Balancing the work equation
In understanding the uncertainties and challenges experienced by people seeking employment and finding solutions to overcome these challenges, it is helpful to think about the future of work from two perspectives – the supply side and the demand side.
The sweet spot is where both demand and supply meet at the highest possible price (i.e., salaries).
The supply
Workers are educated to supply the required employable skills, experience and knowledge to employers. To make or receive money, for-impact organisations receive funding or donations. For-profit organisations make money from their customers.
In return, workers get paid for their contribution to generate value for their employers.
When workers don’t have the required skills, experience, and knowledge that will help their employers, they are not hired and will not have jobs.
Timing and positioning are important. This matters as an oversupply of labor will cause salaries and wages to be suppressed caused primarily by technology and automation.
The demand
On the other side of the equation, employers require timely and appropriate skills, experience and knowledge to get the work done in the shortest possible time and at the lowest cost. Without the required employable skills, work will not get done.
Workers wanting a job, or career must, therefore, fully meet the requirements and expectations of employers so that they get hired. The ability to supply what employers want will be the key to a sustainable income stream for the worker.
Challenges facing by young people
Young people desperately need our help to overcome more than 47 challenges that they are more than likely to experience in their lives as they transition into adulthood and the workplace.
We should avoid the head in the sand approach but be armed with valuable knowledge about these challenges and disturbing facts (later sections) that can assist everyone to make better choices.
Besides the 135 challenges that I have researched and documented facing workers in today’s workplaces, there are more than 47 specific challenges facing our young people.
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Challenges faced by employees at work
Challenges faced by young people
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Scary facts parents, school leavers and graduates must know
Research is revealing a lot of scary facts. It is not my intention to put fear into people with these telling facts.
Rather, for many of us especially parents of teenage children and young people, it is for us to be aware that the world is rapidly changing and will continue to change.
The head-in-the-sand approach will not help. When we don’t have the facts, we will make poor decisions. When we do so, especially with our jobs or career choices, it will have a life-long impact on our lives and financial well-being.
Need to spend more time looking for jobs
There are so many available resources and tools that will give us the ability to spend hours researching and understanding the job market, only if we look and be committed to our future well-being.
On average, job-seekers now spend 3 hours and 16 minutes searching for jobs each day, as shown in the diagram below. (TalentWorks, 2019)
That’s 44% longer than during the 2008 recession!
Unfortunately, this number will only be increasing. Job seekers will continue to spend more and more time on finding jobs in the future.
The 2016 Talent Board North American Candidate Experience Research Report showed that only 16% of candidates spend over five hours researching a job.
This is a scary figure.
Contrasting job seekers with a car buyer researching which car to buy, it has been reported that “car Internet clients” are shopping on the Internet for about 14 hours before purchasing a car. The individuals who burn through at least 12 hours on the Internet wind up going to 3.3 merchants before purchasing.
What we are saying is that we value our cars more than we value our jobs!
By devoting the proper time and effort in performing the proper due diligence when choosing jobs will go a long way in ensuring that we have secure jobs that we can enjoy doing.
Graduates struggle to find their first job
A college or university degree has lost its value as graduate numbers have exploded despite the significant cost to both students and the National Budget. Grattan found that many recent “relevantly-qualified graduates” find it difficult to get full-time employment.
The 2015 Graduate Outlook Survey found that 68.8% of employed graduates had found their employment within six months of commencing their job search and 16.8% found their role in less than a month. However, around one in five (20.5%) graduates had taken more than 12 months to find their role.
Research by the National Institute of Labour Studies found that between 2008 and 2014, the proportion of new university graduates in full-time employment has dropped from 56.4% to 41.7%.
The Australian Productivity Commission found that employment outcomes for full-time graduates have been getting worse and many employers are not satisfied with the quality of recent graduates. A quarter of recent graduates believed that their degrees added no value.
Underemployment ratio among graduates was at 20.5% in 2016 compared to about 9% in 2008. Graduate starting salaries have also been growing slower than wages across the broader economy declining from nearly 90% of average weekly earnings in 1989 to about 75% in 2015.
