HBR: Why Employers Aren't Filling Their Open Jobs

Thanks to my neighbor Scott Lakes for sending me this article and discussing it with me. Of all the reasons why open positions are going unfilled, I think based upon our recruiting experience here at Career Solutions that Wharton Management Professor Peter Cappelli's final possible reason for high unemployment levels at the same time we have high numbers of posted jobs is the right one: This recession has gone on for so long that it changed what hiring managers think they can find in the labor market. Early on in the recession, when literally millions of people were being laid-off, it was easy to find someone fresh out of a job with the experience and skills needed to step right into your vacancy. Now in the fifth year of the downturn, unemployed candidates have often been out of work for quite a while. The candidates with current work experience that hiring managers want are working for someone else, and they aren't desperate to take a new job. I would also add that I question the relevance of the Beveridge Curve in the internet job posting age. Because it is so easy and cheap to put job postings on the internet, employers tend to leave postings on the internet for positions that have no urgency to be filled. For the Curve to be relevant again, it should more heavily weigh dollars spent by corporations on recruiting and job postings in comparison to the unemployment rate. Why Employers Aren't Filling Their Open Jobs by Peter Cappelli | 7:00 AM March 8, 2013 There are many signs that the US economy is improving, but the most important one, the unemployment rate, remains stubbornly rooted in recession territory. We had jobless recoveries coming out of the last recessions in 2001 and 1992, but this one put the budget squeeze on recruiting and has gone on for a very long time. Does it mean there is something really different this time? One way to answer this question is to see whether the level of hiring now is different than one would expect given unemployment rates this high. This ratio of job openings to unemployment when calculated over time is known in economics as the Beveridge Curve, named after the British economist William Beveridge. Several studies during this recession seemed to indicate that the situation was similar to previous recessions, but a recent study points to one big anomaly: Job openings are not being filled nearly at the rate they have been in previous recoveries. In other words, vacancies are staying vacant for a very long time. If so, then the next question is, why? Why aren't employers filling those jobs? The popular explanation that there is something wrong with the applicants has no support. There is no "mismatch" between the industries and occupations where people were laid off and where hiring is taking place, for example. Jobs have not changed over the last couple of years in any way that changed skill requirements substantially. The "failing schools" notion, even if it was true, couldn't explain the continued unemployment of the majority of job seekers, who graduated years ago and had jobs just before the recession. The better answer comes from the ways in which contemporary practices have made hiring more difficult. Companies regained profitability during the recession with a relentless squeeze on costs, and most of that squeeze was associated with labor. We know, for example, that employers are spending far less to recruit and hire a candidate than before the recession, which may make it harder to find the right person. Line managers with profit-and-loss responsibility also have a big financial incentive to avoid adding new employees and the associated costs, so the pressure to hire often comes from overworked employees who demand more help when business and the workload picks up. But even when managers give permission to hire, they may drag their feet about actually bringing someone on. With all those people looking for jobs, why not be picky? Candidates routinely report that companies now take months to make hiring decisions, putting the candidates through round-after-round of interviews with long pauses in between, as the employer picks through the many worthy candidates. Some of the cost-cutting took out recruiters. They used to be the people pushing back on hiring managers, asking "do you really need someone with a graduate degree to do this job?" or telling them, "you aren't going to find someone with 10 years of experience at that salary." Outside recruiters report that they often have to bring in many candidates who turn down a client company's job offers before the client is persuaded to raise its pay. And some of the cost-cutting also took out training and development capabilities, so that hiring managers have no choice but to wait for candidates who already have all the skills needed to do the job. Finally, part of the explanation may also be that this recession has gone on for so long that it changed what hiring managers think they can find in the labor market. Early on in the recession, when literally millions of people were being laid-off, it was easy to find someone fresh out of a job with the experience and skills needed to step right into your vacancy. Now in the fifth year of the downturn, unemployed candidates have often been out of work for quite a while. The candidates with current work experience that hiring managers want are working for someone else, and they aren't desperate to take a new job. So where does this leave employers — and the unemployed? The reason markets adjust is because the participants, in this case the employers, eventually learn that they either have to raise their pay or lower their expectations in order to get the workers they need. That process of learning and adjustment slows down a lot, though, once companies have cut the recruiters, who used to do the learning for them, and the trainers, who could turn imperfect candidates into credible workers. More blog posts by Peter Cappelli More on: Economy, Hiring, Human resources Peter Cappelli Peter Cappelli Peter Cappelli is Professor of Management at the Wharton School and the author of several books, including his latest, The India Way (Harvard Business Review Press, 2010).