The Workforce Conundrum

Part 2: People Out of Work

In Part 1 of the Workforce Conundrum, I discussed one of the factors in “why” this whole conundrum exists, in Part 2; I will address another of the major influencers to “why.”

One can’t talk about people being out of work without discussing the unemployment rate.  In the European Union (EU), the overall unemployment rate is 6.8%.  But that is a little deceptive as the EU is made up currently of 27 countries.  According to the latest Eurostat data, the countries that make up the EU range in unemployment from 7.6% in July 2017 to 8.2% in July 2018.[i]  (See Figure 1 below.) In the United States, the unemployment rate is reported as 3.8%[ii] for the country.  In Asia, the officially reported numbers in some of the major countries are: 3.8% in China, 4.2%[iii] in Korea, 2.4% in Japan and according to Trading Economics the general unemployment rate for Southeast Asia is 2.84%.

So far so good, right?  Well, let’s look a little deeper into those unemployment rates where we can because it will be critical in scoping the available workforce for all these unfilled jobs we talked about in Part 1.

Figure 1: EU Unemployment Rates by Country (July 2018)[iv]

Let’s start with the EU.  In the EU, there are typically three categories of unemployment numbers counted: jobless, underemployed part-time workers, and jobless persons not seeking employment.  When Eurostat categorizes someone as “jobless” they are referring to individuals actively looking for a job, and in the age range eligible for work (those between 15 and 74) If a woman’s place of employment shut down and she is looking to gain new employment but has yet to find it – she person is “jobless.”  “Underemployed part-time.”  refers to those who would like to work more or are qualified to higher level work but are limited in either hours or job opportunities.  The nurse working as a barista.  The last term that is used in the EU unemployment vernacular is “jobless not seeking,” which captures those people who are discouraged job seekers.  Your friend or colleague who has looked, but due to nothing coming to fruition, has stopped looking entirely.  The total of these three groups in the EU for 2017 was around 38 million people.[v]

In the United States, you may or may not be aware of this, but there are many different levels of unemployment figures that are generated by the Bureau of Labor Statistics.  The one that is almost always reported on the news is the lowest number and correlates strongly to the “unemployed” category used by the EU as described previously. Currently, reported rates are at about 4.0%. Each level below this adds another class of persons either un- or underemployed.  At the lowest level, we get to the same kind of data described by all three categories in the EU.  That number is currently around 8.5%.[vi]

If we do a little math, the data points to about 40 million people in both the EU and the United States today and it is projected there will be nearly 50 million in China alone available by 2020 that could be inserted into the previously described needed positions.  If we could engage and educate these folks appropriately, we’d have approximately 125 million potential workers in just the EU, the United States and China.

Why are there so many people not fitting into the available positions?

There are several factors, but let me focus on one before we move to the solutions space in subsequent posts.  Let’s talk about mergers and acquisitions (M&A) around the world. M&A often find themselves splashed across the news, especially if there are major brands involved.  In 1985, there were a total of 2,676 mergers and acquisitions that took place globally, in 2017 there were 51,919![vii] From less than 3,000 to over 50,000 per year over the past 30 years! (Figure 2) That is absolutely amazing to me.  Especially in light of the data supported by a KPMG study and an HBR report that most mergers and acquisitions generally fail.[viii]  If they do not work, why are they increasing in popularity?  I don’t know all of the answers and I know blanket statements are dangerous, but in some cases (and yes, even in the big headliners) we have seen that it has been purely for short-term gains by those who are structuring them as opposed to long-term strategic benefits.  If the benefits were more clear, they wouldn’t be growing and failing at a rate between 70 and 90%.

Figure 2: M&A Growth 1985-2017

Alright, we have two of our five pieces of the puzzle; we know from Part 1 the skills gap is causing the open positions and from this entry, we understand there is a significant set of available individuals who are either un- or underemployed.  Next week in Part 3, I will add another piece – job loyalty.

_{[i] https://tradingeconomics.com/european-union/unemployment-rate}

_{[ii] https://www.bls.gov/data/}

_{[iii] https://tradingeconomics.com/country-list/unemployment-rate?continent=asia}

_{[iv] https://ec.europa.eu/eurostat/statistics-explained/index.php/Unemployment_statistics}

_{[v] https://ec.europa.eu/eurostat/statistics-explained/images/4/41/Beyond_unemployment_June_2018.jpg}

_{[vi] https://www.bls.gov/data/}

_{[vii] Institute for Mergers, Acquisitions and Alliances, “Number & Value of M&A Worldwide” January 2018}

_{[viii] http://lakeletcapital.com/blog/2017/3/15/success-and-fail-rate-of-acquisitions}