Cheap Labour May Soon Be a Thing of the Past

Migrant Worker Style. By Matt Ming
Migrant Worker Style. Photo courtesy of Matt Ming.  (In communist China, being a labourer is considered dignified, hence they often wear nice coats)

What would happen if the world ran out of cheap labour?  It’s a threat, or an opportunity, depending on your perspective.  But it could happen in our lifetime.  In an earlier post I described how unemployment was low but wages weren’t rising.  If job growth were to continue all around the world, we could soon be surprised that there are few people left on earth who will work for low wages.

In a January 2018 New York Times article from January 2018, the article points to a global economic up-swing.  The reason why the economy is improving is different in every country.  The global economy has been recovering for a decade, since the 2008 recession arising from the sub-prime mortgage fiasco in the U.S.  This time around, the thriving economy is different.  Economists note that because the growth is broad-based, there are fewer star performers.  If any one country slips into a recession, the rest of the global economy could keep things going strong.  The world economy is forecast to grow by 3.9 percent in 2018 and 2019.  This growth includes a lot of developing countries.

However, this may be a house of cards about to come crashing down once you factor in the “Lewis turning point.”  The Lewis turning point describes when a developing country grows enough and creates enough jobs that there is no more surplus labour.  That means that in order for businesses to grow they must offer higher wages than other employers to draw people away, such that economic growth causes wage growth.  Before the turning point, investors grow their businesses taking for granted an unlimited supply of cheap labour.  After this turning point, the country sees notable changes in their society.  People suddenly stop working in the very lowest-paid jobs.  Employers offering benefits and job-permanence develop an edge over the competition.  Workers get picky about where they want to work.

In this interesting article on a website called The Diplomat, researcher Dmitriy Plekhanov looks into the speculation that China’s era of cheap labour has come to an end.  The methods of measurement are complicated and confusing, but in brief:

“No matter which indicators are employed, they all point out that wages have more than doubled since the year 2009. Such a pace of growth obviously has serious implications for the Chinese labor market and its international competitiveness in terms of relative wages.  The pool of cheap labor has definitely dried up.”

These changes narrow the wage gap between Chinese labour and the rest of the world.

There has been an active debate for some time about whether China has reached, or is about to reach, the Lewis turning point.  One paper from 2011 asserted that it had already happened.  Over at the International Monetary Fund a paper in 2013 estimated that the turning point “will emerge between 2020 and 2025.”  The paper notes that demographics will be a major issue.  Due to the aging of the population and their drop in fertility a few decades ago, China’s labour market is now at its peak size and will start to shrink in the near future.

It’s important to consider China in the context of the global economy.  For some time, globalization has been perceived to be a phenomenon of manufacturing job disappearing in the industrialized world and then re-emerging in China.  Yes, there were other low-wage countries to relocate to, but China was the big kahuna.  If this low-wage option disappears for investors, they must suddenly look to other countries with fewer workers.  Switching countries for a second, an article from January 2017 notes that India needs to create 16 million jobs to reach the Lewis turning point.  The article interprets that this is a lot of jobs, but that’s almost nothing in the global scale.  We’re not very far away from both China and India running out of surplus labour.

This means that investors must go farther afield.  The Times article describes a major investment being made in Rwanda, which might have been a no-go zone in years gone by.  In those cases where investors stick with their domestic populations, they need to change their perspective and seriously consider hiring ex-convicts, people with limited education, people with disabilities, and those who have experienced prolonged bouts of unemployment.  Employers can find contractors in the gig economy, but those contractors can also become scarce given that gig workers are part of the labour market.

All around, it is employers themselves that must put on a good show at the selection interview.  So if you ever thought human resources was a support function, think again.  Your competitive pay position, the quality of the employment experience, and the effectiveness of your recruiting function might become critical to business success.  Oh, and by the way …don’t tell the unions.

All Qualified Felons Are Encouraged to Apply

Under Arrest, by Chris Yarzab
Under Arrest.  Photo courtesy of Chris Yarzab.

When you think of a prison work force, your mind naturally drifts to chain gangs in striped clothing smashing rocks with pick axes. Well, it may be time to update your perception. Employers in the US are increasingly hiring job applicants who have criminal records.  It’s a sign of a tight labour market where employers are desperate to fill positions.

In a great New York Times article from January 2018, Ben Casselman details the many ways in which people are getting a little more out of the jobs market.  To clarify, workers are getting more out of it.  But employers have to put in extra effort.  The criminal-hiring phenomenon appears in varying degrees depending on the unemployment rate, particularly in places where unemployment is below 4%.

