America's Growing Employability Problem
Matthew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
We’ve been fixated on one set of statistics as investors, and other than the roller coaster of nauseating news out of Europe, markets in the States rise and fall in lockstep with the employment readings. We keep hearing that there are jobs out there but unemployment is stubborn and politicians on both sides of the aisle are pointing fingers and pointing to November.
Yet, in the midst of this there is another number that those with a platform aren’t shouting to address. It’s a number that makes Europe seem like oceans away. This is a mind-numbing number related to workforce development -- and therefore economic development -- that if left untreated will make it impossible for us to compete in the global economy.
I’ve been hearing about this number a lot of late and its mention is met with frustration by those with jobs to fill. Just the other day I was sitting in a conference room at an Alcoa (NYSE: AA) facility where a group of company and community leaders were discussing workforce development, and the subject turned to this local Alcoa plant’s inability to find workers to hire. They have a product that their customers need and are working feverishly to fill the 100 or so blue-collar jobs, but just cannot find the workers to fill those jobs. These are decent manufacturing jobs and it has nothing to do with there not being qualified applicants -- they have plenty of those. It also has nothing to do with experience as they can train anyone with the critical thinking skills necessary to complete the task at hand.
They simply cannot hire enough employees to fill their growing order book because not enough individuals can pass a simple drug test.
That mind-numbing number I mentioned earlier -- well, at this plant, it was at least sixty percent of applicants, according to the plant manager. Let that number sink in for a moment. More than half of the qualified applicants could not be hired because they failed the drug test.
Statistics vary widely as not every company tests for drugs. However, those that do are finding this to be a growing problem that isn't limited to manufacturing. In another example from an article called, "Don't Take Drug Test if You Know You'll Fail," the employer was spending an estimated $7,000 per year on drug test screening and only 25% were passing this test for jobs that were paying upwards of $50,000 per year. Further, the owner of this particular company estimated he was wasting over $24,000 in time and expenses on these candidates.
On the other end of the spectrum, an interesting story out of Florida showed that only two percent of welfare applicants failed the state’s new drug testing policy to receive benefits. Those that failed were on the hook for paying for their tests and could not receive benefits for a year. Finally, according to a national survey in 2009 by the US Substance Abuse and Mental Health Services, nearly 9% of the US population over the age of 12 used illicit drugs, with the rate dropping to around 6% for those over age 26. Whatever number you use, it’s costing companies thousands of dollars each year to test for drugs and a multiple of that on other related expenses.
In another example of the provenance of the problem, last fall the organization I work for held a conference on the growing economic impact of the Marcellus Shale industry in our region. An executive from Rex Energy (NASDAQ: REXX) was sharing with those in attendance that they were finding it difficult to hire qualified workers. The biggest hindrance to hiring wasn’t in finding individuals with experience but in finding candidates who again could pass a drug test.
Like Alcoa, Rex is growing rapidly but they struggle to hire because of drug issues and it is becoming the number one issue in developing our workforce. I cannot tell you how many conferences and meetings I’ve attended with community leaders or businesses trying to hire that are spitting out 50%, 60% or 80% of candidates because they cannot pass a simple screening process. An executive from Consol Energy (NYSE: CNX) said they were seeing the same issues and it is becoming a concern for their long-term viability. They have many veteran workers who are nearing retirement and cannot find the younger talent to backfill to ensure the organization can continue to meet future demand.
For a company in the manufacturing or energy sector, safety is typically their first priority. These companies will see a prospective employee with drugs in their system as a potential liability, as they could compromise the safety of the organization. Work-related injuries cost employers a lot of money through lost productivity, damaged equipment replacement costs, and increased insurance premiums. This hurts economic returns, which in turn hurts the returns for investors.
If companies cannot hire the workers they need it will impact their competitiveness in a global economy. If a company like Alcoa or Consol is forced to spend excessive money, time and effort to hire employees, it will create strain on the existing employees as understaffing can create morale issues and productivity issues. This in turn creates more turnover, which has its own costs to solve.
What worries companies especially in the energy industry is that compromised safety can mean more than simply damaged equipment. It can lead to a national disaster. Incidents can mean deaths and hundreds of millions of dollars in liabilities to the companies. BP's disaster wasn't drug-related, but such a widespread and costly incident always looms in the minds of management, so businesses aren't likely to do anything (like hiring a candidate with drugs in his system) to increase the likelihood.
Where does this leave investors? Hopefully a little shell-shocked and agitated to see things changed. You as an investor, as a person with some means, needs to get out there and do something. Safety is a big issue as the costs of an incident far outweigh the costs of prevention. If you are a decision maker at your company, institute a random drug testing policy along with the support to help those who need it. Educate and mentor those younger than you as the financial burdens on our schools are not going to be solved anytime soon. While our economy might not be growing as fast as we’d like and we are faced with government spending and debt concerns among all our other issues, we possess all the tools we need to build a bright future for America. Now, let’s get to work.
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