I continue to think about the present day economic condition of moderately high unemployment and underemployment plus the low rates of workforce participation. These conditions seem contradictory to the observation that we need to reform immigration laws so we can fill large numbers of jobs that can not be filled. These unfilled jobs are in inconvenient locations or require specialized credentials, both of which are easily addressed by a transient immigrant population. Despite the potential availability of eligible workers, we need more immigration to fill the jobs. This is especially true for H1B visas involving specialized skills.
In the case of present citizens seeking jobs or better jobs, the explanation is a little easier to understand. Clearly, the unemployed are eager to find new work and will take jobs if offered. Their continued unemployment occurs because the jobs are either inconvenient (long expensive commutes), unpleasant (so-called dirty jobs), or the jobs require qualifications that the applicants do not posses.
I am more curious about the low workforce participation and find that to be harder to explain. Historically, we had a much larger percentage of working-age eligible population participating in work and earning enough money to have expendable income that drove the economy with higher velocity money. I assume that the cultural or personality characteristics of this population has not significantly changed from their historic peers. Something structural about today’s economy must explain they choose to opt out of employment. I don’t know that answer, but thinking about this puzzle has motivated a few earlier posts.
The present-day immigration debate is interesting because throughout most of my life, the perception is that we needed to close our borders because people were having trouble finding jobs. In contrast, for this country’s first century or so, we welcomed immigrants without much restraint at all. The workforce readily accommodated these new workers. I was taught that that era had to come to an end because industry became more efficient or the production has shrunk its need for workers. We had a lot more work to do back then than we do today because back then we were extremely inefficient.
As an aside, I also was taught the magical melting-pot metaphor about how immigrants became Americans. The fantasy was that this was due to some profound appreciation of the ideals expressed in the constitution and declaration of independence. That was just the right kind of story to fill the imagination of my youth. Now, I suspect that most of the phenomena of rapid assimilation was due to the fact that the immigrants spent half of their day-to-day lives in factory or other mass-employment settings. They had no choice but to learn to communicate and get along with their diverse peers in the workforce. Early industrial employment may have had its dangers and abuses, but it offered an ideal environment for the workers to create a common culture that we would recognize as American.
That earlier era of high demand for labor has disappeared. In economic terms, we don’t mind because we have become much more productive. We are enjoying the benefits of this productivity through better and more affordable products that were inconceivable even a few years ago. Economically, we are doing just fine with higher unemployment and lower workforce participation.
I suspect there is a political downside to the chronic unemployment and low workforce participation. This is an increasingly large population that is free from having to participate in a diverse work environment. They are under no pressure to assimilate. As a result, they can begin to create isolated local cultures that increasingly become antagonistic to the broader culture. Even native-born citizens are constructing fragmented communities because they are not participating in the workforce.
One appealing argument against immigration is that we lost the assimilation mechanism of mass-employment. The modern immigrant population faces far less pressure to give up their hereditary culture and they have more influence in passing that culture to the next generation. This is even true for the H1B visas because these jobs are so specialized that they often work with very small number of peers, many of whom will have very similar immigrant backgrounds. These specialized jobs are very unlike magnitude of diversity in factor-floor jobs of the 19th century.
New immigrants will become American only in the sense of having a legal residence in the geographic boundaries of the country. Culturally, they will remain distinct and will become more defensive in protecting that distinction. Even if we have the jobs for these immigrants, the jobs will not be ones that will foster assimilation. The immigration will benefit us economically but this may come at the cost of losing the older widely-held common culture of what it means to be American. That’s my impression of the argument for restraining immigration.
There is the counter argument that this diversity is healthy and valuable to make us more worldly. I am not convinced of the benefits of this kind of diversity.
The point of this post, though, is to consider what we once had in the 19th century that we have since lost. I recognize that the jobs performed then were later made obsolete because of improvements of automation. But I marvel at the fact that there were so many innovations of new industries that at least initially involved hard work because the industries were too new for productivity improvements to take affect. I can imagine that some clothing shop can gradually automate the production of clothing. But I find remarkable that as this was going on, people were coming up with so many other kinds of businesses that would have to start from scratch in terms of becoming more productive. There was something that was driving the creation of new categories of businesses faster than the productivity improvements of older businesses.