“In Dane County, Wis., where the unemployment rate was just 2 percent in November, demand for workers has grown so intense that manufacturers are taking their recruiting a step further: hiring inmates at full wages to work in factories even while they serve their prison sentences.”

The effects of the low unemployment rate go beyond those with criminal records.

“Burning Glass Technologies, a Boston-based software company that analyzes job-market data, has found an increase in postings open to people without experience. And unemployment rates have fallen sharply in recent years for people with disabilities or without a high school diploma.” (Emphasis added)

Those who have experienced prolonged bouts of joblessness are also able to make gains.

When governments attempt to design better social programs, they often say the labour market does the heavy lifting.  That is, when those dependent on social supports are suddenly able to work and then they find work, employment does big things for their wellbeing.  A man named Jordan Forseth is showing up at work in a car that he bought with the money he earned while in prison.  He says that this arrangement is giving him a “second chance.”

In the United States, labour force participation fell dramatically over 20 years.  During those two decades a lot of people lost good jobs in the manufacturing sector, or lost jobs in their small-town locale.  They assumed they would never find similar work.  Discouraged workers create the illusion of low unemployment, because they don’t show up in the statistics for “people seeking work”.  But as employers exert more effort to hire those who had been passed-over, there is encouragement, and those workers come back into the market.

It’s a feel-good story, reading about employers who are going out of their way to hire the disenfranchised.  But what does this mean for ordinary employers who have not put in this effort?  Well, they could soon be in a bind, and this could mean you.  The active recruitment of discouraged workers is a social technology, if we were to define technology as a way of organizing production.  If the external environment has created a combination of opportunities and threats that imply that we should adopt a certain technology, then the businesses that adapt first can have a competitive advantage.

It can take a year or longer to adapt to other social technologies such as anti-bullying legislation, the acknowledgement that addiction and mental health are one-in-the-same, and the obligation to terminate super-stars who sexually harass juniors.  These new methods of organizing can be just as disruptive as computer-based technologies such as cloud computing, online delivery of learning tools, and the use of analytics.

One of the most challenging features of this new social technology is that people will need to trust prisoners and ex-convicts in order to work with them comfortably.  Similar to a newfangled device being brought into your workplace, you might worry that the new way of doing things can cause harm.  However, it should be noted that in several jurisdictions, there are human rights rules that prevent an employer for screening-out applicants based on crimes that are irrelevant to the job requirements.  For example, a drunk-driving conviction might be prohibited grounds for a job that does not require any driving.  This means that the social technology may already be in place, as legislation, and it’s just a question of whether you will comply and keep up with the times.

It’s ironic… that in order to screen-out job applicants who have broken society’s rules, an employer would be put-upon to break a different societal rule.  These rules are tucked inside human rights codes alongside rules against discriminating on the basis of race and sex.  And we should know from the advanced class on employment equity, that in order for us to all get along we need to know each other’s stories.  So what was the convict’s story?  Are they so much different from you, as a human?  Perhaps with your strength and wisdom you have an obligation to cultivate trust, rather than use mistrust as an excuse.

In order to stay at the cutting edge, employers need to adapt to one more compelling, externally-imposed change:  rethink your ideas about the less-fortunate.  Because one day they might be helping you.

Side Hustles – The Great Employment Equalizers

Taylor Reynolds, courtesy of John Sturgis 3
Taylor Reynolds.  Photo courtesy of John Sturgis.

There is a great new buzzword making the rounds, and it deserves some profile.  The concept is the “side hustle,” outside-of-work activity that keeps people interested while making a bit of extra money.  People who have a good side-hustle have great things to say about it.

Side hustles are jobs that pay you to learn, so consider them “real-world” MBAs as Sam McRoberts refers to them as in this article in You are likely to learn sales, negotiation, and website design.  Several authors note that you are obliged to learn a lot of time management skills.  There’s nothing quite like being overly-busy with something you love to motivate you to organize your day properly.

Amongst the benefits of side hustles, one of the biggest is figuring out what you want to do with your life.  We have all had day-jobs that weren’t thrilling.  The idea is, name your biggest passion, get out and do it, and explore if that kind of work is really for you.  It’s important for those in early-career who are still trying to find their calling.  One millennial, Samantha Matt, wrote a 2015 blog post in the Huffington Post in which she cuts to the heart.

“Even if you’re not 100 percent happy at your day job, if you’ve got something in the works on the side that you absolutely love, that will ultimately lead to happiness…”

She talks about a number of functional career outcomes but you can tell from her tone that she’s just wildly ambitious and wants a career that is engaging and taking her places.

