Prolonged periods of unemployment have several consequences. A study published in 2009 by Till von Wachter, Jae Song and Joyce Manchester reported the effects on the wages of those fired during the 1980s recession. In the short-term, they could expect to earn up to 30% less than those who had kept their jobs. And 15 to 20 years down the line, their wages would continue to suffer significantly. Lisa Khan, an economist at Yale, also found that young workers entering the job market during a recession face higher unemployment rates than average for up to ten years.
As the graph below demonstrates, since the financial crisis struck, queues at job centres have been stubbornly long in both the UK and the US.
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While the immediate problem in the UK and the US is to get people back to work, there are other considerations too. Once economic recovery is in full bloom, it won't be just the size of the available workforce that matters, but also its quality. Unemployment, especially in the long-term, is bound to impact on the skills of the workforce.
A recent survey conducted by the Economist Intelligence Unit, reported that employers in both the UK and the US think that the private sector, along with the government, has a role to play in improving jobseekers’ and employees’ skills. In fact, nearly two-thirds (63%) think that employers should be offering more training schemes and updating existing ones. And the benefits would not only be felt by the workforce; a better-trained staff would have a positive impact on profits, productivity and customer satisfaction, according to executives in the survey.
So what are some of the players in the private sector doing?
John Lewis, one of the UK’s biggest employee-owned retailers, offers a multitude of training programmes to its workers – also known as partners. Among these is Leisure Learning which provides fee subsidies to employees wishing to enroll on externally run courses. “Learning a new skill outside of their role enhances partners’ career development because it teaches them new ways of thinking and working – and the ability to try something new is itself a very positive experience for the partners”, says Jane Beine, head of partner development at John Lewis.
On the other hand, Hilton Worldwide, one of the world's largest hotel chains based in the US, is trying to make the most of its available workforce. It has created a global management system that maps and documents every employee’s specific skills, including languages, education and experience. Hilton Worldwide can then find the skills needed by one department in a different part of the organisation. It also means they can readily assess any skills gaps and tailor training offerings accordingly.
Though unemployment rates won't improve dramatically over night, keeping up – and improving – workforce competitiveness will be vital for both the UK and the US economies. It's by no means a small task but certainly one employers must pursue to stay competitive themselves.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.
