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The invisible employment crisis that threatens the auto industry and our economic future

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While employment is relatively low in America right now, millions of high-skilled, strategically essential jobs are going unfilled.

The Next Idea

A very strange article in The New York Times caught my eye the other day. It noted that while unemployment has fallen to 4.7%, the lowest in a quarter-century, that’s actually an ominous sign of trouble ahead. The article used employment data to suggest that while almost everyone who wants to be employed is currently employed, millions of high skilled, strategically essential jobs are going unfilled. More so, the new xenophobia is making it increasingly difficult to import talent from other countries.

Nowhere is this talent gap more challenging than in the automotive industry. A recent BusinessWeek story says it all: “Detroit Is Trying Really Hard to Woo Young Workers.” It points out that the lack of qualified new hires has become so pressing that it now part of the weekly executive briefing at General Motors. At this year’s Mackinac Island Policy Conference, Michigan Governor Rick Snyder highlighted the need to train, recruit and retain proficient young engineers, and other professionals, if Detroit-based companies hope to win the connected technology and autonomous vehicle race.

As the Baby Boomers who created the post-war economy retire in ever increasing numbers, the ramifications are clear and unsettling. If America hopes to keep its prized position as the innovation leader of the world in key industries such as automotive and aerospace – and keep the standard of living that goes with them – it had better find a way to quickly develop the competencies required to advance technologies faster than its competitors.

It's time we moved beyond measuring what percentage of us have jobs, and look at the more telling key indicator: the number of jobs that have gone unfilled because of a lack of qualified applicants. This is the innovation gap.

That brings us to the specter of a new innovation leader: China. Less than three years ago, then-vice president Joe Biden quipped: “I challenge you, name me one innovative project, one innovative change, one innovative product that has come out of China.” Well, anyone who attended this year’s Consumer Electronics Show can probably name a dozen: industrial robots, 3D printing, and various types of consumer prosthetics, to name just a few. And these aren’t even close to the whole story. Chinese advances in material science, naval engineering and deep space satellite killers are all currently considered issues of national security.

In fact, during the past three years, China’s expenditures for research and development, and the patents awarded for innovations, have significantly outpaced our own. In their book China's Next Strategic Advantage: From Imitation to Innovation, professors George Yip and Bruce McKern intimate that it may already be too late for the U.S. to regain its position as first in class.

Perhaps the most telling change of fortunes recently occurred when President Trump decided to pull the U.S. out of the Paris Climate Agreement. Within the week, Chinese Premier Li Keqiang, declared that China was ready not only to meet its obligations, but would lead world efforts to reduce global warming. While China is widely known to be of the most polluted countries on the planet, what is often overlooked is that is clearly a global leader in clean-technology. Premier Li knows that the Paris Climate Agreement is good for business, and China has a young and skilled workforce capable of taking advantage of the situation.

As we move towards a populist ethos, it’s easy to forget the fact that high wages accompany high skills. Full employment with declining wages and lagging industries is a poor bellwether of our economic prospects. The actions of our government are of little consequence if we lack the talent and culture to participate in the highly competitive, and lucrative, world of innovation. It’s time we moved beyond measuring what percentage of us have jobs, and look at the more telling key indicator: the number of jobs that have gone unfilled because of a lack of qualified applicants. This is the innovation gap. Once we look at it this way, we could realistically address the difficult issues of education and immigration that will determine our fortunes in the not-so-distant future.

Jeff DeGraff is a clinical professor of business administration at the University of Michigan Ross School of Business

The Next Ideais Michigan Radio’s project devoted to new innovations and ideas that will change our state.

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Jeff DeGraff got his nickname, the Dean of Innovation, because of his influence on the field. DeGraff is Clinical Professor of Management and Organizations at the Ross School of Business at the University of Michigan.
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