Job creation has been one of the strongest indicators of the health of an economy. But numbers tell only part of the story, as the technological, global and demographic forces wreak changes on the business employment environment.
According to November’s federal jobs report, 271,000 new jobs were created nationwide in October, with 4,700 of those jobs added in Arizona. Since 2011, when recovery from the recession is considered to have begun in earnest, the total nonfarm employment in the Phoenix market has increased by more than 183,000 jobs.
At the same time, there is a skill shortage nationwide across a number of industries, from technical trades to software developers.
One of the bigger changes is the makeup of the workforce itself, notes Eugene Giovannini, Ed.D., president of Maricopa Corporate College, which works with employers to customize a workforce education program for the entire gamut of employee level. There are 85 million baby boomers, 65 million GenX-ers, and only 47 million millennials. As time goes on, then, there will be fewer people in the workforce. With fewer people, employers need to negotiate differently — and millennials negotiate life differently, Dr. Giovannini points out. “Companies are struggling with how to engage the millennial population in the workforce,” he says. “They’re not interested in a 30-year career; they’ve seen their parents get laid off.”
An indicator of how tough the market is to start hiring is the fact that unemployment just over 5 percent, says Ryan Reeder, senior director of talent acquisition for Progrexion. “We have the most need of hiring IT professionals, and call center professionals (preferably with sales experience), and also need to hire customer service agents and representatives, And we’re continually hiring for own HR team as well,” he says, explaining Phoenix is among the top cities in the United States for call centers, with new ones coming in all the time, and it’s very competitive, therefore, especially in sales. “We’re in the finance part of it, doing credit repair, and when we opened in Phoenix two years ago, we had a great influx of applicants. Now, the market has gotten tighter.” Calling it a candidate’s market, he notes, “We need to spend more to advertise for hires. Companies work harder to get A-level players now.”
At a 3-digit Standard Occupational Classification level, according to research by the Arizona Commerce Authority, the occupations projected to grow by the largest number are Food and Beverage Serving Workers. This, however, is a very low-wage occupation, usually paying only 43 percent of the state’s average wage.
Top jobs — those paying the higher wages — are in those professions that are degreed or require advanced degrees, says David Bruno, managing director at ZRG Partners. The two biggest industries are healthcare — technology or diagnostics — projected to grow 18,000+ jobs; and computer occupations, projected to grow 17,600 jobs by 2025. “The third-most important industry is finance — because of the rules, regulations, taxes, etc. — and this also takes degrees,” he says.
Noting that manufacturing is laying off, he points out technology is taking up those numbers. And in Arizona, with so many companies supporting the military, “Industrial engineering technology is extremely important; it’s stronger here than in rest of country.”
In fact, Sandra Watson, president and CEO of Arizona Commerce Authority, says, “If we compare the rates at which workers in the Phoenix area are employed to the national averages, we find a number of occupations are significantly more concentrated in the Phoenix area.” Top of the list are industrial engineering technicians, with aerospace engineers and electro-mechanical technicians also on it. “All of the occupations offer wages well above the state average.” They also require a bachelor’s degree or higher.
“Today’s workforce in Greater Phoenix is well-aligned to meet industry needs,” says Chris Camacho, president and CEO of the Greater Phoenix Economic Council. And GPEC is focused on bringing in more companies in very specific industries. “These are largely advanced industries,” he notes, “and, in most cases, they have significant export positions and high-wage jobs.” Industries targeted are mission-critical software, aerospace and defense, healthcare, biomed, advanced manufacturing and broadform technology-related companies.
The message GPEC takes to markets that have these types of companies is, Phoenix is the market where companies can go to scale. And he notes that, today, job growth of the financial services, healthcare and software industries in the Phoenix area is outpacing the national average. “Most companies bring 10 to 20 percent of their workforces with them from original market, and then hire the rest locally,” he says.
Large companies hire big numbers of people, but by percent growth, small businesses lead the pack. When a 12-person business adds three more, that’s a big percentage, Bruno points out. He points to NextNet Partners, an IT consulting firm in Tempe, growing from 20 to 30 people — a 50 percent gain.
