June Jobs Report

A third straight month of strong job growth continued to boost optimism for the second half of 2015. The U.S. economy added 223,000 jobs in June according to the Bureau of Labor Statistics' Employment Situation Summary. The unemployment rate decreased to 5.3%, the lowest in seven years. However, economists worry that falling unemployment was prompted by Americans exiting the workforce, rather than more people finding jobs. The labor participation rate decreased to 62.6%, the lowest since October 1977.

Industries that experienced the most growth in June included professional and business services (+64,000), health care (+40,000), and retail (+33,000). Temporary help services increased by 0.7% and created 20,000 new jobs.

No More Negotiations: A Way to Solve the Gender Wage Gap?

Ellen Pao, former junior partner at Kleiner Perkins and now interim CEO of Reddit, has consistently made headlines. First, for her highly publicized discrimination suit against her previous venture capitalist employer, and then for making a bold move as the Reddit chief executive. Just days after losing her case, Pao announced that she would be eliminating salary negotiations at the social news-sharing site in order to eradicate the gender wage gap. Now all new-hire job offers at Reddit are attached with a take-it-or-leave-it salary amount. According to Pao, the offered pay is based on comparing the salary for similar positions against industry standards and does not take into account a candidate's salary history or other personal factors.

Pao claims that eliminating the uneven bargaining table that women encounter when they try to negotiate can help close the wage gap. For instance, of graduating MBA students, half of men negotiated their job offers, while only an eighth of women did (Harvard Business Review, 6/16/2014); but research into why women are hesitant to negotiate has revealed that it has less to do with a lack of confidence and more to do with how women are treated when they advocate for higher pay. Women who are hesitant to negotiate have been advised to simply "man up" and use tactics that work for men – being more assertive, sharpening their competitive instincts, and maintaining a firm stance. However, even when women employ these "masculine" techniques, they still lose. Women who negotiate pay a social price: they are seen as demanding and less-than-ideal colleagues. In a study, the evaluators of those negotiating salary found that the "social cost" of negotiation – a decline in the evaluator's willingness to work with the person negotiating – was 5.5 times higher for women than for men (Harvard Business Review, 6/16/2014). Realizing that women are statistically less likely to negotiate than men and that "when they do they're often penalized for it," Pao has taken negotiations off the table entirely.

Reddit may also be benefiting from an unexpected advantage of the new policy: a less antagonistic and suspicious dynamic when hiring new employees. Pao has claimed that they've had many new applicants to Reddit because of the new rule alone. But critics of Pao's policy contend that it rests on enforcing the gender stereotype that women can't or won't negotiate and also takes the control from the employee and gives it entirely to management. A candidate may not deem their offered salary as "fair" and is given little to no room to communicate a differing viewpoint. Reddit does not have salary transparency, which means that any new hires must simply trust that they are being offered the same or similar pay to their counterparts. Detractors worry that taking away negotiations strips candidates of their power to evaluate their own worth and results in a hiring process that happens behind closed doors. Additionally, it is unclear whether eliminating negotiations would actually help eradicate gender pay disparity. Opponents point out that a "fair" offer from management does not ensure that implicit bias has not influenced the salary offer.

Rather than eliminating negotiations, critics counter that Pao, Reddit, and other companies should give women the tools to negotiate more effectively and create a work culture that does not penalize women for being assertive and negotiating pay. Some point to Marc Benioff, CEO of Salesforce, as an example of a positive alternative. The company has launched a program that will examine the existing salaries of all 16,000 female employees to eliminate gender pay disparity. The initiative also aims to hire and promote more women and has set a new policy that at least 30% of the people at every meeting must be women.

No stranger to sex discrimination, Pao hopes to eliminate what she considers a no-win scenario for women by abolishing salary negotiations. However, it has yet to be seen whether her plan will help women close the gap in pay.

Readers, would you apply at a company without salary negotiations? Do you think it could help eliminate the gender pay gap? Comment and let us know!

Can Blind Auditions Eliminate Hiring Bias?

