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Wharton management Professor Peter
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Capelli joins us today to talk about the
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job market thanks for joining us today
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Peter thank you is it a good idea for
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potential employees people looking for
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work to be thinking about tempor
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positions oh I think so uh and I think
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you know for entry-level jobs for people
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leaving school let's say this has been a
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pretty standard uh way to get a job for
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quite a while even when the economy was
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more robust uh the idea of going work
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for a temp agency and then eventually
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getting hired was pretty standard pretty
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routine so my guess is it'll be even
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more important now because full-time
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hiring is not happening Are there
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specific sectors in the economy perhaps
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Green Technology that has or are likely
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to be producing more jobs for the rest
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of 2009 and in into
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2010 uh well I I think the answer is
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sure uh the problem is do we know which
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ones they are and the answer to that is
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no you know this is this is sort of your
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place in bets and you're placing bets on
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what part of the econom is going to grow
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fastest I don't think we know I think if
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you're a job Seeker the way to think
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about this is that it's much like trying
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to play the stock market uh and that is
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it isn't just whether you're trying to
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find where you think more jobs are
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you're trying to find those
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opportunities where more jobs are that
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not everybody else knows about right so
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same thing in the stock market if you
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know an econom a company is growing but
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everybody knows that you're not going to
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make any money on that you want to find
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those companies that are going to grow
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and nobody else seems to understand that
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so you'd like to find those situations
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where uh there are going to be
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opportunities and everybody's not
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swarming them one of the peculiar things
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we found a few years ago for example was
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that
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there were great career opportunities in
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the previous couple of decades in the
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steel industry uh people got to Advanced
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careers there executive jobs faster in
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steel than in a lot of other Industries
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even those that were growing fast and
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the reason was because in part because
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not a lot of people were going to the
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steel industry um but sometimes too
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there are a lot of opportunities simply
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where things are in transition when
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companies are changing their focus uh
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where there's a lot of restu ruring
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going on there could be some real
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opportunities there especially for
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people who have experience already so so
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my sense is uh this is kind of like the
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stock market it's kind of like um you
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know some aspects of sports you kind of
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want to go where everybody else is not
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right and it's it may not be the thing
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to do to simply try to go where you
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think the jobs are uh that's hard to
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predict anyway but go where you think
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there may be opportunities where
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everybody's not swarming all over I see
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there's been a lot of discussion uh in
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recent years about the emergence of a
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freelance economy in which workers take
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on specific kinds of short-term projects
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for a variety of companies do you think
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the recession might uh hasten that kind
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of transition from relatively permanent
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employer employee relationships I think
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so for the reasons we described earlier
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and that is employers are trying to
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hedge their bets they don't want to make
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long-term commitments uh I think there's
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another more General Trend going on and
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that is that companies find it ult to
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plan even in Good Times uh because their
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business strategies are changing all the
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time because product half lives are
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shrinking down uh and as a result they
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find themselves changing directions much
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more frequently than in previous
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generations and because of that uh the
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work tends to be a little more shortterm
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in its orientation and it's much more uh
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conceivable to engage somebody to work
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on a discret project uh than it is to
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hire them in and then think about this
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project or Beyond this project Etc so I
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think we're kind of moving in that
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direction anyway uh and indeed even some
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of the bigger temporary help firms some
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of the bigger uh leas employee sort of
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firms essentially are playing on that
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same idea the original client company
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contracts with a temp firm or a least
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employee firm to engage employees on a
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project likee basis sometime the project
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can go out quite a long time a year or
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two but beyond that the company may
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change directions and that entire skill
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set may become obsolete so it's easier
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to move toward this gig model now
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employers used to pay a penalty for that
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in terms of training costs and and that
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sort of thing is that penalty
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diminishing as these um uh as the
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lifespan of products and strategies also
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shrinks well they're paying a penalty in
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the sense that they pay more per hour
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for the same workers uh the cheapest way
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in terms of cost per hour to engage
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laborers to hire somebody full-time but
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you're placing a bet then and you're
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placing a bet that you'll need them for
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a long enough period of time for that to
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pay off um and if not you end up with a
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big cost of having to let them go and
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the severance cost and the legal cost
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and all that sort of stuff uh so it's
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the case now that if you're hiring a
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temp worker from a temp agency you're
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paying them more per hour sometimes by A
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Lot 25 or 30% more than you're paying
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your regular full-time employees but for
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the employer the reduction in
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uncertainty associated with that uh is
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worth it I don't have to worry about the
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long-term bet whether I'll need them for
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uh a year or two or three even if I only
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need them for a few months uh I can let
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them go without any cost to me and so
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the per hour costs I'm willing to pay a
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premium on that is does that premium
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include the cost of benefits for
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employees full-time employees uh yeah
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even when you're including benefit costs
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yeah and some of the temp agencies and
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particular the least employers um they
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build that in they're paying their own
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people health care costs they're
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charging the client company for that so
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you know the clients are paying a
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premium per hour they're willing to pay
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it to avoid the uncertainty and risk of
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a long-term relationship okay now in
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terms of employee flexibility should
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should people who are about to enter or
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have recently entered the job market be
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more prepared than they have in previous
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recoveries to consider jobs in other
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parts of the us or even overseas perhaps
