Workforce Development: An Overview for CGIA-SAWDC

by Semoon Chang

Semoonchang.comDecember 10, 2015

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Impact of Economy on Workforce Development

Recession: Keep employees and inventories to minimum

Growing economy Increase in hiring Increase in turnovers

What if future is uncertain?

Growth Rate of Real GDP (%)Annual

Growth Rate of Real GDP (%)Quarterly

12-1 12-2 12-3 12-4 13-1 13-2 13-3 13-4 14-1 14-2 14-3 14-4 15-1 15-2 15-3

-2

-1

0

1

2

3

4

5

2.7 2.9

0.50.1

1.9

1.1

3

3.8

-0.9

4.64.3

2.1

0.6

3.9

1.5

Projectionof U.S. Economy by FRB

2015 2016 2017 2018+0.00

1.00

2.00

3.00

4.00

5.00

6.00

2.10 2.30 2.20 2.00

5.00 4.80 4.80 4.80

0.40

1.70 1.90 2.00

Real GDP Unemp Rate Inflation

Projections by CBO

Actual Projected

Growth of Real GDP

Percent

6

4

CBO expects output to grow more 2 rapidly in 2016 and 2017 than in

2015 and at a more moderate pace

0 in subsequent years.

-2

-4 2000 2005 2010 2015 2020 2025

Sources: Congressional Budget Office; Bureau of Economic Analysis.

Inflation

Actual Projected

O verall

C ore

Inflation

Percentage Change in Prices

5

4

3 CBO anticipates that core prices will rise modestly, reflecting the

remaining slack in the economy and 2 widely held expectations for low and

stable inflation.

1

0 2000 2005 2010 2015 2020 2025

Labor MarketThe Labor Force, Employment, and Unemployment

The percentage of the population that is employed is projected to fall over the next 10 years because of declining participation in the labor force, mainly by baby boomers as they age and move into retirement.

Percentage of the Population

70

65

60

55 Labor Force Participation Rate

50

0 1955 1965 1975 1985 1995 2005 2015 2 02 5

Sources: Congressional Budget Office; Bureau of Labor Statistics.

Actual Projected

Unemployed 63

61 Employed

59

58

Hourly Compensationpercentage change

Actual Projected

Hourly Labor Compensation

Percentage Change

5

4 Although hourly labor compensation

has grown slowly in recent years, 3 CBO projects that growth over the

next several years will be stronger

2 than in 2014, as the demand for workers continues to rise and slack

in the labor market diminishes. 1

0 2000 2005 2010 2015 2020 2025

Sources: Congressional Budget Office; Bureau of Labor Statistics

Interest Rate Projections

10-Year Treasury

Notes

3-Month Treasury

Bills

5

4 CBO projects that interest

rates on Treasury securities will rise

3 with the anticipated increase in the federal funds rate and with

2 expectations of continued improvement in

economic conditions. 1

0 2015 2016 2017 Longer Term

Sources: Congressional Budget Office; Federal Reserve; Bloomberg

Fed Chair Yellen’s speech at Economic Club of Washington DC: Dec. 2, 2015

“economic and financial information received since Oct meeting has been consistent with our expectations of continued improvement in the labor market,” and inflation moving “back to 2 percent objective.” However:

“economic conditions may warrant keeping the target federal funds rate below” 3.5% long run natural rate.”

Why Slow Growth? Too many

regulations Needs to be

flexible Too many

depending on gov’t

Too much debt>>>

Annual Budget Deficit

Surpluses Actual P rojected

Average D eficit, 1965 to 2014

(-2.7% ) Deficits

Total Deficits or Surpluses

Because outlays are projected to grow faster than revenues after 2018, projected deficits increase to almost 4 percent of gross domestic product from 2022 through 2025.

Percentage of Gross Domestic Product

4 4

2 2

0 0

-2 -2

-4 -4

-6 -6

-8 -8

-10 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

-10

Public Debt How much?

$18,774,000,000,000 total ($60,000/person) $450,000,000,000 annual interest $1,500/per person per year

Long-term impact? What if no one is willing to lend Higher interest rates (Why Not now?) Slowing economy & loss of jobs Limit what gov’t can do during

emergency (big recession or war)

Stock Market, Anyone?

Old Times Low price earnings ratio Expected capital gains

Today Rising income Rising demand unrelated to P/E

Wider/wilder fluctuations Index funds with low expense ratios

What If Attacks Continue?

