Transcript
Speaker: Is it a labor shortage or a skills shortage? Are we heading toward a workforce that's 50% contingent? And what happens to careers when there's no career ladder? Today on Aviante Digital Edge, I'm sitting down with labor economist Gad Lebanon to unpack the forces reshaping the American workforce from AI disruption to immigration policy and what it all means for the future of staffing.
Speaker: If you're in the business of connecting talent with opportunity, you won't wanna miss this conversation.
Speaker: Welcome to Aviante Digital Edge, where we explore the technologies, trends, and strategies shaping the future of workforce management. I'm your host, Chris Ryan. Today's episode tackles a question that's keeping staffing executives up at night.
Speaker: Where is the labor market going, and what does it mean for the future of contingent work? We're living through a paradox. ah HR executives are planning to cut hiring by 20% over the next year.
Speaker: New college graduates can't find jobs, yet employers still complain about labor shortages, and staffing agencies are wrestling with immigration policy. Meanwhile, artificial intelligence is rewriting job descriptions in real time.
Speaker: Immigration policy is in flux, and some experts predict that contingent workers could make up half the workforce within our lifetimes. To help us navigate these cross-currents, I'm joined by Gad Levanon, Chief Economist at the Burning Glass Institute.
Speaker: Gad has spent years researching the disconnect between what employers need and what the workforce offers. He's tracked how ai is transforming labor demand, studied the evolution of work arrangements, and has unique insights into where opportunities lie in this rapidly shifting landscape.
Speaker: So whether you're trying to figure out which industries to target, where to focus your recruiting efforts, or how to advise your clients on workforce strategy, this episode is for you. Gad, welcome to Aviante Digital Edge.
Speaker: Thank you, Chris. It's a pleasure being here. So before we get started, tell us a little bit about yourself and Burning Glass Institute. The Burning Glass Institute is a think tank that studies labor markets, higher education skills, and everything in between.
Speaker: i co-founded it with Matt Siegelman three and a half years ago. And before that, I was working at the conference board for many years. So essentially you've been studying labor economics and human capital for a long time.
Speaker: This is your primary focus. Yes, it is. And it's been a very interesting period to study labor markets. That's definitely the case. So, Gad, let's talk a little bit about the labor shortage paradox. And it's funny, given some of the weakness that we've observed recently in the job reports, you've been researching labor shortages in the U.S. economy for years.
Speaker: So I'm kind of curious, is the problem that we don't have enough people or is that we don't have the right people? Well, I think when we're talking about labor shortages in recent years, it's actually in the lower education occupations, blue color, manual services.
Speaker: That's where we see most of the shortages. And i would say it's more that we don't have the people who want to do those jobs. People who are retiring now in large numbers, many of them don't have a college degree, and the people who are entering the labor market, much higher share of them do have a college degree. So the workforce is becoming much more educated, and the number of people who don't have a college degree is declining rapidly.
Speaker: And but if you get a college degree, you don't want to work blue-color and manual services jobs. So what we have is not enough workers in those occupations or people who are willing to work in those occupations.
Speaker: So we have a labor shortage there. On the other hand, in many of the professional and office jobs, we have kind of a glut of workers, which is now becoming even bigger because of AI and the way it can automate entry-level professional jobs.
Speaker: I see. So when we talk about jobs, I noticed that the plumber who came to my house a month ago, he was older than I am. He was in his late 60s. He could have retired immediately and he had no one helping him.
Speaker: And he was very hard to schedule. And yet if I needed a lawyer, I could find one tomorrow. Is that what we're talking about? Is it skill trades? Is it specific areas or professions? Or is it all across the board?
Speaker: I think we may have the same plumber. So I guess it is a common thing. The key trade is definitely one of those things because we had a very big decline in enrollment in community colleges and a lot of the trades probably suffered from that.
Speaker: But it also has care support and even in many other construction, fixing installment and repair, things like that. That's where we see a lot of those shortages. Yeah.
Speaker: So really a skilled craftsman where experience is critical to the quality and speed of their work, um the sort of thing where you need both some education, but also an apprenticeship almost.
Speaker: yeah And I would say in among the more educated the workforce, while there is less shortages in general in areas like healthcare and social assistance, the demand for workers is growing very rapidly.