I suspect that today’s business environment presents more friction to creating new jobs compared to what existed in the 19th century.
It is easy to explain the higher demand for labor back then as a result of large factories of primitive technologies that demanded human labor for their intelligence (to be trained) and their dexterity. Computers and robots today are trainable resources of dexterity. Work just does not need as many humans any more. I understand that.
But, I marvel at the rapidity of creating new kinds of industries and the eagerness to build these industries so quickly that human employment was the only way to get the jobs done. I think about the creation of the transcontinental railroads. This was a remarkable achievement at the time, but I am amazed at how rapidly that generation pursued building so many railroads. I understand that there was a lot of speculation about making money in the future, but I am not sure that fully explains the urgency of why it had to happen so incredibly quickly. The speculators could have reasoned that the payoff could wait for productivity innovations to better automate the track-laying process but they instead employed manual labor to get the job done. This was not pleasant work, but it did commit a large population to participate in a common project that required working together for a long time and for long hours.
Through many projects like this, we assimilated many immigrants. The skills these projects required were natural human traits of strength, stamina, dexterity, and ability to follow directions.
We have convinced ourselves that modern jobs are fundamentally different. There aren’t many modern jobs that can be satisfied by being in the right place at the right time in order to swing one’s limbs as instructed. Today we need highly specialized skills to have gainful employment. At least that is what we have convinced ourselves into believing.
I suspect this case is oversimplified. Clearly, the heavy work in factories, laying railroads, or working in mines did require tedious labor. However, they also required substantial training. We look back at the jobs and imagine them being intellectually easier than they really were. I recall a story (unfortunately I can’t find a link) about someone’s experience joining an apprenticeship of carpentry where he learned a more efficient way to handle a hammer after gaining the confidence of the master carpenter that he was worth training. I also recall a more modern story of chefs being taught the proper way to hold a chef’s knife. In many ways these proper ways were unnatural: these are not our first instincts for using these tools. Because they were somehow unnatural, their proper use required repeated practice to get it right. It is only after this practice that the person will have the skills work work productively and independently.
The example of becoming a chef is interesting. Today, we think nothing of attending a tuition-required school to learn to become an entry-level chef. These culinary arts schools involve specific training for skills through repeated practice of actually performing those skills in realistic settings such as a rigorous daily meal-time preparations. It is amusing that we accept the notion that this training is something we must pay to obtain. Even people with no interests in earning a living as a chef will pay to take this training. It is also amusing to see the inherent waste of gaining these skills in a school where the pedagogical setting prepares food that is not very marketable or even wasted. The schools focus is on building the skills outside of the demands of contributing to the success of a food business.
We had chefs long before we had schools to train them. The restaurant would hire an apprentice who would immediately begin earning a small income. The apprentice would be given simple tasks that directly contributed to the business but these tasks were less critical to the success of the business. The apprentice may work months doing the same simple task but he was earning a salary. Part of the reason for the duration is that it takes time before learning opportunities appear where the apprentice may learn something new and advance his duties. Another part of the reason is to assure the apprentice is devoted to the trade to stick it out to become a master so that it becomes worth the investment to train him.
I know virtually nothing about what goes into becoming a chef. I also know little about what it takes to lay a railroad line or to dig a mine shaft. I’m convinced that I don’t have the skills to get started in any of these jobs. There is more involved than just brute force labor in nearly every job.
Today we have a culture of hiring for skills. We have culinary arts schools because restaurant businesses do not offer apprenticeships. They need to hire people who have already been trained.