Metro Areas for CGIA-SAWDC Members Alabama

Mobile (MOB) Daphne-Fairhope-Foley (DAP) No metro: Monroe, Washington, Clark,

Escambia Florida

Crestview-Ft. Walton Beach-Destin (WAL) Panama City (PAN) Pensacola-Ferry Pass-Brent (PEN)

Mississippi Gulfport-Biloxi-Pascagoula (BIL)

Metro Comparison

UNR 8-14 UNR 8-15 GDP($M) 2014 RankMOB 8.1 7.6 18,284 124DAP 6.1 5.6 6,488 254WAL 5.3 4.5 12,007 174PAN 6.4 5.2 7,674 225PEN 6.3 5.2 15,916 140BIL 7.4 5.6 15,841 143

Importance of the Manufacturing Industry

AL Ind Energy Cons

23

Why Is Manufacturing Important?Long-term commitmentOnce lost, hard to bring it backHigher wages in generalSignificant multiplier effectMajor source of exports; andMajor source of productivity

growth

24

100 New Manufacturing Jobs

25

Create additional 66 to 356 jobs, depending on products

Based on latest RIMS II multipliers for Alabama.

Manufacturing Industry…

26

Requires globally competitive energy supply.

Locates plants where it allows them to be competitive.

Responds to high energy prices. Key driver of the AL/MS (FL?)

economy through jobs and wage benefits.

2015: Year of Retail Boom Retail

McGowin Park (Dock’s Sporting Goods) Westwood Plaza (Gander Sporting Goods) Pinebrook Shopping Center (Whole Food)

Non-Retail Airbus Return of Carnival Austal expansion

Impact on Tax Revenues?

Sales Tax Revenue by Month: Mobile Co: Jan 2005 to Sept. 2015

Mobile Co. Sales Tax Revenue by Month (Jan. 2012 – Sept. 2015)

1 2 3 4 5 6 7 8 9 10 11 120

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

2012 2013 2014 2015

Sales Tax in Alabama:What are the problems?

ProblemsMany different ratesToo many exemptionsTax rates too highNon-compliance

Impact of Retail Boom in Mobile?

Sales tax revenues will increase above the trend in recent years..

The rising trend in sales tax will make leaders to proclaim that “we are doing a good job!” and

Hide all the problems of current sales taxation with no attempt to solve them!!!

Words vs. Action

CGIA & SAWDC

Central Gulf Industrial Alliance “best practices in the areas of

workforce development”SW AL Workforce Develop Council

“comprehensive, integrated workforce development system”

Two ApproachesSector-based (demand

side of workplace)Place-based (supply side

of workplace)

Sector-based approach

Focus on industries which most likely hire new employees

higher entrance requirements than place-based strategies

typically created through networks and partnerships (part of incentives)

Need employers to participate in curriculum development and trainee evaluation

Potential barriers

Regions experiencing skills gap between trainees and employer needs

Low literacy or educational levels of trainees

Quick turnover in technology making training program obsolete

Need to be ready for changing technologies

Place-based approach

Help participants gain initial access to the labor market

ideal framework for state and local government to address the issue of unemployment and poverty problems

requires analysis of the community's current and anticipated needs

Programs must be flexible enough to adapt to changing workplace needs.

Generation

Baby Boomers: born 1946 to 1964; X: born 1965 and 1977; perceived

to be disaffected and directionless; Y: People born in 1978 or later;

known as Gen Y because they came after Gen X; also called Baby Boom Echo

Millennials

% of workforce 6% in 2000 35% in 2015

Top 3 most valued work benefits Training & development Flexible working hours Cash bonus (next: free health insurance, etc)

Millennials Tech Savvy

Prefer to collaborate online Use personal smartphones at work Use downloads for work purposes

Work values Not a team player Narcissistic

Excessive or erotic interest in oneself Inflated idea of own importance

Negative Impact of Automation on Jobs: Old Concerns

1961 TIME magazine titled “The Automation Jobless” Feb 24, 1961.

1964 President Lyndon B Johnson empaneled a blue-ribbon national commission to tackle “the problem that productivity was rising so fast it might outstrip demand for labor.”

Negative Impact of Automation on Jobs: Continuing Concerns

2014 Erik Brynjolfsson and Andrew McAfee (MIT), “The Second Machine Age: Work” 2014 Norton & Co:

Best time to be a worker with special skills, but worst time to be a worker with ‘ordinary’ skills

because computers, robots, and other digital technologies are “acquiring these skills” at an extraordinary rate.

David H. Autor (MIT), “Why Are There Still So Many Jobs? The History and Future of Workplace Automation,” J of Economic Perspectives (Sum 15)

Automation does substitute for labor

Automation also complements labor, leading to higher demand for labor

Changes in technology do alter the types of jobs, however.

Autor cites computer technologies as an example.

computers follow procedures laid out by programmers

Cost of computations “fallen by at least 1.7 trillion-fold since the manual computing era”

Firms have strong incentives to substitute computers for labor

computers can substitute routine tasks, but not non-routine tasks such as

problem-solving capabilities, intuition, creativity, persuasion, visual and language recognition, and in-person interactions.

Professor Autor concludes Education and job training system

should focus on producing workers who can combine routine and non-routine capabilities

“human capital investment must be at the heart of any long-term strategy for producing skills that are complemented by, rather than substituted for, technological change,,” especially…….

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