Speaker: There being some disadvantage because in many of those jobs, you cannot work remotely and that reduces its attractiveness. So we may have some shortages there as well. If you wanted to have a career in the skilled trades, are the community colleges the primary place? Is it an apprenticeship?
Speaker: I don't see the Ivy League's developing a program for training electricians or plumbers or HVAC engineers. Yeah, it's still early days, but we may be seeing some recovery in the enrollment in community colleges, especially in the trades programs.
Speaker: But there are also strong efforts to increase apprenticeships in the country. So that could help. But I think the increase in educational attainment is still happening. More and more young people are getting a college degree and they don't want to be plumbers. So we may still see some shortages in that.
Speaker: And I should add another thing. The new immigration policies, which are having a huge impact on especially the number of undocumented workers in the U.S., is also hurting that segment more.
Speaker: Perhaps less like very sophisticated trends, but some of the more manual work in agriculture, construction, some transportation, moving, healthcare support, that's also increasing shortages in areas that have a lot of undocumented workers.
Speaker: Yeah. So it's a combination of both skilled trades and work that may seem less desirable to Americans that we were looking to fill with immigrants. So I want to jump to the question around artificial intelligence and its impact on labor demand.
Speaker: You've written a little bit about this. I've seen this in some of your articles. and you kind of have a unique visibility into how AI is changing job requirements. I'm curious, what types of roles are genuinely being eliminated because of artificial intelligence versus those that are being transformed?
Speaker: And where is AI actually creating new labor demand? Well, we see a very striking impact on job ads or job postings for new entry level or people without experience.
Speaker: There was a very big decline there, whereas in the more experienced segment, we don't see any decline at all. So that's a very striking impact. And when you think about it, ah what AI can't do is things like relationships and judgment and experience that the people with experience get.
Speaker: But the more routine and technical things like simple coding, that is something that AI can do well. So that's where we see a lot of impact. I would say from all occupations, the coders are seeing the biggest impact.
Speaker: That's like an area where AI is uniquely good at. So everyone who's been sent to coding school recently to learn how to code, potentially those are the people who are most at risk from artificial intelligence.
Speaker: Yeah. That's exactly that. We've seen a very large increase in people who study computer science, who are learning how to code, and that's the profession that is now experiencing the largest decline.
Speaker: So in some respects, the way I've been thinking about artificial intelligence is that it really favors experts. If you're already an expert in your field, if you already have strong relationships, then you can leverage technology to actually expand your impact and be more effective in what you do.
Speaker: But if you're starting out and you need to learn the ropes, AI potentially is replacing you. You may no longer have a career entry point. Is that the right way to think about ai In many cases, yes, it can replace things that you can learn in school, like how to code, but it's not as good in many of the things that you don't learn in school that are harder to define exactly, that are more based on judgment and experience.
Speaker: I think that's an accurate definition. Got it. So when we think about the weakness that was shown in the Bureau of Labor Standards in the BLS jobs report, of course, with you the revisions that occurred over the last couple months, to what extent is ai driving that versus other factors that might be in play in the economy?
Speaker: I think we certainly have seen some slowdown in the economy starting in April or March. Although I think April, May were the worst months.
Speaker: That's where the sentiment shock was the strongest. Almost everyone was talking about a recession. Stock prices went down. The sentiment was just terrible. And I think since then, sentiment has improved.
Speaker: Companies are investing a lot. We are seeing some softness in consumer spending, but it's still growing. So there was definitely kind of impact on demand for goods and services.
Speaker: But I think in in general, where AI comes in is we are seeing relatively strong productivity growth. It started even before the pandemic. It accelerated after the pandemic.
Speaker: The big labor shortage that we saw in 2022, 2023 really forced companies to try to learn how to do more with less. And now AI is coming in and also you see a lot of layoffs in tech and also some in finance. and other industries and reduced hiring.
Speaker: So I think all of those things together helped in slowing down job growth because when productivity is stronger, you don't need to hire as many people. And on top of that, ah very big impact came from, again, the immigration policy.
Speaker: There are probably hundreds of thousands of people who would have come through the border and didn't, who would have stayed in work and now they're afraid to get out of their houses so they don't show up.
Speaker: Many are voluntarily exiting the U.S. So that also drove down Job Gross. Got it. So let's switch gears a little and talk about the contingent workforce, an area that's of great interest to our listeners.
