A decade ago, globalization went viral, and suddenly everything was different. Global terrorism came into being, as did global financial meltdown, global social media and a global talent market.
Around the world people were connected, experiencing either the up- or downside of the same globalization phenomenon. While volunteers were doing service projects in Zimbabwe and Costa Rica, legacy economy jobs were packed up and shipped off to India and China. Longtime factory and call center jobs, the economic lifeline of whole communities in the United States, were gone in a moment. Structural unemployment set in just as overleveraged financial markets imploded, leading to the worst economic crisis since the Great Depression.
Globalization moved at broadband speed, but diversity leaders were dial-up slow to grasp its implications for their work. Only in the past few years has globalization entered diversity and inclusion agendas, and diversity executives have been sprinting not to be left behind.
Now the D&I field is finally getting a handle on the globalization agenda: Don’t just export the made-in-USA concepts, but instead make it “glocal” so strategies are both globally leverageable and locally applicable; hire native resources on location; and build cross-cultural dexterity. All of which is great, but scant attention has been paid to the effect globalization has had on the most foundational work in D&I — building and nurturing a diverse talent pipeline.
The Diverse Talent Crisis
Many of the manufacturing and call center jobs that were shipped overseas disproportionately employed people of color. For the higher paying, specialized technological and scientific jobs, globalization exposed a socio-economic phenomenon: The United States, an economic powerhouse fueled by an investment and commitment to having the best public and private education systems in the world a generation ago, had lost its way.
After years of its students being among the best performers in nearly every discipline, U.S. student performance dropped and appears to be holding steady at the mediocre middle. Students in countries as different as Colombia, Germany, Latvia, Lithuania, Poland and Portugal are making academic gains two to three times faster than U.S. students, according to a 2012 report by the Harvard Program on Education Policy and Governance and Education Next. Students in Shanghai, for instance, outscored every other school system in the world. American students, on the same test, ranked 25th in math, 17th in science and 14th in reading.
Students of color — particularly African-Americans and Latinos — have been hardest hit. Half of black and Latino kids don’t graduate from high school. Of those who do, only half go to college. And of those who go to college, only half graduate. Out of a group that makes up some 30 percent of the population and growing, only one-eighth end up being college graduates.
There aren’t enough qualified U.S. workers, given the gap between demographic reality and educational and experiential readiness. While the U.S. neglected its children’s education, countries such as India and China began a massive education investment. As in the U.S. before them, this investment subsequently launched new economic powerhouses.
They are leaving the U.S. in their dust. In a 2011 Washington Post opinion piece, Paul Otellini, then the CEO of Intel, lamented that China and India graduate roughly 1 million engineers annually from their universities, while the United States ekes out a meager 120,000.
Further, with 14 million people still unemployed in the U.S., there are 3 million science, technology, engineering and math, or STEM, jobs sitting vacant. Yes, as the wheels of scientific, social and economic transformation continue to turn, some jobs have become extinct, but new ones are sprouting up. However, the U.S. is underproducing the trained talent needed to fill the void.
The state of the diverse talent pipeline is even worse. A study by the National Action Council for Minorities in Engineering Inc. found that while African-Americans, Native Americans and Latinos account for 34 percent of the total U.S. population ages 18 to 24, they earn only 12 percent of undergraduate engineering degrees.
Globalization is in large part a reactionary response to the talent shortage in the U.S. That’s good for the Chinese and Indians. They are doing what needs to be done in a competitive capitalistic system: building the talent for today’s and tomorrow’s economy and the jobs necessary to fuel it. But in the U.S., because of demographic realities of people of color becoming half of the population by 2040 or sooner, a failure to build diverse talent pipelines is a failure to build the talent pipeline for the entire U.S. economy.
Diversity leaders need to grasp the role of globalization in this context or face irrelevance.
Why Bring Jobs Back to the U.S.?
While the U.S. economy — and the jobs that depend on it — have taken a beating because of the competitiveness of a globalized economy, a shift is emerging: The deafening sucking sound of offshored jobs spiraling out of the U.S. to the rest of the world has quieted down. Sending U.S. jobs overseas has lost its cachet for socio-political and economic reasons, and diversity leaders can accelerate the reversal of this trend.
Some CEOs woke up to the fact that they in effect ate their own young by aggressively moving so many jobs overseas. When U.S. businesses shift millions of jobs away from home, domestic consumer markets are hurt badly. The result is stifled business growth that causes economic blowback for these same companies.
An increasing number of U.S. manufacturers are looking stateside for labor, which creates jobs and helps boosts the U.S. economy, according to an August 2012 Time article “The Economy’s New Rules: Go Glocal.” The Boston Consulting Group estimates that within five years, as many as 3 million high-skilled, high-demand manufacturing jobs could come back to the United States.
