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Liquidity in Job Markets

For the past month or so, I have been  looking at job postings in my field of specialization – Geotechnical Engineering – across the US and Canada. During my searches, I noticed some general trends that the companies exhibit when it relates to the expectations and/or qualifications of the candidates they want. Most are what is to be anticipated for the corresponding position. But of all the different expectations listed, one particular aspect has many interesting collateral impacts for the overall job market. And that is the requirement of Experience.

2006-378p-skills-shortage

In general, I noticed the following breakup in the job postings (I do not have hard numbers, but a constant exposure to the postings will pretty much confirm this):

  • Senior Geotechnical Engineer (40% of available positions): 10-15+ years of experience.
  • Intermediate Geotechnical Engineer (30-35% of available positions): 5-10 years of experience.
  • Junior/Entry Level Geotechnical Engineer (25-30% of available positions): 0-3 years of experience.

At first glance, the above description appears to be rather innocuous. A direct correlation between seniority of position and expected level of experience from the candidate is fairly obvious and definitely warranted. But this does not provide the complete picture. What needs to be looked at is that about 70% of jobs in the market are only for candidates who have experience in the range of 5-15 years or more. So what does this imply?

First, we have to understand where the labor supply – all experience levels – comes from and where they are currently and where they will be in the future. In the field of Geotechnical Engineering, I can think of a few hundred people graduating with a Master’s degree every year in the US, and a Master’s degree is pretty much a requirement for a career in Geotechnical Engineering. So that means there is a constant supply of maybe 200-400 eligible candidates every year for the Junior/Entry Level positions. For the sake of discussion, let us assume that all these graduates get an entry level job. (From my own experiences in trying to hire entry level candidates for my company, I can say that the demand exceeds supply. So this assumption is valid). And let us also assume that most, if not all, of the demand for the entry level/junior Geotech positions is fulfilled. So far, so good.

But this is where the fun starts. Because you see, unlike the constant supply of eligible graduates for Junior/Entry level positions, there is absolutely no such supply for the Intermediate and Senior level positions. The people graduating from colleges are unemployed and actively looking for entry level jobs. Companies are also actively looking to fill their junior/entry level positions. So there is a constant match between demand and supply for the entry level jobs.

But there is no such connection available between eligible candidates and the Intermediate/Senior positions. The ‘eligible’ candidates for these positions are typically already employed and lack any incentives to change jobs. The lack of incentive only increases with a person’s experience. That is, the longer a person spends time in a city or a company, they are unlikely to move away from either or both. People develop professional connections, drop roots in a community, buy houses, start a family and get settled in one place as they progress in their career.

If anything, the factors listed above only contribute to a ‘cost’ for the person if they were to consider changing companies and/or cities. And any company looking to hire for an Intermediate/Senior position will have to ‘compensate’ for that cost in some visible form – higher salary, higher position, faster career growth, better living/working conditions, etc. And it is not sufficient for the company seeking to hire the candidate to be just ‘better’ than the candidate’s current employer. They will have to be ‘significantly better’ since they will have to provide additional compensation for the ‘cost’ the candidate has to pay to change jobs.

All this points to a job market where the entry level positions are continuously filled and the intermediate/senior level positions are hard to fill. Most of the intermediate/senior level jobs typically stay open for a long time (several months). Anyone can login to any job platform and see this for themselves. In spite of this, one cursory look at the tone and content of the job posting requirements for intermediate and senior level positions reveals such a sense of idealism on part of the company seeking the candidates. There are typically such a large number of specific requirements listed for a candidate in these positions, one has to wonder exactly how successful are these companies in hiring people for this level?

And that is not even a rhetorical question from my side. I am genuinely interested to know what the success rate is for companies seeking to hire intermediate and senior level positions in a specific high skilled profession. What percentage of these positions actually get filled? How long are they typically open for? Do the recruiters ever relax their requirements? Do they promote someone from within the organization and/or give them additional responsibilities? Are the recruiters even aware of the nature of the job market? What do they do when they absolutely need someone?

Or in other words, exactly how liquid is the job market at the intermediate and senior positions for high skilled professions? 

These questions take me to yet more interesting aspects/impacts on the overall job market. In an illiquid job market, what does job creation even mean? Exactly how valuable is experience for a given role? How would/should one define skills shortage? And how should this be addressed? What should be the role of immigrants in such a situation?

These are questions I seek to address in future posts. Stay tuned.

 

 

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From a Land of Handouts to a Land of Opportunities

One of the most powerful sources of clarity is contrast. Societies in different countries offer glaring contrasts between each other in a myriad aspects of life – all inevitably attributed to a range of factors including the history, the diversity, the founding principles etc. When both extremes of any specific aspect of a society are experienced or witnessed, the nuances of the society’s working reveal themselves in more detail and clarity. Growing up in India and now living in the US since 3 years has provided ample opportunities to observe this very contrast in many many important facets in both the countries.

The role (and its extent) of a government in the functioning of a democracy is one such prevailing contrast. I have been fascinated to see how Americans perceive the Government in stark contrast to how a majority of the Indians see it. Several questions inevitably are raised when this contrast is quantified in terms of where the two societies are right now and what the Governments are doing in each case. What components of public life does the Government concern itself with? Where exactly do they decide they need to interfere? What are the people demanding from the Government?

Profit was a dirty word for Nehru

In order to attempt answering this question, let’s go back to the time India got independence and the first Government came to power. When Jawaharlal Nehru became the Prime Minister in 1947, he inherited a country in chaos and disarray that needed quick solutions. Tasked with the job of restoring order and generating faith among the people in a quick and easy manner, the founding fathers of the Indian Government decided that the Govt’s role was to act as the entity which had a responsibility to personally take care of every single aspect of its populace. Not only did it see its primary role  to be that of shielding the masses from the problems facing the country, it also saw that the only solution to these problems was the Government itself. Inevitably, when this school of thought manifested in the generation of policies, Govt interference became the primary mode of problem addressal at every level of public life.