Funding for Growth
It takes capital to get started, and it takes capital to scale. Kimber Lanning, founder and executive director of Local First Arizona, makes this point when she notes, “If you can’t get a loan, you’re not going to create jobs.”
And that’s where community banks come into the picture in a big way, Lanning believes, pointing out that 96 percent of the money here is deposited in non-local banks — JPMorgan Chase, Wells Fargo and Bank of America alone counting for three-quarters of that. “They take the underwriting out of state, and lose the ability to understand the business story,” she says, using as example local restaurateur Craig DeMarco (the Postino winebars, Windsor, Churn). “Everything he touches turns to gold. But their underwriters say, ‘I don’t know this guy; the business looks risky to me.’” In her own experience, seeking a loan for her arts gallery, Modified Arts, on Roosevelt Row in Phoenix’s arts district, the bank determined its value by comparing it to a used-car lot on Van Buren. “The loan is derailed if they don’t know the area.”
Plus, she observes, these banks are more interested in bigger loans. Their completion rate of 16 percent with a $2 million average in Arizona “shows they’re not interested in small business.” Lanning believes community banks, which have a nearly 50-percent completion rate and are more likely to customize a loan, are more likely to understand how neighborhoods are turning around. “The City of Phoenix put $50 million into local banks so we’ll have local people making decisions.”
Another factor Lanning points to that affects job creation from a small-business standpoint is the regulatory environment regarding building codes and zoning. Referring to the many 1950s strip malls populated with small businesses, she says, “Many cities rigidly interpret building code, and require bringing them up to current code.” Often, the deficiencies are in ADA-accessible bathrooms or existence of drinking fountains, and are not usually threatening life or safety, and the changes would incur costs small businesses can’t afford and could not pass on to customers. She worked with the City of Phoenix on its adoption of the international existing building code and on overhauling its adaptive reuse program, which is now the most progressive adaptive reuse program in country. “It makes it easier to open a new business in an old building,” she says, citing the success of 80-plus businesses opening in the past five years. Of the pilot program about seven years ago, she reports the first 12 businesses saved an average of $16,000 in four and a half months.
A lesser-known source of job creation lies in a program administered by the United States Citizenship and Immigration Services called EB-5 (Employment-Based Immigration: Fifth Preference). It is an investor program designed to give immigrants a route to a green card, explains Mahsa Aliaskari, a principal with the law firm Polsinelli. Established in 1990 and modified in 1993 to include a regional center concept that allowed a pooling of funds to enable larger investments, it was underutilized until the recent recession. “In 2008 and 2009, it became really popular,” Aliaskari says, explaining the recession had resulted in developers losing a lot of their usual funding sources. “So they looked for creative solutions.”
The job creation calculation, made similarly to that for economic impact studies, includes direct, indirect and induced jobs. Private equity firms and developers look for viable jobs for the EB-5 project to create the jobs the way needed to be able to lead to a green card. These are often hotels and mixed-use project, and in Arizona include charter schools and nursing care. And, depending on job calculation and how targeted employment areas are identified, she says, “More projects may become viable.”
Observing that money is more available now than four to five years ago, Aliaskari points out when money was on hold, EB-5 helped move projects forward. “EB-5 money was the first to go in, then they got the remaining investors — so they needed EB-5 money to get the project started.”
Through the program’s targeted employment area (TEA), EB-5 infuses money into areas that need it or are having a difficult time attracting investment. So she’s found economic development agencies are taking a role in creating the regional centers — which have to fit the criteria of a TEA — to help developers’ projects move forward.
Given the history of EB-5, it’s not surprising that TEA is largely real estate-driven. As such, Camacho notes, it is not seen as leading to manufacturing or significant job producers. However, GPEC does work with GreenCardFund, a company focused on managing EB-5 foreign investment.
Rudy Vetter, chief marketing officer with GreenCardFund, says his company is overwhelmed with interest from foreign investors. Projects are primarily in education, healthcare and hospitality, he says, “because they are job-intensive and most likely will make the necessary job-creation requirement.” From his company’s point of view, manufacturing — for which most investment is in equipment — and renewal energy projects — which generate jobs during construction but that don’t continue after completion — are not suitable for an EB-5 project. A regional center program has to fit the requirement of a TEA, and it is the ACA that has the authority to make that designation. Relating that he was with GPEC at the time, Vetter says, “I was really amazed when I learned about EB-5 and what this type of economic development can deliver to the states.”
