You have probably heard that the health-care field is the nation’s most dynamic industry. In fact, total employment in the field is expected to increase by 30 percent from 2010 to 2020, which is more than twice as fast as the average for the workforce. The industry will open 20.5 million jobs over this time period. It’s true that most of these jobs will be in patient-care occupations such as Registered Nurses (an average of 120,740 openings per year), Home Health Aides (83,750), and Nursing Aides, Orderlies, and Attendants (49,610). However, any industry this big creates lots of jobs in roles that support the industry’s main function--in this case, patient care--without actually participating in this function.

Let me give you two examples, based on the career-change experiences of two personal friends. (The names have been changed.)

Deborah got a bachelor’s degree in chemistry about 30 years ago but built her career around a picture-framing shop that she and her husband owned and ran. When sales at the shop went into a tailspin, she decided to leverage her background in chemistry and enrolled in a one-year certification program, given at a hospital, in clinical laboratory science. The program was aimed at working adults and was offered at hours that were convenient, although it required a commute of more than an hour.

After being certified, she got a job in a clinical lab doing the kind of laboratory work she had been trained for. But she stayed in that job, acquiring experience with the equipment and procedures, for only for a year. That’s because her real love is sales, and she has excellent people skills and persuasive ability. So, instead of doing lab work, she now works as a sales rep for a company that manufactures the equipment used in clinical labs. The travel that comes with the job is probably the part that appeals least to her, but it is not as burdensome now as it would have been when her children were still small.

Kate is a copy editor with many years of experience editing books that often had a lot of technical details, and she was highly skilled at making sure all the details were correct and internally consistent. After being downsized from this job, she found a new job in which she edits the brochures that pharmaceutical companies send to physicians, explaining what the drugs do, how they are to be used, what the side effects may be, and so forth. As you can imagine, this information needs to be scrupulously accurate to avoid costly lawsuits, so Kate’s skills are highly relevant to this work. She still works in publishing, but it’s a very different niche than the book, newspaper, magazine, and Web outlets that employ most publishing workers.

Deborah and Kate now both work in the health-care field. The same forces that are expanding opportunities for workers involved in patient care--the aging of the population, the expansion of medical insurance, and the development of new health-care technologies and medications--are adding security and opportunity to Deborah’s and Kate’s careers.

In my book The Sequel: How to Change Your Career Without Starting Over, I describe how you can move from one occupation to a different one while taking advantage of your experience in an industry. That’s what Deborah did by transitioning from lab work to sales, while remaining in the health-care industry. But it’s also possible to stay in the same occupation while moving into a different industry, and that’s what Kate did when she transitioned from a book publisher to a brochure publisher. Technically, she is still in the publishing industry, but her new work role is entirely directed towards the needs of the health-care field.

Here are some other occupations that do not involve patient care, together with the number of workers holding those jobs in the health-care industry in 2010:

Receptionists and Information Clerks 753,600
Office Clerks, General 555,800
First-Line Supervisors of Office and Administrative Support Workers 347,300
Billing and Posting Clerks 340,700
Bookkeeping, Accounting, and Auditing Clerks 201,800
General and Operations Managers 157,400
Executive Secretaries and Executive Administrative Assistants 155,900
Interviewers, Except Eligibility and Loan 136,800
Customer Service Representatives 124,500
Bill and Account Collectors 117,300
Social and Community Service Managers 96,500
Security Guards 71,800
Accountants and Auditors 66,100
Administrative Services Managers 49,300
Training and Development Specialists 42,500
Computer Support Specialists 39,200
Chief Executives 35,700
Financial Managers 34,300

So don’t rule out the health-care industry because you can’t stand the sight of blood. There are many good jobs that don’t involve patient care, and one of them may be the right one for you.

Two Models for Manufacturing Jobs: Walmart versus Boutique

It’s time to discard the widespread belief that manufacturing in the United States is dead. Although we are not the world’s biggest manufacturer, now that China has taken the lead, second place is not a bad position to be in. And we are already putting the brakes on our downward slide. One factor that’s slowing the offshoring trend is the movement of American manufacturers away from the Walmart model and toward the boutique model.

By the Walmart model, I mean large-scale production of mass-market goods. In this model, marketers and engineers design a product that can be manufactured at low cost in the large volumes that can be sustained by a mass market for a long time. For such a product, it doesn’t matter that the production workers have low skills or that shipping the product around the globe takes a long time. Although the large scale of production creates the danger of inventory buildup, the long product lifespan offers opportunities for the distributor to study and anticipate buying patterns and thus fine-tune the logistics.

But the Walmart model is not the only sustainable form of manufacturing. According to an article on the Forbes website, American manufacturers are learning that they can compete by adopting a boutique model. The author, Mitch Free, surveyed a large number of American manufacturers and found that 40% of them have accomplished some “reshoring” this year. One reason is uncertainty about the economy, which makes the businesses willing to trade the risks of large-scale production for the flexibility and lower risk of smaller-scale projects.

Another factor is the role of computer technology in manufacturing:

Computer Aided Design (CAD) software, Computer Numerically Controlled (CNC) machine tools, and Internet-based manufacturing networks have made producing complex parts and tooling akin to printing documents on network printers. This digitalization allows for distributed manufacturing such that companies can easily produce closer to their customers wherever in the world they may be versus in a single factory. By producing closer to their customers, companies save on logistics, take advantage of local economies, tweak products to local market preferences, build goodwill in the local market, and mitigate the risk of a single production factory.

