May 11, 2016

Labor Substitution and the Digital Revolution: A Ticking Time-Bomb

To borrow a phrase, these are the best of times, and they are the worst of times.

If you’re a technologist, the future has never looked brighter; whereas if a computer can do your job, there’s a lot of darkness out there ….

We are waking up to the implications of robots rapidly replacing manufacturing jobs. We’re starting to understand what it means for technology and offshoring to transform white-collar and manufacturing jobs.

The bad news is that few if any of us are aware of the ticking time-bomb that is the service sector tipping toward permanent joblessness. This is a problem that’s two to four times the order of magnitude of the loss in manufacturing and white-collar jobs.

Look around major airports. Look at parking garages, at fast-food and coffee chains. Look at hotel front desks. Attendants, cashiers, and desk clerks are going the way of the pay phone. A permanent percentage of these jobs are becoming automated. Where are all these laid off workers going to find work?

The forecast is daunting. By 2020 we will lose some seven million jobs—five million routine white-collar, administrative office roles; and two million manufacturing, production, and construction positions, according to “The Future of Jobs” by The World Economic Forum. At the same time we will also gain two million computer, mathematics, architecture, and engineering jobs.

But here’s the rub: A critical mass of the population works in the low-wage service sector. They don’t have the skills to perform new jobs created by the forces that are making their current jobs obsolete.

The average parking lot attendant and most coffeeshop cashiers don’t qualify. The pace of change, sped more and more by technology, is outstripping our systems for retraining displaced workers. The numbers are scary. Today in the U.S. alone, nine million low-wage, hourly workers are cashiers, customer service reps, and fast-food preparers and servers. Their lack of contemporary skills could create a step-function in the rise of unemployment. If we do not act now.

Sure, we’ve seen labor displacement in manufacturing, where the number of global industrial robots has grown 72 percent in the past ten years and the number of U.S. manufacturing jobs has fallen 16 percent. The projected net job losses in the manufacturing and white-collar sectors is a problem. But we must also take a deeper look at the hourly service sector which contains double the workers and where many jobs only require basic skills that can easily be replaced by technology.

Mobile internet, connected devices, and cloud technologies are replacing simple-skill jobs at a speed that makes it challenging to retrain the service workforce displaced.

Retraining this large, at-risk population in five years is a massive challenge for the private sector, governments, and the larger society. Building new skills to perform new jobs is a step-function change—not gradual, incremental evolutionary change.

The difficulty is that by 2020 one-third of the desired core skill set of most occupations will comprise elements that are not considered crucial by today’s standards. Two-thirds of the participants in the World Economic Forum study view investment in retraining current employees as a key part of change management. They think, however, that too many underestimate the technological upheaval of labor markets and too many are guided by short-term profitability pressures—65 percent of all jobs are created by less than 2 percent of global companies most of which are under shareholder pressure for continuous growth.

We, the consumer, drive growth. We, the people, also want workers to have better income and health care. We, the business owner, also want U.S. manufacturing to thrive. But we the people, don’t want to pay more than a few dollars for a hamburger or a cup of coffee. We want inexpensive clothing and electronics. These market dynamics, alongside with regulatory increases on healthcare and wages, drive technology deeper and deeper into every corner of business.

Offshore manufacturing and robotics create cheaper high-quality goods. In 2012, we hit 900,000 operational robots in American, German, Chinese, South Korean, and Japanese manufacturing facilities 1 (one-third were concentrated in Japan). While demand for industrial robots grows, manufacturers are also enhancing their competitiveness in service robots. Offshoring is not an option in the services economy, but service robots are.

Most people think that robots live only in the industrial realm. But ubiquitous mobile technologies—that is, apps—are robots by another name. Mobile apps will replace many jobs in the services economy.

Apps for ordering and checkout at large fast-food chains not only replace costly cashiers and customer service reps who need breaks and benefits. Apps also reduce order errors, further reducing costs. Automated check-in for trains, planes, automobiles, and hotels is here to stay, likewise for parking lots, toll booths, and gas stations.

What can we do? Mobile matching technologies will partially address the gap in low-wage service jobs. Matching apps like Uber balance supply and demand of services where in the past spare capacity sat permanently idle. Matching and dispatching workers in real-time will certainly address part of the problem by replacing traditional staffing and employment agencies. Yet it does not solve the fundamental problem:

Can we equip at-risk service workers with the knowledge and tools they need to fill their skills gap—and can we do it fast enough?

This requires a public-private effort of epic proportions. The private sector can shoulder a big load of the responsibility for closing this gap. But still there are millions of low-wage workers who are simply unprofitable for private companies to train and educate. More than 50 percent of adults in the U.S. lack the skills necessary to identify or interpret one or more pieces of information, essential for succeeding at work.