A GreenCardFund charter school project in Casa Grande that opened two years ago, Odyssey Preparatory Academy, brought $7.7 million in foreign investment and created 96 jobs. The Luhrs Downtown Marriott currently under construction represents an $80 million investment and is projected to create 650 jobs.
The Changing Workplace
The integration of new technology requires a different type of workforce, and the emerging workforce must have some level of ability to do technology migration, Camacho says. “Industries are continuing to change with digitization. Any industry that touches on any kind of computer software is seeing a requirement in software development and even programming and big-data analytics.”
This view is supported by a recent analysis by the ACA, which found one of the most critical changes in high-demand jobs is the growing importance of computer skills in occupations that are not traditionally considered “high-tech.” “The Aerospace and Defense sector in Arizona, for example, now employs more systems software developers than industrial engineers,” Watson says, noting applications developers and computer systems analysts are also among the sector’s top 20 occupations.
“Embedded software, smart sensors and the Internet of Things are blurring the traditional definitions of critical skills for today’s manufacturing careers,” Watson says. According to the U.S. Department of Labor’s most recent occupation profiles, the single most important work activity of both aerospace and mechanical engineers is interacting with computers. On an importance scale of 1-100, this activity is rated 97 and 96, respectively.
“We’re hiring to new jobs that didn’t use to exist,” says Progrexion’s Ryan Reeder. Knowledge of social media is an important job skill now; five years ago, he says, “We didn’t think much about social media.” But important now is knowing how to reach out to customers via chat, instant messaging, Twitter; the company has a dedicated team just for email handling customers’ questions; and it’s looking into how to utilize Snapchat as a tool for additional sales, for example. And Progrexion also has need of IT skill sets in specialized areas, such as developers and operators, as well as individuals with the right personality to hustle in the commission-based sales call center.
In fact, tech companies everywhere need engineers — those jobs are in high demand throughout the industry right now, GoDaddy VP of People Operations Katee Van Horn observes. “That said, I think the primary characteristic we are hiring for is the ‘motivation to make a difference,’ meaning we want people who believe in our mission to empower small businesses and are passionate about helping us do that — whether they do their work in marketing, legal, people operations, customer support or engineering departments.”
While characterizing the metropolitan Phoenix area as a destination market for much of the workforce, she notes also that we have to compete with California’s Bay Area for tech talent. GoDaddy’s ace in that race is its company culture. “Working at GoDaddy is a life changing experience that offers people an environment to learn, grow and do the best work of their career, which we think helps set GoDaddy apart from other tech companies. We have the scale of a mature business and the energy of a startup.” For instance, the GoDaddy Global Technology Center in Tempe has been open for more than a year. “It’s a pretty amazing facility,” Van Horn says, “with its own indoor putting green, ping pong tables, a full gym with locker rooms, bicycles, pedal karts, a basketball court and a beer fridge.” Similar remodels are taking place now at GoDaddy’s Gilbert and Scottsdale locations.
Regarding new jobs that have been created, Van Horn says, “For GoDaddy, and largely the tech industry, it’s a matter of scaling the company and the people who work with us to match the growth of the business.” To new positions that include logo manager and e-learning specialist, GoDaddy this year created a manager of the learning program/onboarding, director of service readiness and a VP of total rewards, among others.”
Healthcare, technology and call centers/finance services are three areas drawing the most attention, says Dr. Giovannini. “The issue of finding workers is acute in every field,” he says, but observes the actual number is greater in those three fields. “The biggest need is finding the people, then training for the particular job.”
Whole new jobs are evolving, he says; in fact, whole new disciplines. “There are skill sets that are not even defined or labeled yet.” And traditional jobs have changed with respect to how the job gets done and the skill set it calls for; there are often more specialized requirements. “More and more jobs are automated,” he notes, “and the interface of humans with automation has changed. It’s the same ‘job’ but done differently.” IT today needs a different skill set from what it needed previously, for instance, and manufacturing may be a computer-controlled environment.