Speaker: The common wisdom is that the opportunities for contingent work, whether it comes through traditional staffing or through gig work or some other form, the common wisdom is that it's going to continue to grow significantly.
Speaker: Do you share that belief? Well, as you know much better than I do, that the camp health part of the contingent workforce is actually on a significant decline. And there may be other parts of contingent workforce that are growing.
Speaker: i would think that the shift to remote work could help with that. If you don't have to be in the office, then the next talk is that maybe you don't need to be an employee. But I don't know that there is strong evidence that in the contingent workforce in general, there have been a strong increase in recent years.
Speaker: Got it. So, of course, the decline in temporary staffing occurred even as overall employment was going up. Is the decline in temp staffing an early warning signal for the economy, or do you think there are structural changes?
Speaker: And I know that this is a very difficult question and it's hard to find data. I'm just curious if you have any thoughts. Yeah, you know, for many years, I thought that the camp help industry was perhaps the best leading indicator of employment.
Speaker: It really performed very well. But in the last two, three years, it's been declining the entire time without seeing a decline in employment. So I think it lost a little bit of its ability as a leading indicator. And I think part of it is because there are also both cyclical and structural factors that led to the decline in Camp Help. I think definitely helps when there is a high churn in the economy.
Speaker: So then companies are using Camp Help more and there's been a huge decline in churn in quits rates during that time. In general, we're in a period of strong labor shortages since I would say seven, eight years. And when that happens, more workers are converting to full-time jobs and the employers are seeking full-time workers.
Speaker: So that probably hurt a little. I think manufacturing slowed down in the last several years. Camp Help is quite concentrated in manufacturing. There may be some regulatory pressure, especially California and other places where there is a risk of misclassification and that pushes companies to go to full-time workers.
Speaker: Also, there's been a lot of criticism of companies that don't treat their workers well and the pressures them to provide more full-time jobs. So there may be some more structural or long-term changes that impacted that. Yeah. So, you know, I was thinking about this, Gad.
Speaker: but You've been talking about or predicting labor shortages for a long time. And, you know, a look at the population pyramid in the United States suggests that as our population ages, people were predicting that there would be greater and greater shortages, especially among hourly workers.
Speaker: And one possibility that I wonder about is whether companies have been investing in automation, not just artificial intelligence, but also other forms of automation simply to run a more efficient warehouse or a more efficient food processing plant.
Speaker: Whatever it is, people are investing in automation because hiring new workers is expensive and turnover has been high. So there's a part of me that wonders if automation itself isn't actually part of this change or this movement towards more permanent employment.
Speaker: When we think about policy, one big beautiful bill, tariffs, immigration reform, you would think that if illegal workers were no longer available, there would still be demand for the work in question.
Speaker: So I'm just curious if you see any of those forces in the last year actually impacting the labor market and especially for contingent work. Well, there are some obeying the law and don't use undocumented or illegal immigrants, but there are some that do.
Speaker: I suspect that the ones that do are significantly impacted by the recent immigration. It's much harder for them. Probably there seeing less employers using them. Also, the workers themselves. Illegal immigrants are probably less in supply.
Speaker: But it may be then an opportunity for staffing companies that are not relying on illegal immigrants. Perhaps there will be a bigger demand for them. Yeah.
Speaker: So let's talk a little bit about measuring the contingent workforce. Obviously, temporary labor and temp staffing is only one part of the contingent workforce. But getting verifiable data on contingent labor is extremely difficult, and a lot of labor statistics don't fully capture the workforce.
Speaker: And so I'm curious, speaking with you as an expert labor economist, from your research, do you have any sense of the real size and growth trajectory of contingent work? And if not, how should we be measuring it?
Speaker: Yeah, so it's not something I focused on very much in the last couple of years, but there are tax information of non-employer, self-employed that gives a pretty accurate description there. And last time I've seen, most of the increase was in transportation related. So the Ubers, the Lyfts of the world, but outside of transportation, I haven't seen a huge increase, but it's been a while since I looked at that data.
Speaker: One project that we're planning to do in the Burning Glass Institute is to see if we can identify gig economy or self-employed contractors to see trends. In general, there hasn't been a huge increase in self-employment, so I think it's somewhat hard to find strong evidence that the contingent workers overall are rapidly increasing.