Last year, to the surprise of many, Google released its employee diversity statistics, making a promise to update the information annually. Other tech companies such as Facebook, Yahoo, and LinkedIn followed in Google's wake and also disclosed their diversity data. Google recently released an update to the statistics, but despite the acknowledged importance of hiring women and minorities, the outlook barely improved. The percentage of women in tech jobs for Google only increased from 17% to 18%, and women in leadership roles slightly budged from 21% to 22%. Company minority hires in tech and leadership positions did not show any uptick (Google, 6/1/15). The tech giant and many other companies recognize that a more diversified workforce makes a stronger company. It plans to invest $150 million in diversity initiatives; however, the tech (or any) industry could help increase diversity by building in blind auditions to eliminate hiring biases.

Managers may not even be aware of their gender or racial bias when hiring. A study found that both men and women managers were twice as likely to hire a man over a woman, even when both applicants possessed equal skills. Additionally, even when men were under-qualified and performed worse on aptitude tests, they were still 1.5 times more likely to be selected over women (Proceedings of the National Academy of Sciences, 1/31/14). Minorities face similar prejudices: even when African-American applicants had the same qualifications and education as their white counterparts, they were 16% less likely to get called back for an interview (Fortune, 11/4/14).

To eliminate racial or gender bias when hiring, some companies have started implementing blind auditions for job applicants. The startup pioneering blind hiring is GapJumpers, and employers such as Dolby, Adobe, Mozilla, and Google are already using the service. The startup calls itself "The Voice" of hiring after the reality TV competition show. Employers post a job opening and candidates apply through the platform; however, the employer does not receive any information regarding the applicant's ethnicity, age, gender, or educational background. Instead, candidates answer work assessment questions and are tasked with some sort of challenge related to the job. For instance, a web developer might be asked to create a web page or a social media manager might outline an online strategy. From their first year's worth of data, GapJumpers found that with their blind hiring process, 58% of those who were selected to interview and 68% of those who ended up getting hired were women (Business Insider, 5/31/15).

Prejudices when hiring women and minorities are evident through multiple studies and tests; even self-aware hiring managers might have implicit prejudices that could cause them to pass up minority or female candidates. Companies that want to hire the best talent and create a meritocracy where applicants are judged for their qualifications, not for their gender, race, or educational background should consider how blind hiring auditions could help eliminate biases and instead onboard the best people for the organization.

Readers, have you ever experienced hiring bias? Do you think that blind auditions could help increase diversity? Comment and let us know!

Los Angeles is Now the Largest City with a $15 Minimum Wage

In an anticipated move on Saturday, Los Angeles Mayor Eric Garcetti signed a measure into law that will require employers to raise the minimum wage from $9 an hour to $15 an hour over the next five years. The first increase will take place in July of 2016 and raise the wage to $10.50. The Los Angeles law was approved with a 14-1 vote and requires that any business with more 25 or more employees raise their hourly wages to $15 an hour by 2020. The wage hike will affect upwards of 600,000 workers, but no one is quite sure the effects the new law will have, and the second-largest U.S. city has now become an experiment for a huge higher minimum wage. Although other cities such as San Francisco and Seattle have also recently raised their wages to $15 an hour, the city of Los Angeles will be watched closely as a trial for whether other cities, and even the federal government, could reasonably institute similar wage hikes. No city as large as Los Angeles, which has nearly a million people living below the poverty line, has tried to institute such a hefty or fast pay increase. The success or failure of the new law will be closely scrutinized and could either be a huge victory for those advocating for higher wages or deter other cities from implementing similar pay increases.

A seemingly endless debate surrounds raising the minimum wage and whether it will help or harm the economy. Mitchell Englander, the only City Council member to vote against Los Angeles' new measure, argues that this new minimum wage "may hurt the very people it is designed to help" by forcing low-margin industries and small businesses to reduce jobs and hours and relocate to the many districts outside of LA city limits which have much lower wage standards (Los Angeles Times, 6/15/2015). Additionally, Englander points out that even $15 an hour will not do much good when affordable housing is so scarce in LA, where the average apartment rents for more than $2,000 a month. A report from the LA Chamber of Commerce echoes Englander's concerns, citing that the increase will result in job loss, business relocation, and will do little to aid low-income families to rise above poverty due to the high cost of living in Los Angeles. Many restaurants openly opposed the measure, predicting that they would be forced to cut as much as half of their staff (The New York Times, 5/19/2015).