The impacts the society faced over the next several decades should not only be viewed as a result of what the Government did back then. Equally important is to look at what the Government did NOT do. When it told the people, “We are the Government and we are responsible for you. We will take care of you so you do not have to take care of yourselves”, the Govt did not frame policies that generate opportunities and jobs for the people to solve their problems themselves. It did not encourage the people to seek out and build their own lives. Instead of framing policies and laws that generated jobs and opportunities, the Govt decided that the easiest way to “take care” of the poor and the lower class was to give them ‘handouts’.

These handouts came in many forms – subsidies on cooking gas, petrol, diesel, loan waivers for farmers, tax breaks etc. The lower class families were shielded from the real problems of the society by the appeal of free money. An added benefit for the Govt was that it made it more popular among the voters. (When did free stuff ever become unpopular?). But the important question to ask is how the Govt paid for all these schemes. Its answer was simple. All it had to do was to play Robin Hood. It made sure to tax successful businessmen at insanely high rates (up to 70%) in order to give free handouts to the poor. (I mean, surely those rich people did not NEED that money, right?) This led to the now obvious consequence of discouraging  job creating businesses and instead encouraging Government dependency among the people. More the people depended on the Government, more the Govt decided it was their responsibility to take care of them. The effects of this vicious cycle over the years are reflected best in the demands the poor and the lower class make now.

The entire population that has received handouts from the Govt over the years now demand only one thing – more handouts. They do not demand  better infrastructure and more opportunities for them to build their lives on. This does not appear to them to be the solution to their problems. Why? Simply because the only solution they have ever known has come in the form of free handouts from the Govt. Bad rains? Wave the farm loans. High diesel price? Subsidize it. So much so, these handouts have almost become a fundamental birth right for the long term recipients. And any attempt to get these same people to do without the handouts is going to be futile.

In addition to the obvious consequence of mass objection by the recipients to any reduction in the handouts, there is always going to be a political party that is bound to take advantage of the discontent among the voters to further their own agenda. So ultimately, we have a society in which a Govt gives handouts instead of opportunities or infrastructure, which is in turn voted to power by people who demand more handouts as opposed to opportunities and infrastructure – and all this in a democratic setup that does not allow the breaking of this vicious cycle.

Contrast this with what I have observed in the USA. The founding principles here were based on individual liberty and achievement. The people were encouraged, and in fact expected, to build their own lives by hard work and effort. Meanwhile, the Government saw its primarily role as the entity tasked with the responsibility of framing policies and laws that generated sufficient opportunities for the people to go out, build their own lives and to take pride in their achievement. The Government also sees that it has a responsibility to provide the necessary infrastructure and security that facilitates the effective utilization of the available opportunities by the people. When elections come in, people don’t demand subsidies or handouts. They want to know how each candidate plans to create opportunities, improve infrastructure and provide healthcare and security.

The prevailing mindset in a society that has been subjected to THIS process is very evident. People take pride in building their own lives and achieving their dreams. This in turn leads to improved dignity of labor  – something that is grossly lacking in the Indian context. But perhaps more importantly, we will have a society that attracts and retains the best talent in the world – and this is extremely evident in what is happening in America. You see, this is because the best minds seek appreciation of their talent through opportunities and reward for hard work, not through handouts and subsidies. Ultimately, we have a society where the economy prospers when the people prosper.

(As a side note, the fact that President Obama is going exactly in the opposite direction – that is more Govt control, more food stamps, more subsidies, bailouts, redistributing wealth Robin Hood style – is what will make him never get my support. Do read the full text -not taking anything out of context – of his now infamous ‘You did not build that’ speech and if you still feel he does not have Socialistic tendencies, then you are perhaps already an Obama supporting Democrat no matter what. This ideology, however, sets a very dangerous and irreversible precedent for going down the wrong path)

But I digress.

My main aim of providing this contrast is for it to serve as a means of explanation for the origins and roots of something so deeply ingrained in the Indian psyche. Make no mistake. This is not to imply that the average Indian will consciously NOT make an effort to make use of opportunities and infrastructure. On the contrary, Indians have shown what they are capable of when the economy was hit with reforms in early 1990’s. The middle class rose to the occasion to make use of all the newly available opportunities to build their own lives. Entrepreneurs blossomed amidst encouragement for businessmen and industrialists – generating employment for millions. Today this result can clearly be seen in the ever booming software industry.

Even the poor lower class have shown a propensity to utilize whatever opportunities and infrastructure is available to improve their livelihood.  As Nandan Nilikani has pointed out in his book ‘Imagining India‘, a million dollars spent on laying a road to a remote village is likely to create a lot more jobs than the same amount being spent to provide subsidies for the people of the same village. However,  the fact that their demands still revolve around subsidies should be attributed more to their own prior experience regarding what they have received, instead of implying an inherent hesitancy to work.

The proof is evident and clear. Whenever opportunities are provided, and along with it the necessary infrastructure, the people of India have always risen to the occasion to make use of it and succeed – irrespective of how rich or poor we are. The Government needs to recognize this and prioritize its spending accordingly. What India needs are opportunities – not handouts; it needs infrastructure for the people to effectively make use of these opportunities – not increased subsidies that increase Government dependency and drive up the deficit.

However, as I pointed out earlier, in a multi-party democratic setup like in India, there will always be someone who will seek to appease the people by promising them more handouts. And the unfortunate fact is that this approach has shown to work repeatedly. When or how this vicious cycle is broken is hard to tell. And until that point, India will never make the transition from a land of handouts to a land of opportunities.