 “…when I first started out, writing a book was not something that was in the cards. With a side hustle, you learn to always stay hungry and that will get you climbing the career ladder to success faster than you ever imagined.”

Mike Templeman in an article from Forbes describes increased opportunities to network, as the side-hustle opens you up to new a whole community.  There’s nothing like sincere conversations about a labour-of-love to open up connections with a community of peers.  Samantha Matt is doing what she loves, and she doesn’t mind doing the kind of thing that people normally think of as soul-sucking.  She now enjoys chasing the dollar, she is motivated to work extra hours, and she is building her resume as a thrill.  She can network for fun.

Don’t you wish you could have this life?  At work, don’t we all wish that our peers or our employees could also have this kind of motivation?

Templeman describes how the extra energy from his side-hustle gave him more energy in his day job.  His regular workplace “…was a place for me to socialize and push my limits… I started getting promoted because I was putting in extra effort all over the place and my ideas were getting recognized.”  He describes an increased willingness to be creative in the workplace, because he had energy and mojo.

For the uninitiated, intrinsic motivation is that sense of acting on drives that come from inside you… to follow your heart, as it were.  By contrast, society is often prescribing what you ought to do, and those prescriptions can make joy disappear.  The big secret about side hustles is that by disregarding society’s prescriptions you can become more successful.  And that is because you are listening to yourself, driving yourself, and putting in a stronger effort.

It’s a much-needed improvement on the idea that you should “follow your dreams.”  You might have met people who caused themselves great harm by abandoning something secure in favour of a semi-delusional dream.  What is different about the side-hustle, is that you have the option of holding onto the security while making safe experiments with your dream career.  The side hustle gives you permission to fail.

As I described in my review of the McKinsey research on the Gig Economy, the key to gigs is that they are fulfilling if they are voluntary.  Voluntary-ness is more important than the amount of money earned in terms of job satisfaction.  But the money can arise from the higher productivity associated with motivation and courage.

Where does this courage come from?  Some of it comes from developing your own bargaining power.  McRoberts asserts that having a single point of failure is brutal to your career mobility.

“So why is it that most individuals have just one income? A single income means you’re trapped. You have fewer options, you’re in a weaker position to negotiate, and you’re in bad shape if that main-stream income happens to goes [sic] away. Granted, employers typically want it that way, because it puts them in a position of power.”

People are deciding that the expectation of devout loyalty to one employer is a con job.  How can any employee in this crazy world express faith that their current employer will take care of them for years to come?  As employees we need to develop our BATNA, short for Best Alternative to a Negotiated Agreement.  In bargaining theory, a strong BATNA gives you something in your back-pocket that protects you from exploitation and allows you to be calmly brave when you ask for more.  Your bargaining alternative is critical to the game of life in which everything is negotiable.

One last important point comes from Templeman when he notes you still need to check that you’re not breaking any rules with your employer.  So yes, you need to be calculating, and cautious, and shrewd.  Only then can you get on with it and follow your dreams.

Dig Deeper and Discover Employees Are Human

010-hard-work, by jdxyw [edits]
010-hard-work.  Photo courtesy of jdxyw.
In an earlier post I summarized Josh Bersin’s 2018 forecast of disruptive technologies in HR, which I followed-up with an overview of the leadership styles implied by the technology.  My experience with the technology and analytics is that many of the logical elements of human resources can now be figured out with increased ease.  Or rather, it’s easy if you figured them out last year.  But once we have figured out the numbers, it is the social and qualitative factors that become important.

When describing the analytics Bersin names four different types of data:

  • HRMS data
  • Relationship data
  • Wellbeing data
  • Sentiment data

The relationship data described above is a reference to Organizational Network Analytics (ONA), which uses social network theory to look at the way people interact.  ONA collects data from email traffic, meeting attendance, phone calls, and geographic proximity.  It takes a lot of work to get the data to sing, but we already know some of the implications from pre-existing research on social networks.

Information and opportunities flow through the social networks with partial disregard for rank, department, or a person’s commitment to the institution itself.  Sometimes powerful and important people have good connections… but sometimes they do not, and sometimes there are lesser-known influencers who are the key.

Your new status in a network will be influenced by your ability to consider contradictory opinions, your curiosity about new perspectives, and your connections to people in diverse cliques.  Keeping the channels open will be key to your success.  But the best opportunities are to coordinate the entire network for organizational gain, rather than to rig it to favour one individual (be it yourself or someone else).  Think of this as being like pay equity on steroids; once you measure and publicize how things have been organized, there will be an immediate impetus to re-orient everything towards fairness and performance.