The Walmart model is aided by a long product lifespan, but the trend is toward ever-faster obsolescence of products, which in turn requires ever-faster innovation and time to market. In this race, it helps to locate production near a company’s engineering and marketing teams, enabling close collaboration that produces quick results. This arrangement also facilitates customization of products. As the writer observes,

Starbucks is a great example of us paying a premium for customization; we could buy a coffee at the convenience store for $1 but we go to Starbucks and pay $4 for a customized coffee. This same behavior is permeating the product sector, and companies are quickly learning that there are fat margins in allowing customers to tailor some aspect of their product to specific tastes.

Some other, less significant factors that the survey found were the weakening of the U.S. dollar, rising transportation costs, and rising wages in traditionally low-wage countries. With regard to this last factor, the writer notes that there will always be emerging countries offering low-wage workers to turn out commoditized products that earn thin profit margins.

It’s important to understand that the boutique model of manufacturing depends on a highly skilled labor force. For American workers to take advantage of this trend, they will need the technical skills to use and maintain the computer-aided machinery, which in turn means a good education in STEM (science, technology, engineering, math). But even more fundamentally, they will need good learning skills to be able to adapt to constant change, plus good communication and people skills to be able to work collaboratively.

The emergence of this highly skilled workforce depends partly on the nation’s schools. And it also depends on an evolution in thinking about career goals, so that young people recognize that the new manufacturing jobs can offer a lifetime of highly rewarding work. The schools can contribute to this change in perception, but the larger culture also has to adapt and grant greater prestige to boutique-model, high-tech manufacturing jobs.

The Affordable Care Act and Jobs

This week it has been impossible to ignore the news about the Supreme Court’s upholding of almost all the provisions of the Affordable Care Act (ACA), the so-called Obamacare law. The ACA will affect our lives and the U.S. economy as a whole in many ways, but what particularly interests me is its impact on jobs.

Therefore, I took instant notice of an entry on The New York Times Economix blog by a regular contributor, Prof. Casey B. Mulligan of the University of Chicago. Prof. Mulligan argues that “the coming Medicaid expansion will reduce employment,” although he holds out hope that some of this can be prevented by the Court’s ruling that states can opt out.

The ACA expands Medicaid coverage to those earning up to 133% of the federal poverty level. Prof. Mulligan’s argument that the ACA will reduce employment is based on these premises:

• Able-bodied adults who are currently earning wages below 133% of the poverty level are working mainly to get employer-paid health insurance and will no longer need to work when ACA expands Medicaid coverage (unless governors block it in their states).

• Medicaid is a transfer, so even though it creates jobs where the funds are spent, it destroys jobs where the funds are obtained.

Now, here’s what’s wrong with this argument.

The first premise—that low-wage workers are holding jobs merely for the insurance—is based on the unrealistic assumption that all jobs come with health insurance as a benefit. My job does, and Prof. Mulligan’s does, but this benefit is much less assured for jobs held by the working poor. Keep in mind that, for a single adult, the 133%-of-poverty level is just under $15,000 per year. The Washington Post/Kaiser Family Foundation/Harvard University Survey of Low-Wage Workers (PDF), which covered workers earning as much as $27,000, found 27% of them without any health insurance. A 2001 survey by the Commonwealth Fund (PDF) found that, among those earning $10 or less per hour (equivalent to about $20,000 or less per year), only 30% working for a small employer and only 69% working for a large employer were eligible for an employer-offered plan. Still another study (PDF) found employer-paid health insurance in 2005 covering only 23% of workers earning less than $15,000 per year.

But even if some low-wage workers have employer-paid coverage and quit their jobs once ACA gives them Medicaid coverage, does that mean the jobs cease to exist? Especially in the present slow recovery from recession, other workers will happily take these vacated jobs. The Survey of Low-Wage Workers found that health care and health insurance came in fourth among the expenses that respondents had trouble meeting. Funds for their children’s education, transportation costs, and savings for retirement were greater concerns. In other words, low-wage workers need a paycheck for a range of necessities, and employer-paid health insurance clearly is not the only reason they stay in a job or would take one vacated by another worker for whom this is the only concern.

The second premise, that transfer payments are job-neutral, makes sense only on a theoretical level and comes crashing down once you apply it to the realities of health care and the ACA. First, the Medicaid funding is based on progressive taxation, which means that the funds are transferred from the high-earners, who would have spent some of it and saved some of it, in contrast to the low-earners who are spending all of it (on health care). Yes, savings would create investments, which would create jobs, but nowadays more and more of those investments are creating jobs overseas. In addition, those dollars that the high-earners spend would go to a mixture of goods (many imported) and services, whereas the bulk of health-care spending goes to American service workers. In fact, health-care spending supports a lot of low-skill jobs—for example, over 1 million home health aides, with a 69.4% growth projected between 2010–2020. In short, the job effect of a dollar is not identical no matter where it lands in our economy.

Expanded Medicaid spending will boost jobs. I’m still waiting to hear some actual specifics about the replacement plans of those who advocate repealing and replacing the ACA. I don’t find any reasons to expect expanded employment from the platitudes and generalizations I’ve heard to date.