However, some are concerned that the wage hike is too little too late. For instance, by the time that LA's minimum wage reaches $15 an hour in 2020, it will be worth the equivalent of $13.75 today (assuming that inflation holds steady). Add to that the fact that it currently costs 40% more to live in Los Angeles than in the average American community, and the future $15 an hour for LA residents diminishes to be worth about $9.75 an hour (FiveThirtyEight, 5/20/2015).

Other cities such as Seattle and San Francisco have passed similar measures to raise the minimum wage. The pay increases have not had enough longevity to determine whether they've helped or hurt workers and businesses. San Francisco's first pay increase was instituted on March 1 and will reach $15 an hour by 2018. Long-term effects of the minimum wage increases are still a mystery, although some are already decrying the escalations in San Francisco as a disaster that has led to local businesses teetering on the brink of closure and restaurants increasing prices by 20% (The Wall Street Journal, 3/24/2015). Seattle's minimum wage, which took effect April 1 has already spurred a debate about whether the pay increases will lead to adverse effects including an abnormal amount of restaurant closures or whether that speculation was wildly exaggerated without the full facts.

Whether the recent minimum wage hikes will be a boon to the economy or will make these metro areas go bust is still unknown. Economists, politicians, business owners, and employees will all be watching these major cities as they experiment with significantly higher wages. Los Angeles especially will be under close scrutiny since it will be the largest city to date that has decided to raise the minimum wage so much and so quickly.

Readers, how do you predict that the $15 minimum wage will affect Los Angeles and other cities? Comment and let us know!

6/17/15 Update: The small California city of Emeryville, near the San Francisco Bay area, voted to raise the minimum wage to $16 per hour by 2020. This will make Emeryville the city with the highest minimum wage in the nation.

May Jobs Report

A second straight month of strong job growth continued to boost optimism that first quarter stagnation was due mostly to winter weather and not a sign that the economy is stalling. The U.S. economy added 280,000 jobs in May according to the Bureau of Labor Statistics' Employment Situation Summary. The unemployment rate edged up slightly to 5.5% as more Americans returned to the labor pool and actively started looking for work. Wages increased 0.3% last month and have risen 2.3% over the last year, which may be luring some back to job searching again.

Industries that experienced the most growth in May included professional and business services (+63,000), leisure and hospitality (+57,000), health care (+47,000), retail trade (+31,000), and construction (+17,000). Temporary help services increased by 0.7% and created 20,000 new jobs.

Do New Grads’ Job Expectations Match Reality?

This is part 2 of our series examining the job market that the Class of 2015 will enter into after graduation. To read part 1, click here.

Millennials have officially surpassed other generations and become the largest share of workers in the American labor force. More than one in three employees now belong to Generation Y (Pew Research Center, 5/11/15), and even more young people will inundate companies after the Class of 2015 enters the workforce. New graduates are starting out in the "real world" with a firmly Millennial mindset about work, but their career expectations may not match up with the reality of what employers want or offer.

Optimism reigns for the Class of 2015. Some 80% of new graduates are confident that their education prepared them well for the labor force (Accenture, 2015); however, businesses don't share their positivity. Only 23% of employers reported that last year's graduates were prepared with real world knowledge (AAC&U, 1/20/15). Some 46% of employers believe that this year's college students do not have enough real-world learning (CareerBuilder, 4/28/15), and their concerns may be validated: four in 10 students about to leave school will do so without the complex reasoning skills necessary for white-collar work (The Wall Street Journal, 1/16/15).

Those in the Class of 2015 seem to think they will outperform their past peers and rank themselves highly in many areas necessary to succeed at work, while employers view new grads as under-prepared and lacking in many essential skills. For instance, when it comes to feeling prepared for (1) working well with others, (2) making good decisions at work, (3) organizing and evaluating information, and (4) analyzing and solving complex problems, new grads' perception differs greatly from their prospective employers'. Well over half of graduates think they are well prepared in each area, whereas well under half of employers agree (AAC&U, 1/20/15). It remains to be seen whether these new graduates have an elevated opinion of themselves or whether their future employers are underestimating their abilities.