“Bilingual” is the currency of today’s workplace, but it has nothing to do with nationality. Bruno shares that he hears the term frequently now when meeting with employers. “What they want is someone who understands technology, and can translate it into marketing, HR, finance, operations — and the reverse.” The reality now is, people use their laptop and phone for data, so employers are looking for employees who are both technically savvy and a specialist.
Where Have All the Workers Gone … or Where Are They Coming From?
Immigration is a hot topic for political rhetoric and posturing. Economists turn to studies to look at real-world impact.
According to Arturo Bris, professor of finance at the top-ranked IMD business school and director of the IMD World Competitiveness Center, and José Caballero, senior economist at the Center, a large survey of senior executives, carried out for the IMD World Competitiveness Center’s recently released IMD World Competitiveness Yearbook, shows that decision makers at companies view nations with strict immigration regulation as less competitive and lower on talent.
From 2014 to 2015 Germany, Malaysia, Switzerland and the United Kingdom have clamped down on immigration. At the same time data shows that executives perceive that these countries have experienced a decline in the availability of skilled labor and senior managers with significant international experience. Conversely, executives indicate that in the same period while Qatar has “relaxed” its immigration policies that the country has experienced improvements in the availability of skilled and competent workers, and that its attractiveness has increased.
While the survey measures perception and not “hard data,” and did not study the Arizona market, the key take-away is that perception is important because if decision makers at a company favor a location over another, there can be implications for job creation and other factors that impact local populations and prosperity.
Notes Dennis Hoffman, Ph.D., professor of economics at W. P. Carey School of Business, “If you unfetter the labor markets, let them flow to the most efficient places, generally the economy is better off — with the most efficient labor markets and most productive economy.”
Other research, he says, suggests that people who are mobile — who are willing to move hundreds of miles, and change state or country, to take positions (whether high level or low) exhibit a work ethic characteristic that tends to make them more productive. And, in a dynamic market, more productive workers take jobs away from less productive ones. But to the debate about saving jobs, Hoffman says, “The efficiency and output of the economy would suffer if we worry about maintaining labor market conditions so that less productive workers held jobs.”
Dr. Hoffman’s point is, immigrant labor does not take jobs away from domestic workers unless the immigrant worker is more productive. And while they may be more willing to work for less, which would put a downward pressure on wages in some markets, the plus is prices would be lower and that would free up buying power. “If we want to protect the domestic worker from immigrant labor, we have to put up with the inefficiencies that protection is going to bring.”
Matching the Workforce to the Work Place
Says GPEC’s Camacho, “Universities have to understand the type of worker and skill set needed to compete for jobs.” GPEC works with partner organizations that focus on workforce development and education “to ensure the trained workforce of the future,” he says. “We’re about a 24-month indicator, looking ahead, of where future industries are going. We share that information with our education partners.”
“Everyone wants the soft skills, and most want some analytical ability,” Dr. Giovannini says.
Putting it another way, Corey Loucy of Knod — which offers an experience-based learning model that connects the worlds of education and employment — says, “Companies hire for technical skills, and fire for soft skills.” Knod, which entered the Phoenix market this past September after identifying it as “particularly behind in degrees,” according to Loucy, designed its program to include teaching the soft skills needed to be successful, and partners with a university for the technical skills individuals need to get hired. “Everything is hands-on learning, working with employers to solve real-world problems.” Project ideas come from Knod’s career advisors, whose input is “to ensure we’re looking at the right types of skill sets,” Loucy says. Advisors come from companies that include eBay, Google, IKEA, TMP Worldwide, InSync and healthcare. “They help us stay super-current, and pay attention to trends as they’re coming.”
But it’s the upfront assessment of soft skills, which is often overlooked, that is crucial to getting the right people in the right positions, Dr. Giovannini emphasizes. Not doing this is one reason for high turnover in jobs. Noting every job has its own core needs, he says companies need to “assess skill sets, competencies and the training needed to meet those competencies and skill sets.” And being “highly skilled” does not necessarily mean a person has a degree at all. The biggest need is finding the people, and then training for a particular job. Says Giovannini, “Change is happening so fast that the skill set behind the typical college degrees may well be out of date by the time the student graduates.”
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