I describe this as a cultural change, but it may also be a change in our laws. Our labor laws and minimum wage requirements forbid the kind of entry level jobs we once were able to provide. The old concept of an apprentice is one with so little skills that his initial efforts probably did not contribute to revenues at all, but the apprentice would still receive some small allowance. I recall again that story I mentioned earlier (that I have lost the original reference) where the narrator described his first experience as a paid apprentice was to move a stack of wood from one location to another on one day, and then move it back to the original location on the next. The task had no value whatsoever but he was given the task and he earned a small allowance. This kind of work is illegal today because that allowance must be far below what we consider to be a minimum salary.
The original concept of an apprentice compensation had nothing to do with having a living wage. The compensation was just what the employer could afford. The goal of the apprenticeship was to create a future valuable contributor to the business. This is the old apprenticeship model.
I believe that much of the work in the 19th century involved apprenticeships or something that looked a lot like apprenticeships. We were able to take people who had just arrived from foreign countries and put them to work immediately. Their initial tasks must have been simple operations of a common task. For example, at a carpentry site you may have seen everyone hammering nails into wood (before nail guns became prevalent). At first glance, they all seem to be doing the same tedious and exhausting work. But on closer inspection, there will be some that will get the job started by setting the wood in the right position before allowing others to apply the additional nails to finish the job. The same effort of swinging a hammer is required, but some tasks requires more skill that is learned on the job.
Apprenticeships in carpentry still exist in some form today. Modern technologies such as nail guns help to make entry level apprenticeships sufficiently productive to justify their minimum wage. I understand Mike Rowe‘s point that there are lots of jobs like these that remain unfilled. The problem is that many of these manual jobs require substantial investment in skills before the person is hired in the first place. Today we require trade schools and certifying exams before allowing a person to work on these jobs. There are few jobs that can be filled without any prior skills at all. His point is that we once had a much larger number of such skilled workers in the past. My point is that those industries created those skilled workers by hiring immediately available unskilled workers and putting them to work where they can learn on the job. They could not rely on trade schools that required the students to invest in tuition and uncompensated classroom time. The available labor pool did not have that kind of money to invest.
Recently, I received a call from a recruiter for a position that I may have been able to do. The job was located near Baltimore that would make a long although feasible commute. I probably would have been interested in it if the commute were easier, but even then I would feel reluctant because the job description seemed relatively junior in skill levels. The skills, though specialized, were some those I felt an unskilled person could pick up within a few weeks or at most a couple months. I wondered why it was necessary for the recruiter to be searching this far out in a different metropolitan area. He explained that there is no one available in the immediate Baltimore area. Baltimore has a higher unemployment rate than Arlington. While it was true that I could have been a good fit for the job, I didn’t understand why they couldn’t find someone more local.
We are quick to distinguish how much more challenging modern skills are to skills in the 19th century. This was a job in information technology, and obviously this recent information technology requires specialized training and experience. For some reason, we convinced ourselves that we can not fill these jobs by putting a help-wanted sign out front of the business and then talking to whoever happens to answer the notice. We are convinced that the hiring process must be selective in terms of pre-existing skills. We feel justified in trying to lure someone from the other side of the continent to come work for this job because he has just the skills we want. The H1B visa shortage is based on the certainty that the only person qualified to do the work is on the other side of the planet.
Perhaps all of that is true. But I am not convinced. I am not convinced of even the first assertion that modern IT skills are anyway different from the experienced labor skills of 19th century factories, mines, or transportation systems. In my youth, I recall marveling at the the number of early scientific discoveries by people who did not have formal education at all, or their education was unrelated to the contributions they made. I believe a lot of innovations in industries came from people working on the floor of those industries. People working their tasks long enough will inevitably figure out what can be done better.
I think we today under-value some of their earlier discoveries because those discoveries seem so obvious to us. We forget that the discoveries were not obvious at the time. These early uneducated scientists and engineers truly did the work that we expect today (and often are disappointed in not receiving) from advanced degrees or certifications. People in the 19th century learned to be productive in their jobs, and much of this increased productivity came because they became prolific innovators.