The Class of 2015 has not only a high sense of self worth, but also high expectations for their future employers. However, when they enter the "real world" they may want to prepare themselves for disappointment. Some 77% of college graduates expect that their first job will provide formal training opportunities, but only a little more than half (53%) of those graduates from 2013 and 2014 received such training. They may also face frustration when they receive their first paychecks. Some 85% expect to earn more than $25,000 a year, while 41% of graduates from 2013 and 2014 are earning less than that (Accenture, 2015) and 49% are under-employed (CareerBuilder, 4/28/15).

High expectations may stem from the fact that the Class of 2015 will have more career options than the other graduates from the past few years. Rather than simply being grateful for a paying job, they have the opportunity to be more selective in where they choose to work. More than ever, new workers espouse a Millennial mindset and value work culture over pay. Some 69% of graduates prioritize positive social environment over compensation, and many are more concerned with meaningful work and flexible hours than their pay rate (Accenture, 2015).

New college graduates have high (some employers might say unrealistic) expectations for the workforce and may find themselves let down once they start their first job. However, an improved job market does promise more opportunities, better pay, and the luxury to be more selective as they enter the workforce.

Readers, is the Class of 2015 prepared for the "real world?" Comment and let us know!

Class of 2015 Graduates into Best Job Market since the Recession

The Class of 2015 is preparing to don their cap and cloaks, turn their tassels, and transition from college into the "real world" of the workplace. Commencement speakers will encourage new graduates to follow their dreams and change the world, but many soon-to-be grads are worrying more about the immediate question: "Will I be able to find a job?"

New graduates are no strangers to the effects of the Great Recession. When they started their college years in 2011, the graduating class had over 10% unemployment and 19% underemployment. Many of those in the Class of 2015 witnessed their siblings who graduated during the worst years of the recession founder, scrambling to find full-time employment and moving back in with their families.

This year's college graduates are entering into the best job market since the Recession; however, they will still be competing for entry-level jobs and may find it difficult to earn wages that will help chip away at their student debt. Employers expect to hire 9.6% more college graduates this year than in 2014; organizations also reported that they have more job openings for new graduates than the previous year (NACE, 4/15/15). The Class of 2015 may not be competing against each other as fiercely as in the past, but the market is still competitive, and employers receive an average of 23 applications per posting (The Wall Street Journal, 4/15/15). Despite several years of continued job growth, the unemployment rate for those in their 20s with a four-year degree actually rose last year to 12%, putting a damper on the optimistic expectations for this year's new graduates (CBS News, 4/16/15).

New graduates in certain fields face better prospects than others. Health care, STEM industries, and accounting and finance offer the best growth and some of the highest salaries for newly minted college grads. Health care careers are expected to grow by nearly 20% between now and 2020, engineering has a similar growth projection (and some of the highest starting salaries for new graduates), and accounting jobs are expected to grow by 17% (Fortune, 4/7/15). College graduates with degrees that are less in-demand may face more trouble finding a job with decent pay. Less than 10% of companies are making it a priority to interview and hire those with degrees in communication, journalism, liberal arts, and education (CareerBuilder, 4/28/15).

Members of the Class of 2015 have high hopes for themselves, despite the fact that nearly half (49%) of college graduates from 2013 and 2014 consider themselves underemployed or working in a job that does not require a college degree (MarketWatch, 5/12/15). In contrast to this and perhaps reflecting the optimism of youth, some 8 in 10 college graduates are confident about their working future and report that their education prepared them for the workforce (Accenture, 2015).

With 58% of new graduates reporting that they will leave college with more than $50,000 in student loans (MarketWatch, 5/12/15), wages are a concern for new graduates. Although 33% of employers plan to raise the starting salaries of college graduates that they hire, 57% have no plans to change starting salary offers, and 26% plan to offer less than $30,000 a year (CareerBuilder, 4/28/15). Just like hiring, the salary predictions for the Class of 2015 will vary widely depending on their degree. Those that leave college with an engineering degree can eagerly await starting pay upwards of $60,000 a year, while those carrying degrees in education, the arts, or communication can expect to make less than $40,000 per year (PayScale, 2015).

Although anyone graduating in 2008 or previous years would be envious of the job market for the Class of 2015, this year's new graduates will face still face a tough (although improved) job market. If companies hire as predicted, many new graduates will be able to answer the pressing question of whether they will find a job with a solid "Yes." However, will their presumptions about the working world match with the reality of what companies expect? Find out in Part 2 of our series next week.