The U.S. government has tried for years. In 2009, nine agencies spent $18 billion on 47 public programs to elevate low-skill workers’ skills and quality of life (up from $5 billion and three programs since 2003). However, they haven’t worked. Studies show that these employment and training programs spread funding over too many issues and failed to eradicate any of them. Even in times of high unemployment, these programs saw sub-10 percent participation rates.

We need to try another way, and a good first step is to provide affordable access to mobile technologies in order to enable real-time training and participation in the matching economy.

By 2020, the totality of labor substitution by technology will be magnitudes larger than the 5 million job losses in 15 countries estimated by the World Economic Forum. Based on current trends, 5 million low-wage service jobs could be replaced by technology in the U.S. alone. If that’s true, labor substitution will become a critical social and economic problem to address not only in the white-collar and manufacturing sectors but also in the larger service hourly-jobs sector. Ignore it and that time-bomb will tick down to zero. 

  1. Bureau of Labor Statistics - Occupational Outlook Handbook 2014 
  2. Bank of America Merrill Lynch - Transforming World Atlas - March 2016 
  3. U.S. Bureau of labor statistics - Q1 2015 
  4. Japan Robots Association Administration Department - Oct 2015 
  5. Program for the International Assessment of Adult Competencies (PIAAC), 2012. 
  6. United States Government Accountability Office - Employment & Training programs - 2011

Sep 23, 2015

Should we care about the low-wage sector skills gap?

The hourly-jobs sector is the heart of the U.S. labor force with 76 million workers, and open positions are staying open for 30 days -- longer than ever recorded in the 15-year history of the National Mean Vacancy Duration Index [1].

With over nine million workers looking for jobs, why is it taking longer than ever for employers to fill open positions? The popular explanation is that the American economy is currently suffering from a surplus of unskilled workers.

Half of U.S. employers experience difficulty filling “mission-critical” positions [2], and 61 percent claim they’ve hired someone who did not meet the job requirements [3]. In sectors such as manufacturing, the skills gap represents a loss of up to $14,000 per open position in revenue annually [4].

More than half of adults in the U.S. lack the literacy skills necessary to identify or interpret one or more pieces of information [5], a key element for success in work. And while extensive research exists on the skills gap affecting sectors such as engineering, manufacturing and technology, there is also a major gap in the low wage hourly sector. reports gaps on basic skills required to be a merchandiser, retail clerk, customer service rep, hotel housekeeper, delivery driver or fast food restaurant worker, among many others. Up to 35 percent of job seekers are missing one simple skill such as having a driver’s license, a security guard certification, a food handling permit, or knowledge on how to read a planogram, build rapport with a customer, or operate a specific piece of equipment. These gaps keep them from getting a job that represents, in some cases, a double-digit percentage increase in their hourly wage. In most cases, job seekers were not even aware of the need to have that skill, and instead spent time and money getting trained in skills that are not beneficial in the job market.

A shift might be needed to help individuals find the right path to the right job, recognizing that most jobs do not require a four-year degree.

How do we deliver the right training, be it four years, one year, one month, one week or one hour -- to the right person? And how do we simultaneously inform potential employees that the job is out there and if necessary, show how to improve their skills based on what the employer wants when making the hire?

Many experts point to low wages as a root cause of the skills mismatch. This scenario is evident even in skilled industries where, although employers should pay more to attract and retain qualified workers, current market dynamics and consumer behavior demand the cheapest possible good or service, thus adding downward pressure to wages. This results in a lack of incentive, on the worker’s part, to invest in proper training.

Why pay to go to a technical school or even to a four-year college or university only to make marginally better wages?

A 2014 study by CareerBuilder found that 92 percent of employees become more loyal to a company that invests in training them. In the hourly sector, with attrition rates as high as 200 percent, even a marginal improvement in retention can have a meaningful financial impact on reducing the costs associated with a constant hiring cycle. This money can then be used to bump up wages for workers with the right skills.

The U.S. private sector has been addressing the need for skills training for some time, with companies such as Comcast launching their own learning institutes. Since 1999, they have offered over 4,000 training courses, delivering 4.7 million hours of training to their employees, with the majority of the resources spent on front-line hourly employees. In 2014, the average annual spending on training in companies with more than 10,000 employees in the retail and service sectors was over $19 million while companies with 1,000 to 9,999 employees invest $0.5 million to $1.6 million.

In 2015, over 40 percent of U.S. companies plan to invest in Learning Management Systems and online learning tools, and 23 percent in mobile learning. Many companies plan to increase their investment in worker training in 2015. In the retail sector, two of every three companies plan to increase spending, along with two of every five companies in the service sector. The key drivers behind this higher spending are the increase in the workforce (more people to be trained) and the acquisition of training technology [6].

