There’s an emerging structural shift in the U.S. economy that has created a serious mismatch between employers and employees in today’s economy. That’s the provocative thesis of this week’s cover story in BusinessWeek, “Help Wanted.”
This is a big deal that could have major repercussions. Among them, says my colleague Peter Coy, are:
The unemployment rate is likely to remain distressingly high because many people who want jobs will lack the appropriate qualifications. Second, inflation could pick up sooner than expected if employers are forced into bidding wars to recruit the few people who are qualified for the work. Third, if unemployment stays high it will put additional political pressure on Congress and the Obama Administration to push through fixes that could make matters worse in the long run, such as insulating workers from the cost of long-term unemployment to the point where they lose their appetite for work.
I was one of several reporters and editors who helped Peter write this cover. I learned a few interesting things while reporting the story, which led me to believe that this shift was having a real impact. One thing I learned is that the thousands of laid off workers from Wall Street, many of whom have high-level math and computing skills, are so far not that interested in leaving finance and going to work for a tech startup.
Consider this one story from venture capitalist Fred Wilson. Last fall after Lehman Brothers fell, Wilson, cofounder of the New York venture capital firm Union Square Ventures, backed an experimental Web site called www.leavewallstreetjoinastartup.com. (The other venture capital firm that backed the site was First Round Capital.)
The idea was to try to lure some of the talented software engineers who had been laid off on Wall Street to technical jobs at the two dozen New York-area companies that his venture capital firm was financing. Wilson was fishing for quants.
But it wasn’t the game-changer the VCs were hoping for. Wilson only filled a handful of jobs. “It wasn’t the panacea I thought it would be,” says Wilson.
It turns out that the learning curve was too steep for many financial engineers who were not well versed in the ins and outs of online advertising and analytics. Plus, many Wall Street refugees are not prepared to accept a massive reduction in their salary.
“For a lot of people who used to work on Wall Street they have a large personal burn rate,” says Wilson. “For them to take a job that pays a lot less they have to make a meaningful change in their lifestyle. And that is an issue.”
What does this mean for tech companies? I think it means that it will most likely be hard to poach seasoned talent from the financial world for the next few years. Most of the Wall Street folks I know who have been laid off are still looking for jobs with financial firms, though they are more likely of the smaller, boutique variety. Some of them are finding jobs. Not all of them will, though. Wall Street just won’t be big enough to absorb all the people who have been laid off or fired. That restructuring process is probably going to take a few years to play out.
Meanwhile, if I was a tech company, I would focus on trying to poach talent from other tech companies, or I would look for recent graduates or younger employees with tech skills that can be retrained much more easily.
This is the hope of President Obama. In a lengthy interview in the New York Times magazine with David Leonhardt, President Obama says that one healthy consequence of the financial crisis will be that college grads with math skills won’t automatically want to become derivatives traders. “We want some of them to go into engineering, and we want some of them to be going into computer design,” said Obama.
The President also is aware of the skills shift. In the interview, he said one of the biggest constraints holding back his plans for building electricity smart grid is a lack of “trained electricians to lay down those lines. . . Somehow we have not done a good job of matching up the training with the need out there. And that’s one of things where government can help, help to guide and steer our education process in a way that meets future needs and not just the needs of the past.”
So I would expect to see more talk and action from the Obama Admin. on this skills mismatch and retraining issue. He clearly sees it as a economic problem and priority.