Readers, what are your predictions for the Class of 2015? Comment and let us know!

Cracking the Millennial Consumer Code

Millennials remain a mystery for many companies. Those belonging to Generation Y have been characterized as both self-absorbed narcissists and socially conscious advocates for change, as lazy Peter Pans who won't grow up and as ambitious self-starters looking to take on leadership roles. Whatever Millennials may be, they will soon become one of the largest groups of consumers in the United States, and companies are trying to crack the code on how to harness their enormous buying power.

Millennials (generally known as anyone between the ages of 18 and 35 in 2015) represent about one fourth of the U.S. population and have about $200 billion in annual buying power (Forbes, 1/20/15); by 2020, it's estimated they'll account for 30% of all retail sales (Accenture, 2013). Almost every company is trying to capture the attention and patronage of Millennials. Organizations are investing an enormous amount of money and effort into attracting them as potential customers, especially as consumer spending continues to remain stagnant despite job growth and falling unemployment.

Many companies have launched new product lines and branding techniques in order to win Millennials as patrons. Whole Foods is the latest in a string of companies trying to attract Gen Y customers; the health food grocery store recently announced they will open a chain of stores that will sell less expensive food and also focus on "streamlined design and innovative technology." However, in order to fully understand what Millennials consume and how they choose to buy, Whole Foods and other organizations need to understand the experiences and mindset that influences the purchasing decisions of Generation Y.

They are still recovering from the Great Recession.
Many Americans across a wide range of demographics are still recuperating from the Great Recession. However, the 2008 recession may loom the most for Millennials. Many in this generation graduated into or just before the downturn, where unemployment for their age group hit 18% in 2010. More than a third of un- or under-employed Millennials moved back in with their families, giving them the reputation of youths who would never grow up. They postponed marriage, children, and home buying because they could simply not afford it. Even as prospects improve for Gen Y, most are skeptical of the economy and the housing market especially; about 30% of Millennials claim they have no plans or desires to ever own a home (The Washington Post, 2/28/15).

They are saddled with student debt.
Millennials are the most educated generation in American history, but their knowledge has come at a huge price. Student loan debt has increased 84% to $1.2 trillion since 2008 (CNN Money, 9/10/14). Students hoped to take on debt that would allow them to get a better job with a higher wage; instead, they graduated into the worst U.S. economy in eight decades. For more than 50% of Millennials, more than half of their monthly incomes goes to paying off debt (The Boston Globe, 4/26/15).

They do their research.
Before Millennials buy, they do their research on products and companies, but rarely is it through such historically traditional media sources as the news, magazines, or books. Rather, Millennials are relying on blogs and social media to scope out their purchases before they buy. Some 33% of Millennials will consult blogs that they trust before making purchases (Forbes, 1/20/15), while 62% use Facebook to do research on products they're hoping to buy (Brafton, 7/14/14).

They don't trust advertising or rhetoric.
Deriving from their experiences during the Great Recession, many Millennials are skeptical of corporations and companies. Some 86% of Gen Y don't trust Wall Street (The Washington Post, 4/30/15). Cynicism toward big business means that those in this generation don't trust advertising or corporate rhetoric. Only 1% of Millennials claim that company advertising makes them more willing to purchase goods or services from them. They value actions over words; almost half (43%) rank authenticity as more important than content (Forbes, 1/20/15).

Millennials have an influential amount of buying power, and when they like a company and product they have brand loyalty; 60% of Gen Y continue to be patrons of brands they already trust and like (Forbes, 1/20/15). However, unless companies understand the experiences that have shaped how Millennials think about money, they may have trouble winning their patronage.

Readers, do you think that Millennials are a different kind of consumer than other generations? Comment and let us know!

April Jobs Report

Relieving fears that the economy may have been starting to stall due to weak GDP growth and disappointing job increases in the first quarter, April saw the job market rebound, according to the Bureau of Labor Statistics' Employment Situation Summary. The U.S. economy added 223,000 jobs, and the unemployment rate decreased to 5.4%, the lowest since May 2008. The labor participation rate edged up slightly to 62.8%, a still worryingly low number despite falling unemployment.