Speaker: Got it. Yeah, that's interesting. So looking ahead three to five years at specific industries, what types of skills and roles do you think will be in the highest demand? And if you're a staffing agency or one of their clients, where would you be focusing your recruitment and development efforts?
Speaker: I think the areas that are growing the fastest are healthcare and social assistance. In fact, in recent months, it's the only growing sector in the economy or almost the only.
Speaker: But i would say, you know, we talk a lot about AI destroying jobs, but AI will also create jobs and there will be a lot of new goods and services coming out that will create jobs.
Speaker: There is huge investment in infrastructure, data centers, servers. power, energy that will be needed to let the AI world function. And there's huge increase in that investment, for example, in manufacturing structures.
Speaker: There are a lot of jobs related to that. Large language models, in some ways, there'll be a science the same way as there is neurology. And a lot of management to understand better how to manage and how to get the maximum out of workers. There is entire industry about that.
Speaker: I think there will be an entire industry around how to get the maximum out of large language models. And also things related cybersecurity and ethics and implementation in ah workflows.
Speaker: So there are a lot of jobs that will come out there. So look, I think AI is a big shock and probably a very long shock that it's not going to be just a matter of five or ten years.
Speaker: I think in the foreseeable future, AI will get better and better and companies will use it more and more. So a lot of jobs will shrink or disapp disappear. But in history, there was never, perhaps excluding the Great Depression, very long periods of high unemployment rate. So the market balances itself.
Speaker: When companies make money out of AI, they tend to spend it. The benefits from AI are not evenly distributed. A lot of people are going to people who are already quite wealthy and they will become even wealthier. So a lot of spending on luxury items and but we see even more spending and jobs related to that.
Speaker: If you just look at the number of millionaires in high-tech hubs and count them, there's been a dramatic growth. And those people, they will buy second homes, they will go to more luxurious vacations, they will get more domestic help.
Speaker: But the people who work inside the homes, I think that number is increasing and will continue to increase. Yeah, that does make a certain amount of sense. So stepping back for a moment, if you were running a staffing agency, if you're thinking about everything that we've talked about, artificial intelligence, policies, changes, skill mismatches, and the evolution of work itself,
Speaker: What would your advice be to somebody who's in staffing or some form of workforce management? What do you see as the biggest opportunities moving forward in the contingent workforce economy?
Speaker: And how would you position yourself to capture it? Well, I can think of two things. One, many of the jobs in staffing companies could be partly done by AI.
Speaker: Actually, there are more and more studies that show that AI is actually pretty good at interviewing. And of course, all the kind of administrative stuff that is around recruiting workers, it also could be done by AI. And I think many staffing companies are already taking advantage of that, but there could be a lot of efficiency gains So while maybe demand will decline or already declining if this long-term trend continues, but costs will also decline. So that's one thing.
Speaker: The second thing is if the staffing industry is shrinking indeed, and that's like a long-term trend. Staffing companies are not just good at recruiting temp help. They are and just good at recruiting in other workforce solutions in general. So kind of shifting perhaps a little away from the temp help part of it to just help companies do a better job in recruiting their regular staff.
Speaker: That's, I think, a skill that many staffing companies have. It's something that many staffing companies already do. So, yeah, I think the market for hiring and workforce management is not shrinking. It's just that perhaps just a camp hell part of it.
Speaker: Yeah, and it's interesting because at Aviante Connect, we had actually talked about this and what we're seeing as this potential evolution from temp staffing towards more holistic workforce solutions type of company where consulting, training, recruiting, acting as an employer of record for compliance purposes.
Speaker: There are a lot of different ways to participate in this economy that may or may not just simply be around temp staffing. So I absolutely agree with you that there are some real opportunities here for companies.
Speaker: What I also hear you saying though, is that there's a huge opportunity to leverage technology and that if it's done properly, conceivably ah staffing agency can generate more profit and be more profitable even if they have fewer placements.
Speaker: I think it's probably one of the industries that can benefit the most from AI. Yeah, there's no question that's definitely an area where I think the technologists at Aviante would strongly agree with your point of view.
Speaker: So I warned you that I would ask you a question about Gary Becker and human capital, and I saved that for the end. and And for listeners who weren't aware of this, Gary Becker was an economist who originally coined the term human capital.
