We have pondered how Skill Premium evolves and what Recruiters and Workforce planners can learn from it. We came across an interesting Kellog University research paper titled “ Trading Up and the Skill Premium.” This paper, written by Nir Jaimovick et al., provides an exciting view. As income rises, households trade up to higher quality goods, and that these goods are intensive in skilled labor. As a result, the demand for high skilled labor rises, increasing the skill premium. This is a very simple abstract of the work they had done, but a significant one. If you close your eyes and compare your childhood times and the present day, the specificity and the choices we expect, even in essential food items, have evolved significantly. I recently learned that we have 21 types of Onions! I may personally feel that is not required, but the market exists for that many variations.
As the economy grows, higher order of skills will continue to be in demand. As a general rule, when a skill is available in abundance, the wages related to those skills should ideally decrease. But in a technology-driven world, the economy is primarily Skill – Biased. There was a massive growth in the number of highly skilled people in many countries, but the demand outstripped supply, keeping the wages higher and higher. For comparison, during the beginning of the industrial age, the demand was heavily for workers who could work with large machines in challenging working environments – an exact reverse of what is happening now. Andrew Ure, Babbage, and Knight shared a common interest in the new technologies of the Industrial Revolution. Babbage subjected methods of production to new methods of scientific analysis. Knight believed that the cost savings and broader distribution resulting from the new book production technologies would improve access to knowledge among the laboring classes and that the cost savings from factory production would improve the overall standard of living. (In some ways, the concept of Citizens Developer that is getting popular now is a variation now) . I have written about this in my last email.
Modern-day enterprises have started attaching premiums to select few skills without understanding the evolutionary nature of skills. If you understand the evolution and interconnectedness of skills, you can recruit top talent quicker. I have opted to explain this through a case study. A large wireless infrastructure provider was struggling to hire Machine Learning Engineers. The volume required was high. Recruiters were getting stressed out due to limited market availability. The team reached out to Draup. Here is the summary of results we were able to achieve
- 488 offers across different role types in 12 weeks
- TTF reduced to 24 days as compared to 75 days for 2019
- Significant reduction in offer decline
While there were many aspects to the talent availability by specific target companies, the one critical aspect is we developed a plan merging Career Paths and Reskilling Paths. We noticed that the Enterprise had a ton of Systems Data Analyst. So using this as an anchor role, we plotted the evolution towards Machine Learning. The model looked like this. This type of cheat sheet was shared with all the Recruiters, and we developed Zones of Proximity. So the Recruiter fully understood whether they are offering a Feeder Role and, if so, what the development plan is.