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in emerging economies yeah I would say
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uh within the US uh probably certainly
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true I'd say one of the things that's
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been different about uh recessions in
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the last few years is that they uh have
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not been quite as National in scope uh
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as maybe they had been in previous
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generations there's some parts of the
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country which have been you know in
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previous years a little better protected
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in previous recessions you know the oil
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industry was doing well in Houston
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people were flocking from the Midwest to
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to Houston this particular recession is
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a little different in that it's so n
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National it's not a particular industry
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that's down Midwest seems to be hit
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particularly hard construction
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especially hard but because it's driven
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basically by credit problems bank's not
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lending it's hitting the whole economy
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as a whole uh so I'd say in comparison
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to you know some earlier recessions in
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the 80s especially the 90s where there
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were some Pockets still doing pretty
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well like oil uh where you could pick up
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and move within the US you really had
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some opportunities there some of that
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still now it's not clear that's such a
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big deal but leaving the country uh is
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an increasingly attractive option and
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there are a lot of reasons for that the
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main one is the rest of the world
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economy seems to be perking up much
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faster than the US is because the
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banking crisis that drove everything is
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still here and so we're still having
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problems with credit uh in Korea for
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example I was there a few weeks ago the
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unemployment rate is down just a little
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below 4% now if you go to places like
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India and China there's an enormous
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demand for managerial Talent so I would
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say it's a great time to look for an
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opportunity outside the US partly
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because inside the US there's not so
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much partly too because the wage rates
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in these other countries have risen a
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lot uh we've just done a big project in
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India and the Indian Executives told us
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that for managerial positions in India
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espe top positions the rates of pay in
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India are about the same as they are in
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the US now uh so you're not taking a
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huge hit in uh wages by taking up some
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of these positions and you're getting
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great experience on your resume and
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something that would increasingly be
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valuable back in the US so I'd say
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that's that's one thing that really is
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different this time around the
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opportunities to work outside the US are
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much more attractive than probably at
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any previous time now um with
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unemployment higher than 10% uh it's
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been a very profound recession for
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workers of all kinds Beyond those we've
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already discussed um temporary positions
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working overseas are there any other
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kinds of long-term structural changes in
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the labor market emerging from from the
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recession do you think well I it's I
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think it's a little hard to say yet I
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think one thing that we do know when you
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have a deep recession like this is that
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the people who enter the job market uh
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during this downturn their experiences
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and to some extent their attitudes uh
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are are fundamentally changed um you can
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see in the data that if you enter the
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workforce in a down economy uh your
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wages over the course of your life will
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never fully recover compared to those
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folks who entered it in an upturn um
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it's also the case that you tend to be a
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little spooked by it uh for a long
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period of time employers would say for
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example that um people who entered the
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job market in 1999 when the economy was
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booming and the fever was on uh even
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when the economy cooled off they still
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had this sense of entitlement uh because
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that's what they experienced when they
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first entered and my guess is that folks
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who enter it now will probably still
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have a sense of gratitude uh even when
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the economy picks up a little bit now
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that's not true of everybody uh and I
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think employers who think that after
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this uh economy picks up again employees
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will be grateful to have jobs and they
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will want security and they'll stay put
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uh they're just wrong it's just not
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going to happen it'll depend on when
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they enter the job market it may depend
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on when they're enter the job market I'd
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say that kind of effect will will occur
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only for those people who left college
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right in this period here for people who
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are more mature and been out for a while
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um they're not uh necessarily going to
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have any great loyalty that their
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current employers I don't think too many
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employers went out of their way to
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protect their employees in this downturn
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I just saw some survey evidence from
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some um consulting firms uh surveying
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employees and the the Figures were
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something like between 40 and 60%
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depending on the survey of the current
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employees in the US surveyed said that
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as soon as the economy recovered they'd
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be looking to leave their current
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employer so they don't feel a lot of
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gratitude to their current employer and
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you discussed this with us uh in a uh a
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couple of articles that we did during
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the early part of the recession the
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importance of trying to find ways
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creative ways to hold on to
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employees so it looks like perhaps
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employers are going to be paying a price
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if they didn't take those steps oh yeah
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I think uh you know employers have been
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remarkably shortsighted uh I think you
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know the typical estimates of the costs
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of laying somebody off are the
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equivalent of about a year's salary in
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terms of replacement costs if you have
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to hire somebody back in some Fields
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where people have expert skills that are
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hard to replace like law for example
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customer contacts the estimates go as
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high as five times their annual salary
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and if you're laying somebody off in
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those contexts and you're expect that
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you'll have to fill the job again within
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a year or so as some of these companies
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thought they're just crazy right it's
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costing you more to lay the people off
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than it would be to just park them and
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pay them to do nothing it's hard for
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them to think that way I think and to
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some extent they they don't understand
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the arguments and the people who do
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understand them often in the human
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resource departments are nervous about
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making them uh so I'd say companies made
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a lot of mistakes they'll pay a price
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for this um the question is whether
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they'll learn next time around and
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jury's out on that I guess okay well
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thank you so much for coming with us
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today I appreciate it thank you thank
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you
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