Beyond social networks, sentiment data opens a major opportunity.  Your opportunities for analysis jump dramatically once you ask people their story, their context, their emotions, and how this experience relates to their home life and how they describe themselves as people.  Qualitative data has turned out to the missing puzzle piece that everyone was looking for.  It’s difficult to get to because analysts need the humility to talk to people who aren’t always great at math.  Some of the best insights about the subjective experience comes from journalists, novelists, philosophers, and people in the arts.  You really need to show up at those kinds of dinner parties because when it’s time to design your model or your AI to mimic human behaviour, you need to know what it means to be human in the first place.

Increasingly, people analytics is a velvet-roped line up to board a greyhound bus that takes you to destinations unknown.  When you get off that bus, you will find you are not being led to a four-star hotel or the hip new club.  Rather, you are unloaded at a diner where a long-lost cousin shares old photos, your best friend calls you on your bull, and you re-discover that one small thing that’s truly important to you.  The truth doesn’t feel good because it’s cool, the truth makes you feel right because it helps you become authentic.

The deeper you go into the data, the more you realize that people are vulnerable, complex, and hiding great potential.  They want to talk, and it’s your job to listen.

Technology Can Reverse the Pecking Order

Photographers expand horizons in 2010 Army Digital Photography Contest 110311. By U.S. Army
Photographers expand horizons in 2010 Army Digital Photography Contest 110311.  Photo courtesy of the U.S. Army.

It’s funny how a small change in technology can disrupt hierarchy.  As new technologies collect better information about employees, it puts management under increased scrutiny.  In my last post I summarized Josh Bersin’s 2018 forecast of disruptive technologies in HR.  While it is interesting to see that there are tools available that allow us to be more effective, there are dramatic implications to the way we work.

After much delay, it appears that the long-awaited labour shortage has finally arrived.  Bersin notes that this will make an appearance as a “war for talent” with recruiting becoming more competitive.  Chatbots are automating parts of the recruitment process, applicant-tracking systems are making things simpler, there is a wider range of tools for assessing candidates, and I would note that it’s possible to use technology to reduce bias (assuming the AI has been taught to not pass forward pre-existing bias).  Many of these technologies have been pioneered already, which means 2018 will be a year of diffusion.

I think there is a social element of this war for talent that warrants more discussion.  That is, when good employees are being fought over they are more likely to ask for pay increases, apply for promotions, and leave their current workplace for something better.  But it can get even more dramatic when employees are bold enough to sign union cards, tell-off their harasser, and speak openly about how to improve management.  These shifts oblige managers to change.  We can’t pretend that everything is normal.  Hiring managers must start treating employees like they are valued, respected, and deserving of growth.  That’s what it looks like amongst managers who are keeping pace.  By contrast, it may suddenly look odd that there are managers who lack this collaborative orientation.

In the discussion of continuous performance management, Bersin references goal-setting and coaching.  We can’t really slip these items into a discussion of performance management without acknowledging that ground-up performance conversations are not yet fully established.  If emerging research recommends that good managers take a coaching approach, what are the implications for managers using a prescriptive approach running off a forced-distribution scorecard?  Simply put, command-and-control managers need to change their style.

For decades, the research has been bubbling just beneath the surface.  The reality is that for employees, true motivation comes from within, and their ability to align personal motivations to their employer’s strategic environment is key.  Engaged employees achieve two-times or three-times the productivity of other employees, and leadership style is a major factor in achieving high engagement.  The new technology is designed to help managers with that leadership style, but there aren’t a lot of apps that will help advance an archaic style.

On the wellbeing side, there is a variety of new tools to monitor cognitive overload and nudge people to exercise, sleep better, and eat better.  We have so overburdened people with meaningless and counter-productive work obligations that we have to reduce workload to improve productivity.  Deloitte has a good model that describes how engagement, productivity, and wellbeing are integrated into a unified concept.  Wellbeing is not really about fruits-and-veggies advocacy any more; it is integrated into peoples’ ability to focus on their best work.

I’m fascinated by the way this trend up-ends the hierarchy.  As a result of the wellbeing imperative, the people who need to “work harder” are management and leadership who are obliged to clarify goals, cultivate a positive work culture, and encourage employees to seek growth opportunities.  Looking back, it seems like a manager-driven culture which obliges employees to follow orders and be happy with their lot in life is hopelessly archaic.

