Results of Employer Survey Show State’s Labor Market at a Tipping Point

Although New Jersey has seen job growth since the ‘great recession,’ wages have gone down and there’s danger of ‘a vicious cycle of low wages, decreased investment and underutilization of human capital’

John J. Sarno
With a civilian labor force approaching 4.5 million, New Jersey has finally recovered the jobs that were lost during the “great recession” of 2007-2009, which officially ended, statistically at least, in 2012. But even as the unemployment rate is 4.5 percent, the numbers cannot mask the troubling structural changes in the economy that have occurred over this time.

The most recent Employment and Wages Report issued by the U.S. Bureau of Labor Statistics (April, 2018) shows the state’s economy at a tipping point. Job growth has occurred in all of New Jersey’s largest 15 counties over the three years. However, in each of these counties, wages have actually gone down. In other words, even as hiring increases, wages in the aggregate have declined.

How is this possible? Results of the Employers Association of New Jersey’s Talent Management Survey explains.

A cross-section of Association employer-members were surveyed in May, 2018. Almost all of the 85 respondents said that they would be hiring this year, most within six months. Recruiting strategies are varied but nearly 60 percent reported that their major recruiting challenge is lack of skills in the applicant pool. Nearly half reported lack of relevant job experience as an obstacle.

What gives?

When drilling down, we find a more complex relationship between the type of hiring that is going on and the wages that are being paid.

Manufacturing has long faced the problem of finding skilled workers. And our survey shows that manufacturing respondents reported labor shortages for technical work and that many other full-time manufacturing jobs remain vacant. In fact, it’s the manufacturing sector that has the most job vacancies statewide. But again, the picture presented in the state’s manufacturing sector sometimes does not meet the eye.

While public resources are now being directed at the development of so-called advanced manufacturing, it is undeniable that much of the manufacturing in New Jersey is done by small shops that rely on long tenured workers and whose unique skill-set has been molded by the job.

These niche players stay in business primarily within a national supply chain, mostly doing defense work. About 1,400 small manufacturers in the state benefit from a U.S. defense contract, which typically does not place a premium on the type of innovation that requires capital investment. Not much has changed on these shop floors for decades — a tweak here, a fix there — as long-term workers operate decades-old machinery producing the same basic product line.

To be sure, these are clean, decent places to work. I have personally visited and documented hundreds of them. Workers are loyal and owners care about their welfare. For some, workers and owners enjoy each other’s company on the shop floor. At others, owners believe that they are morally obliged to help workers and their families in need. Thousands of women engage in assembly work and thousands of men perform production work. Finding replacements for these workers who, at some point, will retire will be next to impossible without succession planning. As such, the retirement plan for owners includes winding down or selling out.

But aside from the perennial problem faced by the state’s manufacturing sectors, the survey tells a more troubling story of a state getting perilously close to being caught in a vicious cycle of low wages, decreased investment and underutilization of human capital; as the other biggest shortages are in jobs that pay lower wages — drivers, retail workers, daycare workers, and administrative and health service workers. These sectors have the most vacancies and employers are scrambling to hire qualified people. Like manufactures, they will also continue to have trouble filling jobs because wages can’t support a family.

As for the job market as a whole, about two in ten jobs require a college degree. And about 25 percent of college graduates now earn no more than does the average high school graduate. Part of the reason is oversupply. Technology increased the demand for educated workers, but that demand has been consistently outpaced by the number of new college graduates entering the job market.

Nevertheless, our survey shows that six of 10 respondents believe that labor shortages will negatively impact their business. But as long as wages remain stagnant, there is no incentive to invest in skills or better machinery. Thus, labor shortages will continue to be a drag on economic grow.

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