Another Dilemma

There is an article at CNN Money that reports on a recent Organization for Economic Cooperation and Development study that ranked nations by their labor forces skill level (link: http://management.fortune.cnn.com/2013/10/25/american-skills-gap/).  The study looked specifically at  "literacy, numeracy and problem solving in the context of technology-rich environments".  Unfortunately, the United States ranked behind other advanced nations such as Finland, Japan, and the Netherlands. 

The article goes on to claim that some of this skills gap is due to a lack of employer provided training. The article cites an unwillingness to spend money on training for fear of loosing employees once they are better trained, and (ironically) an unwillingness to spend money on bringing in better trained employees. 

Some would view this challenge as a result of a tight economic situation, or the commoditization of the labor force.  However, I think another perspective may be more accurate: the prisoner's dilemma.  The prisoner's dilemma is a thought experiment used to comprehend decision making. In the experiment two prisoners involved in a crime are separated and offered plea deals to convict the other with the crime.  If they take the deal, they get less time and the other serves the max, but if they both snitch on each other than they both get the max. Conversely, if they both hold out there will not be enough evidence to convict either and they will be free to go. The experiment is meant to explore the issue of trusting another party to hold firm to an existing agreement and believing in the mutual good over individual success.

I believe it applies quite well to the current dearth of job training programs because both employers and employees are concerned about the existing agreement with regards to offering or seeking training.  For employers, they are concerned that by offering this training to their employees, these employees will seek other employment as soon as possible. The employee is concerned about whether their employer will offer them more money for taking training or may be training themselves into an area that the company could cut in the future.   These decisions are informed by the factors mentioned earlier (poor economy, lack of stable employment) and cloud some of the perception of each groups understanding of the others perspectives.  

Instead of being trapped in a prisoner's dilemma, greater communication and collaboration may offer a way out. When employer's are considering expanding training, working together with regional competitors may offer a way of reducing the risk of job jumping by newly trained employees.  This could be timing training together so that needs are filled at the same time which would minimize the need of one company to poach the others newly skilled staff (they could even pool training together to lower the cost where possible). Employers, recognizing that funding is limited, could make completing training part of the requirements for gaining a specific monetary bonus, but the raise would be contingent on the organization improving financially (which the training should be connected to). Finally, employees and employers need to be more open with each other about the need for training, the impact training will have on job security, and the career desires of the employees in question.

In many simulations of the prisoner's dilemma, communication improvements lead to better outcomes.  I have little doubt that this would be the case with job training.  For the next post I will try to link to some stories about how some organizations are doing workforce training correctly and what has worked for them.

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I have the high growth flu, you should catch it!

Building on the previous article, the Kauffman Foundation is out with the results of a survey they conducted that looked at how people relate to entrepreneurs.  Specifically it asked two questions (after demographic questions): Do you know any entrepreneurs and do you know any growth entrepreneurs (those working in high growth fields like biotechnology)?  You can read the report here:

http://www.kauffman.org/uploadedFiles/DownLoadableResources/is-entrepreneurship-contagious.pdf

The conclusion the report reaches is that entrepreneurship is viral, but that those in certain segments of the population are exposed to it differently and in different ways (regular versus high growth). It points out that those in low income may know many entrepreneurs , but very few in high growth industries.  This is unsurprising for many reasons, but it is interesting to see data that supports the idea.  Similarly, higher incomes correlated with more high growth entrepreneurs . This report focused on just two questions, so there are many unknowns, however being able to see how certain groups of people are more familiar with different types of entrepreneurship due to their socio-economic status is fascinating.

This report builds on the suggestion from the previous post that exposing lower growth populations (low income, women, and others according to the study) to high growth entrepreneurs (or venture capitalists) it could have a catalytic effect on how they view or engage in entrepreneurship .  This further encourages the idea that there are ways to boost high growth industries in depressed areas, perhaps as simply as having people mingle more.

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Venturing out of Boston and Silicon Valley

There was an article in the Times Union that focuses on how critical venture capital is to stimulating job creation. In New York State's capital district, the largest employers has been the various state government organizations, and if not the state, then large corporate organizations like GE.  There has been a dearth or venture capital in the area, with the article pointing out that during 3 months earlier this year only one company received such capital, and the amount was only a fraction of what the rest of the state (and country) received. You can view the article here:

http://m.timesunion.com/tu/db_41998/contentdetail.htm?contentguid=baMlo6jA#

However, much like the article from the previous blog post, it is exactly these companies which are poised for job growth. Fueled by venture capital, these companies are able to expand rapidly and potentially turn into giants like Google or Facebook.  How we encourage an influx of venture capital is not fully explored in the article, however one idea might be providing incentives or encouragement to draw such funds to the area.  Many venture capital funds are unfamiliar with areas beyond their usual geographic area (say Boston, California, or even NYC).  Perhaps governments or others could coordinate visits by representatives of these funds to areas like Albany, or even Detroit, so that they could see first hand the potential. Or perhaps venture capital could be incentivized by other means, like tax credits.

Venture capital is clearly important in creating jobs but how to attract more is less clear. Hopefully in the weeks and months ahead, there will be more ideas in how to bring this critical aspect of job creation to those places that need it.

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It is a small business world, but should it be?

There was a great story on NPR that illustrates (or audiates?) the common fallacy that small businesses create jobs.  Small businesses may eventually create jobs, but not all small businesses are able or willing to grow beyond their current size.  Many are single person enterprises or small businesses that due to economic reasons face challenges to scaling (think of restaurants or craft shops). Some though, like the one featured in the story, can grow exponentially and want too.

The true challenge, which this story doesn't dwell on, is how to identify the business that will stay small versus the ones that will grow rapidly.  Take a listen to the story below:

http://www.npr.org/2013/10/10/227788692/when-it-comes-to-jobs-not-all-small-businesses-make-it-big

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