Thankfully, we don’t need to debate the best leadership style because transformational leadership simply out-performs the alternative.  Just wait a few years and the only teams left standing will be the ones that have stayed at the forward edge.  Lucky for us, this collaborative style makes work more fun.

In my next post we will explore how subjective and qualitative information are making technology and analytics whole.

HR Technology – Get Ready For the Big Shake!

Day 119 - Shake it all about. By JLK_254
Day 119 – Shake it all about. Photo courtesy of JLK_254.

Looking back, it feels like 2017 was a big crazy dog that we watched playing in the water.  That dog has now come out of the water, it’s coming right at you and… get ready for the shake.  There’s never a dull moment in the world of technological disruptions in human resources and workforce analytics.

It’s becoming clear that the disruptions of the near-future will rely increasingly on human resources departments.  Items such as workplace learning, change management, and leadership development are being increasingly flagged by leaders outside of HR as critical to success in their own fields.  Meanwhile, and the ground level looking upward, employees are getting blunt about their expectations for career growth, workforce diversity, and a sense of organizational purpose.  Organizations trying to get on top of these issues without saying “human resources” are running out of euphemisms.

With a new year ahead of us, Josh Bersin of Bersin by Deloitte has published his forecasts for 2018.  In this case Bersin’s forecast is a list of emerging trends in human resources technology, a narrower focus than in the past.  Nonetheless, as everyone grips for emerging technological disruption in a variety of fields, it makes sense for us to consider how technology will disrupt human resources itself.

In my two subsequent posts I will describe how these innovations imply a different workplace culture and  leadership style, and increase the importance of qualitative information and our interpretations of the employee context.  For now, just consider that all work can change, and the people helping workplaces adapt to change are also changing themselves.  HR is just getting a double dose.

At-a-glance, Bersin’s top ten trends are as follows:

  1. A Massive Shift from “Automation” to “Productivity”
  2. Acceleration of HRMS and HCM Cloud Solutions, But Not the Center of Everything
  3. Continuous Performance Management is Here: And You Should Get With It
  4. Feedback, Engagement, and Analytics Tools Reign
  5. Reinvention of Corporate Learning is Here
  6. The Recruiting Market is Thriving With Innovation
  7. The Wellbeing Market is Exploding
  8. People Analytics Matures and Grows
  9. Intelligent Self-Service Tools
  10. Innovation Within HR Itself

For the uninitiated, Human Capital Management (HCM) cloud solutions (#2) is the technology that delivers databases known as human resources management systems (HRMS) on a fee-for-service basis through off-site cloud-based servers.  It’s disruptive because previous systems involved the purchase of an application which was stored on in-house servers alongside the data itself, with everything being owned and modified by the buyer.  Switching to cloud solutions means that you must steward and cultivate data carefully to allow it to dovetail with the rented solution, like a millwright, but with data.  These solutinos allow employers to take full advantage of all configurations in the latest version of the software.  There is far more functionality.  But the increased functionality won’t work unless your data is good and you figure out how to use the new modules.  This change has large implications for human resources, information technology, and daily users of the database.

Prior to now, most People Analytics (#8) was a combination of advanced analytics interpreting data that comes off the core database, plus a bunch of emerging data coming out of engagement analytics (#4).  But now, those two items are just the major platforms.  There are systems that used to be fringe players in HR but are now increasingly critical… and they need their own enabling technology.  Some of the technology hinges on the HRMS, but some of it does not.  For example, workplace learning (#5) and wellbeing initiatives (#7) used to be something that you could operate off an Office suite using a research-based model that followed the best literature in pedagogy or public health.  The best content would be distributed face-to-face, with limited need for software to make the difference.  Now the technology can help out so much more, and tools are becoming available to empower the traditional delivery methods to be more effective, more targeted, and better connected to analytics.

To some extent, everything is being disrupted in a manner that obliges us to think less about the technology itself and more about general productivity (#1).  Those delivering generalist human resources services are also seeing innovations in their own area.  Recruiting (#6) and performance management (#3) are being improved by technology, and a variety of self-service tools (#9) are automating operational tasks such as case management, document management and employee communications.  First we must obsess about the technology to get it to work for us, then we can clear that obstacle and get into new challenges.  Breaking new ground every day will give people in HR a lot of mojo, but only if we keep moving forward.

Bersin brings it all together by noting that it’s not just the purchased solutions that are transforming human resources teams.  In-house HR departments are disrupting themselves (#10), regardless of help from vendors.  Then they ask for help and the vendors themselves are struggling to keep up with clients.  When dealing with complicated case-work and finicky databases, in-house staff sometimes have a home team advantage.