Change or die – Four issues for the multifaceted future of PES

It is the dominant topic when it comes to today’s digital HR processes: how to develop better, more efficient, up-to-date tools and technologies for matching, which solve the various tasks and challenges in a more customer-oriented manner. Separating the wheat from the chaff is a very demanding task. If today’s technological choice is not up to the task of shaping the future, then this has a strong impact on matching. In particular, problems will be pushed forward into the future because matching means understanding the challenges a labor market faces. All providers of job-matching technologies believe that they are able to place job seekers and thereby stimulate the labor market. There is no such thing, however, as the labor market. Each individual labor market has its own characteristics, and merely placing as many people as possible in the labor market quickly does not suffice; after all, there are other complex problems demanding our attention. Four issues were selected from within this complex topic, which illustrate why it is not only a question of pure placement. And why prevention in the present is necessary for reducing problems in the future.

1) Full employment today, gap tomorrow

Is unemployment actually a problem in the Western world at the moment?

The latest figures for the US labor market released just after the first week of the year indicated near full employment (defined as three percent unemployment) with an unemployment rate of 4.1 percent, after 250,000 new jobs were counted in the last month of 2017: the lowest figure in 17 years. Mark Zandi, chief economist of the market research institution Moody’s Analytics, referred to the American labor market as “soon as good as it can be.” Many Western countries also currently have similarly low figures, even less than four percent in Germany and Switzerland, Norway only slightly higher, and the EU average is the lowest it has been in ten years. Even the United Kingdom has not yet been impacted by the Brexit in this regard. This begs the question: are the employment offices now planning long holidays?

Hopefully not; because it would be a fallacy to think that these nations need not worry about their labor markets. Each labor ministry is confronted with its own challenges, which is why employment offices always are busy. A simple placement solution does not suffice to provide fundamental support for public employment services. Required first and foremost is in-depth knowledge of the labor markets and the diverse challenges that are currently confronting us in every corner of the world.

One particular challenge today is digitalization. While the European labor market may be approaching full employment in many regions, this trend will make it too easy to replace employees in the future. Who needs a taxi driver when the car itself becomes a chauffeur? And who needs a cleaning assistant when cleaning is carried out by robots that clean even in the tightest corners? It is to be noted that there are major differences between jobs with lower qualification levels. It is much easier for machines to take on cleaning tasks than complicated sewing jobs, for example. Correspondingly, not all jobs with lower qualifications are at risk – but many are. And they are not alone. Employees with higher education levels can also be replaced, as computers become able to more precisely calculate and improve the static structures of buildings, logistics or production processes. Similarly, computers are increasingly considered more reliable and risk-averse than the human financial advisor at the local bank because they decide on the basis of facts and not emotionality.

These complex challenges cannot be solved with simple placement, because even if someone could be placed, this job could disappear in the near future due to digitalization. If the combustion engine will soon become obsolete and replaced by the electric motor, a considerably smaller workforce will be required, because the production of an electric engine will only require four instead of seven employees. The three superfluous ones will become unemployed, and to place them again, we cannot afford to merely watch and wait.

 

2) The divide is growing

If you look at certain occupations, the opposite occurrence can be identified as a challenge. While some occupations are disappearing, other sectors are now desperately looking for new employees. The numbers reported in the media continue to climb: 7,000 vacancies for nursing staff in Switzerland, 100,000 engineers lacking in Germany. How is placement supposed to meet a demand for which there are no capacities?

Consequently, the professions people would like to be trained in are decreasingly in line with their demands. People have grown accustomed to having great freedom of choice when it comes to choosing a career: almost everyone can decide for themselves which career path they want to pursue. This freedom leads to the situation in which some career paths are frequently chosen, while others are seldom chosen. This ultimately leads to a tremendous gap between these two groups. In many attractive professions it is becoming increasingly difficult to ensure a life span of four to five decades, and as we work for longer periods of time, this aspect is very important. How many marine biologists are really needed in Switzerland? And while the highly skilled marine biologists remain unemployed, engineers sign employment contracts while still studying in the lecture hall. This is a tragedy.