Recent university graduates are struggling to find full-time work with one in five employed university leavers unhappily working part-time in 2017, according to Canberra Times.
MyBusiness reported that just 3% of Australian CIOs believed that the education system can meet the needs of the current IT demands of the employment market, worsening an already chronic shortage of skilled IT professionals.
Here’s something we can relate to by Sheila, “My oldest daughter Rebecca just graduated from her undergrad at university. I was up visiting last week and she started rattling off all of the jobs that her fellow graduates now had: manager at a fast food restaurant; manager at a chain retail store in a mall; working in another chain retail store; reception for a small business. Not a single person had a job that actually required a university degree. Those that graduated with an actual profession, like nurses and teachers, can’t get jobs in their fields, either.”
The Wall Street Journal reported the troubling results of the College Learning Assessment Plus test administered in over 200 colleges across the U.S. More than half of schools and at least a third of seniors were unable to make a cohesive argument, assess the quality of evidence in a document or interpret data in a table. At some of the most prestigious flagship universities, test results indicated that the average graduate showed little or no improvement in critical thinking over four years.
According to MyBusiness, the higher education sector, by virtue of its size and its bureaucracy, hasn’t been able to keep pace with that rate of change and demands of modern business.
A well-known university in Australia admitted that its degree did not produce job-ready accounting graduates due to the sheer volume of knowledge and skills required to competently do today’s job, according to MyBusiness.
This means that colleges and universities are not equipping graduates with relevant technical and interpersonal skills required by today’s employers. When this happens, graduates will find it hard to land their first job. In addition, many people are drowning in study loan debts with little to show, including not having jobs or jobs relating to their studies.
There is nothing wrong with following one’s dreams by way of having a college or university degree. However, a wrong degree might actually turn out to be a nightmare.
Starting right will set us right for life
A young person’s first job after graduating from a course is arguably the most important. It sets the right foundation in life!
Job seeking graduates who were initially under-employed were five times more likely to remain so after five years than those who were not under-employed for their first job. As a result, more than 40% of college graduates are forced to take positions out of school that don’t require a degree. (Burning Glass, 2018)
Graduates are debt-laden even before working
According to Forbes, more than 43 million Americans carry a total of $1.3 trillion in student loan debt with an average of $25,000 for public school graduates. Marketwatch reported that the typical 20-something student is weighed down by six-figure debts as he or she looks to start a budding career and adult life.
The Millennial generation knows all too well about the financial burden of college debt. Findings from the LIMRA Secure Retirement Institute revealed that Millennials who start their careers with $30,000 in student loans could have $325,000 less in retirement savings compared to their debt-free peers. This is a fairly typical debt load for students. In 2015, the average student loan debt totaled $33,000, compared to $10,000 in 1990.
In comparison, The Australian reported that the median student loan debt in Australia is sitting at $25,000. According to the Parliamentary Budget Office, student loans will increase from $1.7 billion in 2015-16 to $11.1 billion in 2025-26. The number of students getting student loans has also grown by 11.2% annually over the past five years from 308,000 in 2010 to 522,000 in 2015.
These student loan debts can hang around for a long time if not managed appropriately. According to the Huffington Post, nearly 70,000 Americans over the age of 50 are living in poverty as their social security benefits are cut to pay off student loan debts.
The Government Accountability Office found that about 114,000 student loan borrowers over fifty years old are losing out on a portion of their Social Security benefits because of an old student loan. The number of borrowers over age 65 facing this predicament has increased 540% over the last decade.
Older Americans who have been wrestling with student loans over the past five years have saved $182,000 less for retirement. This will result in a $1.3 trillion retirement savings gap by 2021, according to AARP’s 2017 Financial Innovation Frontiers study.
Some Americans still have mortgage debt lingering over their heads during retirement. They may have borrowed money against their home to loan money to their children. The Consumer Financial Protection Bureau reported the percentage of those age 65 and older carrying mortgage debt has risen from 22% in 2001 to 30% in 2011.
The problem is compounded when students borrow money to study a course that is becoming irrelevant to employers or reshaped through automation.