I do not believe the kind of work we have today is fundamentally different from the work back then. Nor do I think the human race has somehow lost some of this inherent capability to excel when given the opportunity. This is readily apparent when we observe the numerous innovations in computer science coming from young people in today’s high-school systems. These are high school systems that are clearly inferior to the education available at comparable ages in the 19th century. My point is that advanced education is optional for becoming productive and innovative. All that is needed for humans to excel is the opportunity to participate in a workplace setting.
The recruiter seeking my assistance from 40 miles away could easily fill the position by hiring someone down the street and then directing him to train up on a particular topic. The hiring could be somewhat selective to observe enthusiasm and ability to learn, but it does not need to be as selective as modern jobs demanding documentation of many years of experience in something that can be learned in one month.
Or current employment system is obsessed with the recruiting process. We refer to managers as hiring managers. During the recruiting process, the hiring manager will state the job requirements for an opening. He will at least implicitly and often explicitly assert that no one should apply if their experience and training does not exactly match the job description. When resumes arrive, he will spend an hour or so scanning them and discarding all of those that don’t match the job description until he finds 2-3 that look promising. Then he will arrange an interview that may take an hour or so of his time. Finally he hires someone. The mark of a great manager is one who is great about recruiting the right staff.
This expectation of the manager’s hiring skills has the consequence of burdening him with his decision. Based on the few minutes reading a resume and an hour or so interview, the manager has already done the essential task of selecting the right talent. After that, it becomes his job to manage the new hire through the rigors of the actual assignment. In many jobs (certainly in my experience), the pressure is on the manager to accommodate a poor performer through frequent reviews, setting performance goals, offering self-improvement courses, or whatever is necessary to make this a successful member of the staff. This pressure comes from the expectation that the manager is first of all a hiring manager who has already made the right choice.
Our modern recruiting mentality results in the idea that the newly hired individual is already an ideal fit for the job. The focus is on accommodating this individual to the particular inconveniences that the job may present to him. I think this idea is a relatively recent one. Certainly the 19th century employers who hired recently arrived immigrants with minimal English skills did not hire someone ideally suited for a job on the first day.
I imagine that 19th century employers hired who happened to be available, with a little bit of probing to see if he may have some existing skills. I imagined many hiring processes to be much like what Herman Melville described in Moby Dick set in the early 19th century. Although Ishmael was unskilled, his partner Queequeg was a skilled harpooner who was given a higher residual during the hiring process. Both were given the opportunity because they were available and offered their services.
I imagine that there is a fundamental difference in managers of the 19th century and those in the 21st. I would describe the difference in these terms. Today’s managers are hiring managers who rely on recruiting processes to capture the ideal talent for their team. The managers of the 19th century were firing manager who took who ever was available and gave them the opportunity to grow into the job. I call them firing managers because their skill was not in the sharp eye in selecting new staff (although that was certainly a factor for the better managers). Their primary skill was in promptly firing the people who are clearly not going to make it.
A firing manager seems more natural than a hiring manager. In human terms, it is more realistic to obtain good firing rather than good hiring. I base this on the time-frame involved. In today’s recruiting process, the actual hiring manager’s skills involve recognizing promising resumes and effectively interviewing the candidates. The hiring task typically involves about an hour of exposure of the candidate to the manager. Based on this exposure, we expect the manager to make a great choice that he must live with for the following years.
In contrast, the older recruiting process was simpler. If a person were available and showed promise, he would be given the opportunity to fill an open position. If the manager were lucky, there would be a long line of applicants to choose from, but often he would be satisfied with even a single straggler who showed at least an enthusiasm to get to work. The skill of the firing manager occurs after the new hire starts. The firing manager observes the progress from the at-first simple tasks to the gradually more difficult or more responsible tasks. When it becomes apparent that the person is not going to be able to make it, the firing manager exercises his defining capability by firing the employee.
There are many reasons why I find this to be more humanly natural. One is that the decision to fire typically occurs after several days or weeks of daily full-time work. The firing manager has more abundant opportunity to observe the worker performing actual duties. Contrast that with the one-hour opportunity of a hiring manager to observe a candidate during an artificial interview situation. I think the advantage belongs to the firing manager.