It should be seen as an enticement for politics, society, universities and all other parties involved to take on a new task: we have a demand, so let us increase the attractiveness of the field in demand. It is time to take action in training and career planning, not just to react in case of emergency, but also to prevent. What can be done to make young people choose the training that is essential? We must look into the future. Do we more extensively restrict access to highly frequented degree programs? Do we provide extra support to people who choose unattractive training programs?

Of course, increasing the salaries of professions such as nursing would make them more attractive. However, who will pay for this if consumers are not prepared to pay more? As long as products and services grow increasingly affordable, wages cannot be increased – which means that earnings are insufficient and the job is considered unattractive. Hence, a job cannot be made more attractive in this way.

When it comes to such challenges, it makes no sense to simply consider placement strategies, whether technological or non-technological. After all, this problem is not solved by simple placement. Instead, we should work to ensure that supply and demand are matched. New models must be created to enable a response to current trends and gaps. The gap analysis shows that the shortage is steadily increasing in all markets. Unfortunately, this cannot be solved by migration, although it is currently leading to many opportunities, particularly in Europe.

 

3) Emigration as the only way out

There are even entire regions in which income is simply insufficient. In these parts of the world, people feel compelled to leave to find work. In Lithuania, for example, in almost every family there is someone who works abroad, because with the rising cost of living, people there can hardly survive from their wages. As a result, the small country has lost more than half a million people in the last 15 years – a large number in view of a total population of less than three million. Especially young people are emigrating from the country either before or immediately after graduation, leaving behind a society that is aging even faster.

Consider the population of Indonesia: over a quarter billion people. People there may find their job market more interesting since the country’s economy is constantly growing. The population, however, is growing even faster – three million additional people each year, equivalent to the population of Berlin, Madrid or Lithuania. More than half of them are under 30 years old. All these young people will need a job at some point. Again, many will view emigration as a necessary solution. New models must be also created for such cases, models that balance supply and demand entirely differently. People cannot be placed where there are simply no jobs available.

 

4) Having a job is not enough

Even if jobs are available, simple placement strategies are not enough. For instance, some South American labor markets are attempting to combat underemployment, along with other challenges such as crime, drug abuse and the lack of transparency in money flows. Underemployment is not the same as unemployment but means an insufficient number of working hours. No adequate standard of living can be ensured with the resulting low wages. Even after the various and sustained efforts by labor ministries, the employment market situation remains complicated. In Paraguay, for example, the unemployment rate is around nine percent, a level similar to those in highly developed countries such as France or Finland. However, what does this value mean? Due to underemployment and a high level of day laborers, a large number of citizens do not appear in the unemployment rate, because they technically have a job. The unemployment rate does not decisively signify whether a reasonable standard of living is guaranteed in a country or region.

 

Reaction instead of awaiting

While unemployment rates may be low, a low rate does not save the job market. Each labor market has its own specific problems which need to be handled differently. There are many more challenges to be met: How to place people over 50? How to place highly qualified refugees? In principle, it is foreseeable that if PES do not adapt and thus master as many challenges as possible, major problems will cause that the PES will lose their raison d‘ être. A reaction to these challenges and discussions about them must be started now; discussions that are fact-based and therefore require the right tools and technologies. Nevertheless, success is not guaranteed by provision of the tools and technologies. Profound expertise has been developed over the course of a decade which knows precisely which problem areas should be tackled, at which location and by which method, and which consequently also knows how the tools are to be used correctly. Required is someone who applies this substantial expertise at an early stage. It is only a matter of time before unemployment rises again, especially among young people. If the proper fundamental understanding of these types of problems is applied, the possibilities can be identified at an early stage and coordinated with the right solution strategies. Furthermore, the specific requirements of the labor market must be brought to light, taken into account and acted upon now, in short: we must react immediately. I wonder why politicians, society, educational institutions and others are still standing by and observing. They should discuss these issues now with specialists who have this specific expertise. There are specialists who deal with, reflect on and analyze all the mentioned and unmentioned challenges of labor markets on a daily basis. The knowledge held by these specialists is available to you – at JANZZ.technology.

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