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Tightest Labor Market Since 1969

George Walther-Meade | 05.01.2019

Current market conditions are forcing companies to consider and incentivize lower skilled workers to offset demand.

The gap in unemployment between skilled and unskilled labor in the US has been shrinking.   A recent report by the Federal Reserve Bank of St. Louis shows the unemployment rate in November dropped for both those with and without a high school diploma.  That same report showed that the unemployment rate for those with a college degree actually increased slightly.

So what's going on?  The current economic recovery is consistently helping less-educated workers find jobs and particularly labor-intensive industries such as manufacturing that are most likely to hire the unskilled.

These labor market dynamics are forcing organizations to offer incentives for less-educated and experienced employees.  One of the most innovative incentives is offering to cover college tuition, fees and books for front-line workers.  Companies such as Walt Disney, Yum Brands, Discover Card and Walmart are all among those doing it.

Once deemed a benefit only for managers pursuing post-grad MBAs; it's now a benefit that larger organizations are having to step up for.  Most common was tuition-assistance to existing staff which reimbursed $5,250 per year (the federal tax-exempt maximum) and only then after the student successfully completed the course work. 

This increased demand for lower rung workers can be seen by Jon Kaplan's recent quotes in a Wall Street Journal report on hiring perks.  As vice president of training and development at Discover Financial, Kaplan saw that the company was getting a good return on every dollar invested in tuition since the participating employees stayed with Discover longer and moved into more senior roles at a higher rate.  

Approximately 80% of Discover's 7,000 employee call-center and field staff lacked a college degree.  They created a new program in May 2018 that covers the cost of employees attending the University of Florida, Brandman University and Wilmington University to pursue one of seven online degrees in business, cybersecurity, computer engineering or organizational management.  By December 2018, more than 700 Discover employees had signed up for the program which was more than double the number of people taking advantage of their traditional tuition-reimbursement program.

The Wall Street Journal report goes on to cite that there are 12,800 employees from Discover, Walmart and other companies under such programs at Brandman University.

"Obviously I'd like to keep as many employees as possible here, but if this program helps some employees graduate college and go on to have a bright future career elsewhere, God bless them," Mr. Kaplan said.  "That's an awesome downside to have."

With benefits like this providing an upside to the organization, it's also likely to provide a social benefit in terms of a more educated, ambitious and content workforce in the regions impacted.