News reported that big Australian employers are going cold on university degrees, leaving students to wonder if their qualifications are worth the debt and extra study. It’s an unfortunate case of over-education of graduates, according to the Royal Statistical Society.
The American Institute of CPAs revealed that 68% of adults with college loans or whose children have loans said that they regretted how they financed their own or their children’s education.
Debt isn’t always terrible.
In fact, debt can be a wise investment if it leads to a significant increase in future earning potential. The trick is researching for good career options that will meet future employers’ requirements. It includes understanding how to reduce what is spent on college degrees. Financial aid, scholarships, technical degrees, and community colleges may help reduce the impact of increasing education costs.
Research findings
International research is telling us that we must be sophisticated in guiding and supporting our young people in making better decisions.
(1) Internship experience increases the interview rate by 14%. (Labor Economics, 2016) More than 62% of the Class of 2017 reported doing an internship at some point during their college years, compared to about 50% in 2008 and 17% in 1992. (Time, July 2018)
Students must now do more to gain that competitive edge over other job seekers. By actively participating in multiple but relevant job-specific internships while in college or university, they can significantly improve their chances of securing employment within six months of graduation.
(2) The number of workers in jobs requiring average to above-average education, training and experience has increased from 49 million in 1980 to 83 million in 2015, or by 68%. (Pew Research, 2016)
The shift to higher-skilled jobs will be accompanied by above-average education, training, and experience. This may be due to more educated people being required to operate sophisticated machines rather than manually do the work.
(3) Almost half (46%) of Gen Z respondents expressed concern about having a large student loan balance when they finish studying. This is an increase of 5% from 2012. (TD Ameritrade, 2013)
It will cost money (and time) to acquire knowledge in courses offered by colleges and universities. In the process of acquiring head knowledge, personal debts will be incurred by school leavers from a very young age.
As the cost of education also increases, so too will be the size of study debt. When the increase in the cost of living is also factored in, the total cost of education has and will significantly increase in the future.
Any decision to take on debt by way of a study loan at this early stage of life should not be taken lightly. These study loan debts can be a tight noose around their necks until the loan amount is fully paid off, even till retirement.
Personal credit ratings and the future financial well-being of young people can be significantly impacted by the existence of unpaid study loan debts. Their ability to buy a house or a car can also be affected by poor credit standing.
(4) 65% of children entering primary school today will ultimately end up working in completely new job types that don’t yet exist. (World Economic Forum, 2016
Being flexible is vital for ensuring that job seekers and workers to stay on top of the trends and opportunities presented by automation. Do avoid the head-in-the-sand approach to life and future success.
(5) Only 21% of Americans use all their education (specific to college major) at work, while only 53% use half or less of their formal education. (edX, 2018)
With only a very low percentage of what is being taught in colleges and universities will be used at work, the relevance and role of higher education institutions in preparing students to be job-ready at work will constantly be questioned.
(6) Degree holders in most STEM fields (science, technology, engineering, and mathematics) are less likely to be under-employed. They can easily escape the under-employment trap than those majoring in other disciplines. (Burning Glass, 2018)
Picking the right field of study can either mean unemployment or employment for a young graduate.
(7) 85% of all job vacancies are filled via networking, as shown in the diagram below. (Lou Adler, 2016) This means that only 15% of jobs are advertised through various mediums like online recruitment sites and print.
Students must start their networking much earlier than ever before to gain a foothold in the job market. Finding where the unadvertised jobs will critical for gaining their first but significant entry into the workforce.
(8) 32% of respondents have considered making a career change at some point within the past year, and 29% of respondents have completely changed fields since starting their first job post-college. (edX, 2018)
Many school leavers don’t know what they want to do in the future. This is understandable.
As a result, an increasing proportion of them will make a job or career change, change their field of studies, or even drop out of colleges and universities altogether.
Therefore, let’s not pump up our young people with just-in-case knowledge at such an early age, but help them navigate identity issues and career aspirations.
(9) 61% of all full-time ‘entry-level’ jobs require 3+ years of related work experience in the U.S., as shown in the diagram below. Employers are constantly driving up the experience inflation. As such, the amount of related work experience required to get an ‘entry-level’ job is increasing by 2.8% every year. (TalentWork, 2018)
Over the next 5 to 10 years, graduates will start needing more than four (4) years of related work experience just to get their first job!