Technology must continue to develop along with the trend for more worker training, as most content needs to be adapted to the mobile web and video format as a result of the changing behaviors of the current and next generation of hourly workers. Among millennials, who account for 35 percent of the total workforce, the penetration of smartphones is over 80 percent and growing.

Mobile technology can enable the private sector to address basic skill gaps in real time.

For employers, this can result in a better trained and more loyal workforce. For workers, it can represent an increase in income as they get exposed to continuous, relevant and up-to-date training and education -- the specific training they need to move up one notch in their journeys.

The question is:

Do we care enough about the sector and understand well enough the potential benefit for the U.S. economy if we address not only the high and mid-level skills gap, but also the lower/basic skills gap for hourly workers?

  1. DHI-DFH Measure of National Mean Vacancy Duration April 2015 -
  5. Program for the International Assessment of Adult Competencies (PIAAC), 2012
  6. 2014 training industry report - Dec 2014 - training magazine,

Mar 31, 2015

Mobile recruiting in the dark ages

How many times in a given day do you access the web on your phone? You do it so often that you don’t even think about it. Americans spend an average of three hours a day on the phone, 55 percent of that time accessing the Internet from a mobile device: paying bills, house hunting, getting a ride, shopping and streaming music. And at some point, you and 70 percent of the U.S. population will conduct a mobile job search to pay all those bills! Our phones are with us 24/7, becoming an extension that connects us to the world.

Yet, mobile recruitment is still in the dark ages.

How dark? Research done by Jibe found that 60 percent of respondents believe that, even if mobile friendly, job applications are more difficult to fill out than mortgage, student loan or health insurance applications.The complexity is not necessarily related to the difficult questions that are asked, but the actual functionality of the job application.

In their 2014 summary job report of large enterprises, which processed close to one million mobile job applications, Jobaline data shows that 80 percent of applicants abandon job applications that are non-mobile. This is because they find themselves trying to type in tiny spaces designed for PC interface, having to take unnecessary steps in the application or going through too many changes of context, including advertisements in the middle of a job application.

The result: Job seekers waste too much time and employers have a large negative financial impact on their operations. This is especially true in the hourly jobs sector, where attrition rates are up to 200 percent per year, and part time jobs or seasonal jobs result in a continuous hiring cycle. Mobile job applications done wrong cost large employers over 80 percent of their job advertising budget.

Simply Shrinking the Job Application Interface for Mobile Delivers the Same 80 Percent Dropout Rate of the larger screen.

Just like the e-commerce or entertainment industries, which went through significant changes to embrace the mobile web, mobile recruitment must go beyond just making the job application fit into a smaller screen.

An inefficient process in a big screen is just as inefficient in the smaller screen. Online recruitment requires reinventing the experience, while taking advantage of the many other dimensions that mobile brings to enrich the job recruitment process. Otherwise, employers are wasting time and money creating online application experiences that, even if mobile, still results in a wasteful 80 percent of their advertising dollars and recruiters’ time.

If you just apply a responsive design to the old “taxi” web pages, we get “taxi” mobile - it’s the same old and dated process, with the same business results, just in the small screen. By reinventing the experience, you get Uber or Lyft, instant match of people that need a ride with people that want to make a living out of offering rides to others. In this context, advanced mobile matching technologies will be the dominant factor in the Human Capital Management sector over the next decade.

Thanks to the ubiquitous nature of mobile devices that are attached to us almost 24/7, we can capture voice, images, location, time, activities and assess skills in real time. We can combine the power of observed information, which is often more meaningful for matching purposes than the declared information captured through standard online or paper-based applications. Observed or inferred information can often paint a more complete picture of a job applicant, resulting in better matches that hopefully result in long lasting employment relations.

In a side-by-side comparison of people completing interviews from mobile devices, the completion rate is five times higher and the quality of candidates is up to eight times better when the proper mobile experience is enabled.

Taking things one step ahead, the use of advanced technologies for algorithmic analysis of the voice of job applicants can take the quality of the match to a whole new dimension. On the other hand, just doing a mobile redesign or a mobile app of an existing Applicant Tracking System process results in only marginal improvement in applicant volume, quality or satisfaction.

If the web is mobile, why aren’t employers embracing it faster? CareerBuilder found a variety of reasons employers don’t use mobile application processes: 38 percent of employers haven’t invested in the required technology; and more than 35 percent don’t have the resources or can't find a mobile solution that does more than take their Applicant Tracking System and make it mobile. Interestingly, more than one-fifth of employers aren’t sure why they don’t offer a mobile application process.

The web is mobile and recruitment is mobile, especially in the hourly-jobs segment. Beyond the obvious difference in the screen size, if technology is leveraged properly, mobile recruitment allows for a richer experience that can remove friction from the job application process.

With close to half-a-billion job applications processed every year to hire over 55 million people, properly using mobile recruitment technologies represents a multibillion-dollar cost savings opportunity for the U.S. economy.