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Help Wanted
Employers casting wider nets in shallow labor pool
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Business New Haven
7/13/1998
By: Lori Green
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Labor, typically accounting for fully 50 percent of total spending for most businesses, is beginning to carry an even heftier price tag.
Small companies and giants alike are scrambling to contain escalating labor costs as they vie for competent employees at all skill levels. And as long the economy hums along, the big picture reveals a continued contraction of the nation's workforce.
The future supply of U.S. workers is projected to increase by only 12 percent during the 1994-2005 period, down from the 16 percent increase over the previous 11-year period, 1982-93.
With job gains in Connecticut over the past two years outpacing losses by a 4-1 margin, workers here are enjoying an abundance of opportunity not seen in the region for more than a decade. Consequently, wage pressures on many businesses are intensifying, but most are containing higher labor costs by improving efficiency and productivity.
By the end of the year, if the economy does begin to cool down - as many Connecticut economists predict - employers will see the pool of qualified workers replenished.
According to BankBoston chief economist Wayne Ayers, despite mild wage inflation for businesses in the region, prices have not climbed proportionately. Instead, rising compensation costs are being absorbed in tighter margins.
Explains Ayers: “Employers are reaching lower into the ranks of applicants' skill levels. We haven't seen this translate into price pressures yet, but we could be at the cusp - unless this economy were to slow down.”
Since nearly every region of the country is facing diminishing numbers of qualified jobs candidates, Ayers doesn't see Connecticut as especially disadvantaged.
In the near-term, however, there's hardly an industry in the state that is not experiencing more difficulty today than two years ago finding and recruiting talent. With cities such as Stamford reporting an unemployment rate below three percent, the state's labor market is one of many across the country experiencing virtually full-employment.
Since demographically New England is an older region than most others in the country, younger, semi-skilled workers are particularly in short supply. And this year's class of high school grads is smaller than at any time since the 1950s.
But a major advantage of a full-employment economy is that it brings new entrants into the workforce. Welfare-to-work programs, for example, are starting to churn out employable candidates for entry-level positions, and disabled workers are more actively recruited now than ever before.
In its recent report, “Connecticut Forecast 2006: A Look at Today's and Tomorrow's Industries & Occupations,” the state's Department of Labor predicts that the south-central region, which includes New Haven County, will lead the state in job expansion in both the service and manufacturing sectors.
Local service industries such as management, higher education and health care are all expected to generate robust numbers of new jobs well into the next century.
Statewide, as well as nationally, available jobs will soar for computer specialists of all kinds, especially engineers. In Connecticut, engineering positions are projected to grow by an estimated 89.6 percent by 2006, and demand for systems analysts at 73.2 percent.
Other high-demand occupations include securities and financial sales, physical-therapy assistants and human service workers. Who will be at the bottom of the demand chain? Mainly the few remaining bank tellers and telephone operators.
The latest U.S. Bureau of Labor Statistics data (see table) show that workforce participation rates in the state have actually fallen off from 1992, and are only beginning to climb again during last couple of years. This means that there are still significant numbers of people who are not showing up on the surveys as either unemployed or employed.
These dormant workers might soon be lured out into the daylight of the seller's labor market by some of the growing number of start-ups opening their doors over the past four quarters.
Says Carl Harris, first vice president and manager of People's Bank's Community Lending Department: “The first quarter of this year the number of new businesses in Connecticut increased by 32.5 percent over the same period last year. Going back to fourth quarter '97, start-ups rose 15.8 percent, and before that [third quarter '97] that growth rate was 25.4 percent.”
Concludes Harris: “That is amazing, when you think about it. And it doesn't seem to be abating.”
“A tight labor market has beneficial effects,” explains Ward S. Curran, professor of economics at Trinity College in Hartford. “It creates higher productivity, and a higher bottom line. This cycle has been going a lot longer than economists had predicted.”
Curran believes that local recruitment problems are less likely to slow down exports, for example, than the Asian financial crises or the rise in the value of the dollar, which is hiking prices of American goods in foreign markets.
Many labor analysts believe that the current paucity of qualified job candidates is likely to be temporary. Bankers and economists applaud the crunch's power to motivate employers to focus on efficiencies, such as maximizing benefits derived from greater automation and more sophisticated information technologies.
Says Harris: “The activity level that we have now from small businesses for loans is higher than it's been in a long, long time. And I think the reason for that is that the forces that create full employment are the very forces that create a better economy. This creates the need for expansion, for new start-ups, and for optimism by consumers.”
Compared with many other states, Connecticut can still boast a highly educated workforce. Thus experts agree that there are bright horizons for well-qualified people who are under-employed to move up.
Fred Andrews, director of the Center for Business & Industry Services at Middlesex Community Technical College, agrees.
“Public- and private-sector employers are becoming more motivated to upgrade the skills of existing employees,” says Andrews.
“A short time ago,” explains Andrews, “when a lot of organizations were downsizing, we started going to companies and said 'Look, we'll be your training department. Outsource the whole thing to us.'” And many companies have done just that.
On the down side, post-secondary students may be tempted by so many prospects for an immediate and livable paycheck that they leave school for the workforce. Says West Hartford-based economist Ron Van Winkle: “We will probably see people who will take jobs rather than get a baccalaureate degree, or leave school because there are jobs available.
“But having a college degree has a dramatic impact on your lifetime earnings,” Van Winkle adds. “This is a great opportunity for community colleges and others to provide training so that workers can really improve their position.”
Part of the dearth of talent in Connecticut is due to the emigration of highly skilled workers who arrived in droves during the last economic boom, but fled as the recession deepened.
Says Van Winkle: “In the early '80s a lot of people moved here, but today Connecticut is unable to attract people from the West.
“Wages here are not high enough to pay for the increase in living costs,” Van Winkle explains, “but they will begin to bid up, even though employers have been reticent to do that.”
Van Winkle sums up the sea change: “Management has had the control of the workplace in their hands now for almost an entire decade. Small businesses don't have the marketing ability or the ability to pay as much, to offer the golden handshake that large corporations have to get employees here.”
Lori Green's forthcoming book, Recruitment & Retention in a Competitive Labor Market, published by Simon & Schuster's Bureau of Business Practice, will be released later this summer.
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