The number of long-term unemployed persons remained little changed at 2.5 million, accounting for 29% of the total unemployed. Despite continued hopes for increased wages, average hourly earnings rose only 0.1%, indicating that any meaningful pay growth for workers still has yet to materialize.

Industries that experienced the most growth in April included professional and business services (+62,000), health care (+45,000), construction (+45,000), and transportation and warehousing (+15,000). Temporary help services increased by 2.1% and created 16,100 new jobs.

Employee or Contractor? The Answer Could Change the Economy

When people need a ride around town, instead of hailing taxis, many are ordering rides from Lyft or Uber. If their home needs to be spring-cleaned, rather than calling a maid service, they can find someone on Handy. When they have a to-do list that needs to be checked off, they don't need a personal assistant because someone from Task Rabbit can do the work for them. Postmates will deliver your packages or meals, Instacart will buy and deliver your groceries, and Washio will launder and deliver your clothes. There is now a business for nearly any human task or job that needs doing. However, all of these companies, and the entire structure of the "sharing economy," could be dramatically changed depending on the outcome of a slew of recently filed lawsuits. Businesses like Lyft and Uber have tens of thousands of people working for them; Uber alone has about 300,000 drivers around the world. These workers are all classified as independent contractors, not as employees. Last year, multiple class action lawsuits were filed in California against Uber, Lyft, and Handy claiming that categorizing workers as contractors, and not employees, exploits them by avoiding paying benefits, health insurance, or other costs (such as gas, vehicle maintenance, and cleaning supplies) that would be incurred by the company if they were employees.

Last month, separate U.S. judges overseeing the lawsuits ruled that they could not make a determination regarding how Uber's and Lyft's workers should be classified. These cases will now move to juries to try and establish the status of the drivers. If drivers are determined to be employees and not independent contractors, the verdict could set a precedent that would greatly alter, and even possibly dismantle, the sharing economy and any business that operates like Uber. A verdict in favor of the plaintiffs could force these companies to take on the cost of payroll expenses, Social Security, workers' compensation, and unemployment insurance. Classifying workers as contractors is estimated to save these companies about 20-30% in labor costs (Fast Company, 2/17/2015). According to SHRM, the average premium for employee health care is $882 per month; by that standard, health care costs alone would cost hundreds of thousands per month if drivers were classified as employees (CNBC, 2/2/2015).

The amount of compensation for which Uber and Lyft would be responsible is unclear, as the plaintiffs have not disclosed the damages they are seeking and neither company will reveal exactly how many drivers work for them in California. For a business like Uber that currently has 300,000 independent contractors, putting even some of those workers on the books as employees would create serious financial impact. Additionally, any future start-ups could collapse under the monetary obligation to pay workers as employees, and those fresh companies looking for venture capital investment that are structured similarly to Uber or Lyft could struggle to find investors that would be wary of that business model.

The plaintiffs suing Uber and Lyft argue that because the companies exert a significant amount of control over their work, such as setting compensation and vehicle standards and terminating employees who fall below performance measurements, they should be treated as employees and protected by the same wage and labor rules. Whatever ruling the jury hands down would apply only to operations in California; however, this verdict could have influence in other decisions.

Many are pointing to the recent lawsuit involving Federal Express where the U.S. Circuit Court of Appeals determined that the company had misclassified 2,300 drivers as independent contractors, opening up the company to hundreds of millions in wage claims. The FedEx case orbited around the question of whether the logistics company maintained control over the work of its drivers; the judge ruled that it did. The sharing economy businesses could have the verdict for their cases balance on a similar issue.

In an economy where more than 17.7 million Americans work more than half-time as independent contractors (The New York Times, 8/16/2014), classifying even a portion of these workers as employees would have huge costs for companies and would change the very landscape of the sharing economy.

Readers, do you think that workers in sharing economy companies should be classified as independent contractors or as employees? Comment and let us know!

6/17/15 Update: A ruling from the California Labor Commissioner's Office has stated that a driver for Uber should be classified as an employee, not as an independent contractor. The ruling ordered Uber to reimburse the drive more than $4,000 in expenses and other costs. The ruling does not apply to anyone beyond the individual driver, but does have symbolic significance. Uber claims that the decision is nonbinding and also asserts that the ruling contradicts a previous ruling from the same commission.

More Entries