The firing manager approach is also more humanly natural from the perspective of the candidate because I believe any mentally healthy and motivated individual can excel in a job when given the opportunity. Suitably motivated, any individual can quickly grow into most job openings we have today, and I include many of those job openings that we consider to be too hard to fill. For example, I’d go so far as to say that the medical field can fill its opening with unskilled laborers whose initial tasks are suitable for on-the-job training that would eventually lead to becoming fully independent surgeons. This is possible in medical system run by firing managers instead of hiring managers.
Conversely, we have abundant evidence of the failure of the hiring manager approach that selects ideal candidates who turn out to become major disappointments on the job. The expectations of success from the modern recruiting process is greatly exaggerated and largely unearned. We simply are not that great at selecting qualified staff who can actually perform the real work needed.
Unfortunately, modern managers are trained to be hiring managers. That means they have no aptitude to be firing managers. We reason there is no need for firing skills because we trust our recruiting processes. Because we are assured of ideal staff up front, our focus needs to be on helping him to succeed with performance reviews and future performance goals. Instead of considering the option of firing, we are advised to have patience for the performance to match the goals.
Even if the modern manager had firing skills, he typically is not permitted to use them. A skilled firing manager can observe in a few days or a few weeks that someone is not going to work out. I trust his instinct is right to let the person go immediately at that point. Except in Donald Trumps reality TV shows, most managers do not have the luxury of immediately declaring “you’re fired”, and certainly not in a short of a period of time after being hired. Again, I trust the firing instinct is correct to conclude that no amount of coddling will obtain the desired performance. However, we work within an idealistic human resources departments that demand a drawn out staff-development process. Firing becomes an option only for overtly criminal behavior, and even then it is just an option.
We are usually stuck with our hiring decisions because our job is to be a hiring manager and a hiring manager’s job is to select the idealized competent candidate for the job opening.
My suggestion for solving all of the present day economic problems of sluggish economy, un-fillable open positions, high unemployment, and even the low labor participation rate is to reject the current hiring manager mentality and replace it with the firing manager mentality that made our country great. (Coincidentally, the country’s decline matches the adoption of the hiring manager concept). The firing manager will fill un-fillable positions with immediately available local unemployed or under-employed and given them an opportunity to grow into the position in a reasonable period of time. For example, a hard-to-fill data science with predictive analytics and machine learning tasks may require a couple months to get the hang of, but I doubt it will take longer than some of these positions are left unfilled.
The sluggish economy and low labor participation rates are closely related and again the firing-manager approach provides the solution. We should free the natural instincts of firing managers to hire immediately and give people opportunities with the understanding the the job is immediately terminated if things don’t work out right. Unfortunately, this takes more than just the will to do so. We need to revise our labor laws and human-resource constraints. Individual managers need the freedom and autonomy to make snap firing decisions. To complement this, the manager needs the freedom to make snap hiring decisions for reasonably promising individual who appears capable for growing into the task despite a resume documenting experience or credentials. To permit hiring such staff, we need to revise our compensation policies to allow for low introductory wages (perhaps far below minimum wage) plus rapid raises and promotions at rates of several times a year as the person grows into a task.
We should accept a far lower minimum wage for an introductory wage. Because this introductory period has a high risk of being fired, it should not be equated as a “living wage”. The introductory wage is an allowance based on whatever excess funds are available because the initial efforts will not contribute much for the business revenue. The rapid promotion and raise cycles are needed to quickly bring the wages to competitive (far above minimum wages) when the individual becomes competent in his job.
This proposal requires a different set of labor and wage laws. I’m suggesting that we return to management practices of the 19th century, a practice I described as being run by firing managers. The obvious way to return to the 19th century business dynamics is to discontinue many of the unrealistic fantasy-based labor and wage regulations we introduced in recent decades.
Returning to a firing manager approach can allow us to recover the more power economic growth of more than a century ago and regain a strong country that is eager to accept massive immigration to fill all of the new jobs.