When I talk to friends about solving the problem of putting people back to work, I usually get the response “What do you mean? Unemployment is at historical lows.” And they aren’t wrong, as of the writing of this article, the national unemployment rate stands at 3.7%. But while the world is hyper focused on unemployment, there is a larger and growing issue of underemployment that is getting little to no attention.
What is Underemployment?
Underemployment is when a worker has a job, but the job they have underutilizes their capabilities and time. A recent working paper published by the NBER has begun to investigate the growing, hidden problem of underemployment and its impact on productivity and wage growth.
Anecdotally, this problem manifests itself as the barista with a master’s degree or the Uber driver with a PhD. Said another way, there is an increasing population of highly educated workers that are underemployed in lower skilled jobs because the current labor market does not provide ample mobility to move into the increasing number of high skilled jobs becoming available. This trend is particularly noticeable in the tech industry, where there is a constant shortage for talent to meet the demand for digital system designers and builders (illustrated below).
Left unchecked, this misalignment creates greater inequality. A growing pool of underemployed workers compete heavily for lower skilled jobs, driving down their wages, and a smaller pool of tech workers compete for a growing number of tech jobs, which drives their wages up. This asymmetry is fueled by 2 larger social issues:
1) A Lack of Diverse Educational Paths
The common path for employment in the U.S. is go to college, choose a major, study it for 4 years, graduate and then get a job. However, this system is increasingly becoming a bad fit for society. Students are graduating with skill sets that don’t match what employers are looking for and are saddled with increasing amounts of debt. This results in a workforce that is highly educated, underpaid and severely in debt.
2) Complexity of Digital Tools and Technologies
As data and processes in organizations become increasingly digital, organizations demand more workers that can design, build and maintain systems that generate insights, automate processes or increase productivity. But the tech labor market is still extremely polarized, you are either technical or not, an engineer or not. However, just because a job centers around building and maintaining digital systems, it doesn’t necessarily mean that you need a degree in computer science to deliver the solution. The barrier here is a lack of appropriate tools that enables the labor market to provide a greater spectrum of tech workers with varying degrees of technical abilities. A greater spectrum of technical workers allows employers to focus traditional software engineers on harder problems while meeting other needs with workers from different educational backgrounds.
The combination of these two trends is resulting in a Tech Labor Bottleneck (pictured above), that is preventing a large group of capable workers from migrating out of lower skilled jobs into high-demand tech professions.
This bottleneck is the source of an increasing imbalance between high vs. low skilled labor. The key to address this imbalance is to focus on the larger social issues of limited education paths for tech and the complexity of digital tools and technologies. Over the next couple of blog posts in this series, I will be exploring the societal responses that are emerging to tackle these two issues in the form of:
Providing Alternative Paths for Education
The traditional 4 year college route as the single path to employment is no longer meeting the needs of our labor market. We need to address labor needs via a diversified set of training channels that match the skills needed without putting huge financial burden on future workers.
Making Digital Tools Accessible to a Larger Spectrum of Technical Expertise
Creating systems and tools that make it easier for workers from different educational backgrounds to participate in the tech workforce.
Stay tuned for upcoming posts that dive deeper into these two topics.
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