But if they are recent graduates, then where would they have got related work experience in the first place?
(10) Securing a job, especially a full-time job will only get harder. A job seeker must apply to 150 to 250 job vacancies to be confident of getting a single job offer. Even if graduates are fully qualified, it can take more than 90 days to get a job in the U.S. The likelihood of securing a job offer from a single job application works out to be ‘zero’ (or basically 1.0% ± 0.5%), as shown in the diagram below. (TalentWorks, 2019)
Young people must be creative in overcoming the ‘broken’ formal or online job application processes. They must focus their efforts and time on informal networking and value creation activities to proactively create job opportunities for themselves and increase the likelihood of getting a job or starting their own business.
(11) Jobs requiring a high school diploma grew faster than jobs requiring a bachelor’s degree from 2017 to 2018. (ZipRecruiter, 2019)
Depending on what you want to do after graduating, students may not need a bachelors’ degree for entering the workforce. Being either over-qualified or under-qualified for a job can have a potential negative impact on your future and finances. Selecting the right course can also be tricky at this young age. Hence the need for parental guidance and professional help.
(12) Only 36% of students feel ready for the workforce. (Strada Education Network, 2018)
The role of colleges and universities must be debated to ensure that young people are equipped and ready for the workforce and the future of work.
The just-in-case education approach is dead especially when young people can’t find jobs in their field of study after graduation. There’s something fundamentally wrong with our education systems if employers don’t want to hire our young people and the rate of under-employed over-qualified young people is increasing.
(13) Workers who were initially under-employed are five times more likely to remain so after five years than those who were not underemployed in their first job. Once in that situation, the chances of escape are slim. The cycle of underemployment became progressively more difficult to escape. (Strada Education, 2018)
Starting out right with the right job is so crucial for laying a solid foundation for our young people.
Unfortunately, those qualified graduates who started under-employed will continue to stay under-employed for many years after graduation.
The Strada survey found that 43% of workers were under-employed in their first job, as shown in the diagram below. 21% were still under-employed 10 years after their first job.
(14) Employers are prioritising technical and interpersonal skills and work experience above academics when it comes to hiring decisions, as shown in the diagram below. (Strada Education, 2019)
There is a growing interest in hiring people based on skills rather than using education as a proxy. Portability or transferability of skills will become more substantial and prominent for workers and job seekers in the future. For young people, this will be an opportunity to intentionally acquire and develop interpersonal skills to gain that competitive edge over other job seekers and secure their first job.
(15) 52% who pursued or completed a bachelor’s degree said that they had regretted their choice of major and 40% are saying that they would pick a different field of study, as shown in the diagram below. (Strada Education, 2017)
Selecting a course or field of study can be very tricky for many school leavers especially when they do not know themselves and what they want to do.
With the benefit of hindsight, regrets can be real and costly for many graduates. They may have ‘wasted’ their time and money gaining something that is not useful for their future.
(16) There is a growing disconnect between the earnings growth of the typical worker in the U.S. and the growth in productivity. (MIT, 2019)
From the end of the Second World War to 1973, the earnings of the typical worker increased in lockstep with productivity, as shown in the diagram below.
After that time, they diverged.
Between 1973 and 2016, labor productivity increased by a healthy 75%, yet the compensation of workers increased by only 12% and the compensation of the median worker increased by only 11%.
Technology has enabled the digitalisation of work. This has made highly-educated workers more productive at similar rates of pay and made less-educated workers easier to replace with automation.
(17) 10.3% growth between 1996 and 2000 was shared relatively evenly among men and women and black and white workers in the U.S., as shown in the diagram below. (Economic Policy Institute, 2019)
However, in the period between 2015 and 2019, the racial wage gap among college graduates has widened as a result of declining wages among black college graduates (-0.3%) and rising wages among white college graduates (6.6%).
The gender wage gap also grew as men with college degrees experienced wage growth more than twice as fast as graduates who are women (7.8% versus 3.0%).