Speaker: And part of his theory basically said that people earn less early in their careers, but more later on, in part through a variety of different, not just skills, but also internal knowledge of how a corporation works, how to navigate through an organization, through creating and building relationships.
Speaker: And Gary really focused on full-time work settings. So Gad, as you think about labor economics in the 21st century, you think about AI and automation. I'm curious, how well do these theories of human capital hold up when a significant proportion of workers have contingent work status?
Speaker: And is it still possible to build human capital and create a human capital accumulation when AI is breaking down traditional career ladders? i was thinking a lot about this in the context of my procession.
Speaker: So I can give you an example of that. So if you want to become an economist today, there are probably like two main ways you can do that. You can, after college, go to a grad school. And then when you're done there, you can immediately become an economist.
Speaker: And the second is to, after college, become like a junior economist or research assistant and then move up and become an economist. I think AI is significantly hurting the second channel. There will be fewer research assistants, fewer junior economists.
Speaker: So I think one of the things that we'll see in that case is that more people will go directly to grad school. And so maybe one impact is an increase in the enrollment in graduate school.
Speaker: Second is we will have to change the ref research assistant or junior economist that we do hire. Probably we'll hire fewer of them, but we will ask of them to immediately do things that are more higher skills.
Speaker: So maybe we will ask less of them doing things that AI can do, like data cleaning and simple analysis, and we'll just pick the ones who can immediately talk to clients or give presentations from the beginning. So...
Speaker: That probably will happen in a lot of other occupations as well. That almost sounds like a sink or swim scenario. You throw the junior economists in the water or and those that are able to swim are going to succeed. And those who haven't developed the appropriate communication or social skills or specific business problem solving skills because they haven't been exposed may not be able to continue in the same way.
Speaker: Yeah, that may very well be the case. Yeah. Very interesting. And it's interesting that you would actually take that question back to the development of economists themselves. Historically, a PhD in economics was always considered to be a guarantee of income and employment for an entire career. And it it sounds like even in the field of economics, artificial intelligence is a potential challenge for junior economists.
Speaker: Yeah. And then would say also partly because of the squeeze on universities, we see weaker demand for actually for PhD economists, which is a troubling sign for the profession.
Speaker: Yeah. So what I hear you say ultimately, and what I'm taking away from all of this, is that the U.S. workforce is under a significant transition and probably will be not just for a few years, but for a few decades as we adjust to major changes, not just in policy, but in automation, artificial intelligence and so on.
Speaker: So you are foreseeing almost a constant transitioning. It almost sounds like if you're in workforce solutions, you might want to specialize in helping people and employers make that transition.
Speaker: Yeah. I think, you know, there are big debates if AI is a big deal or not big deal. I'm on the camp that thinks that it's a very big deal and not just short-term big deal, but decades big deal.
Speaker: So is this going to be an economic period similar to the time in the United States after the Civil War where there was continuous improvement in automation and manufacturing for 30 or 40 years?
Speaker: Is that what we're looking at here? I think yes. I think that we'll see continuous, strong productivity growth and automation and transformation that would last a decade.
Speaker: Got it. So final question for you. If you were advising your children in their careers, knowing what you know, what would you tell them about what they should be doing to prepare to participate in this new economy?
Speaker: Well, you know, my oldest daughter is a singer and she's a college student, but she's not the type of occupation with especially strong workforce trajectory. But that if I'm saying, yes, AI will be slow to re replace, I think. Like I can't see a lot of people coming to listen to robots singing. So if maybe in her case, it's actually ah relatively improving her trajectory.
Speaker: Yeah. Gad, this has been in incredibly helpful. Any final words? Are there any trends that are keeping you up at night? Anything that you think our audience should be watching for? Well, one thing we haven't talked about, the impact on inequality, gaps between rich and poor, and gaps also regional inequality, areas that will grow faster and areas will grow slower. But I think there has been growth inequality for many decades, and I think AI will even accelerate that to some degree.
Speaker: But that's an unfortunate topic for some other conversation. yeah That's a big one. And maybe we'll have an opportunity to unpack that on a further episode. So Gad, thank you so much.
Speaker: And thank you to all of our listeners for the Aviante Digital Edge. You can subscribe to our podcast on Spotify, Apple, as well as several other programs. And if you'd like to learn more about Aviante, please visit us at aviante.com.
Speaker: I'm Chris Ryan. Thank you.