U.S. business and government’s ability to tend to the diverse talent pipeline — particularly Latinos and blacks — will be critical for the U.S. economy to seize the full benefits of bringing jobs back home. It’s not just about bringing them back; there has to be skilled talent to do those jobs.
The diversity executive is in an ideal position to strategically lead efforts to address the weakened and vulnerable diverse talent pipeline in the U.S., and there are a number of reasons why it’s worthwhile.
Labor costs are rising in China, India, Mexico and other countries while they are coming down in the U.S. The Chinese to U.S. wage gap, for example, continues to shrink because of accelerating wage increases in emerging markets and slow wage raises in the U.S. Also, higher rates of corruption in emerging markets compared with the U.S. drive up costs and risks. According to a July 2012 Reuters article titled “As China Costs Rise, Technology Lures U.S. Factories Home,” BRIC countries (Brazil, Russia, India and China) are two to three times more corrupt in the business world.
At the same time, in the U.S. accelerated automation means factories with fewer people — which lowers the labor cost equation that led companies to offshore. “Labor is a relatively small component” of costs, said GE CEO Jeff Immelt in a recent Reuters article. “That’s different today than it was 10 years ago.” GE opened a plant in Schenectady, N.Y., because of labor’s decreasing share of manufacturers’ costs. This reduces the total number of jobs overall, but it slows down the number that get shipped overseas because it’s more cost effective to keep them in the U.S.
Finally, and controversially, in many states unions have been losing negotiating leverage, which has led to new contracts with lower pay and benefits for workers, especially new ones. Legislation in certain states also has added to factors curbing union strength.
Companies want to bring jobs and operations closer to their customers. This is because of three main factors:
Rising energy costs mean shipping goods long distances to the largest market, the United States, matters. How many barrels of oil, not to mention carbon footprint units, does it take to ship a car from the Far East to North America? GE punched in the numbers, which led to the company shifting production of appliances from Mexico and China to Louisville, Ky. Many companies of all sizes are reviewing transportation costs. Along with GE, U.S. firms such as Master Lock, Caterpillar and Seesmart Inc., a lighting products manufacturer, are finding the balance sheet weighing more heavily toward domestic production.
The emerging “locally grown” movement is seeping into manufacturing. Mitch Free, who runs MFG.com, an online marketplace for the manufacturing industry, said in the aforementioned Time article, “It’s all about regionalization and localization rather than globalization.” He said consumers demand that things be newer, faster and better. Shortening the life cycle helps accomplish this. Citizens’ desire to slow down global warming also plays a part.
European and Asian companies are opening up more plants in the United States. This is because of the aforementioned trends and state and city government incentives. For example, Nissan, Toyota and Volkswagen have been pumping up local economies in cities around the nation by opening or expanding plants. Airbus, the European airplane manufacturer, is opening a plant in Montgomery, Ala. When making the announcement, its CEO, Fabrice Bregier, cited “a more competitive labor and growth climate in the U.S.”
Increasing numbers of manufacturing and construction jobs require a higher level of education. This is why there is an urgent need to reinvest in education. High-tech manufacturing requires higher education to run the robots on the assembly line. Even welders must now have in-house training or a community college certification, not just a high school education to meet job requirements. By 2018, 63 percent of U.S. jobs will require postsecondary training.
Global Focus Heightens U.S. Diversity Issues
Now is the time to include diverse American workers in globalization strategies and efforts. As the offshoring tide begins to turn, diversity and inclusion must play a key role in ensuring these jobs fully come back. Otherwise, there is greater risk there will not be enough skilled workers for these positions. If U.S. schools are not graduating half of Latino and black students from high school, it could kill the re-shoring of many of these jobs.
This has implications for the economic well-being of the nation that needs skilled labor, as well as the population’s economic well-being. Leaders need to strategically find ways to get future talent to achieve higher educational attainment. If successful, it will economically benefit the macro economy as well as individuals.
Business must do all it can to save its future talent pipeline — and that pipeline is diverse. To do so, business must initiate its own programs and collaborate with government and nonprofits much earlier in the education pipeline so U.S. students get and complete the education they need for contemporary jobs that are in demand.
There are efforts in place on the part of leading companies, nonprofits and the government. But 3 million STEM jobs that cannot be filled is a significant gap, and current efforts will not be enough.
U.S. corporations face a wrenching irony that, right when a shifting tide of jobs rolls back to the U.S., the skilled talent needed may not be there despite high unemployment.
Diversity leaders, more than any other type of leader in corporations today, are well-positioned to bring about change. But they cannot do it by falling back on legacy diversity paradigms and language. They must be able to make D&I relevant and contemporary in the global context. However, given the enormity of the gap, companies’ individual D&I efforts won’t be enough. Organizations need to experiment with cross-industry and metropolitan-wide collaboration, including with competitors.
Diversity executives have a vital role in making the link between global trends and the threats and opportunities for the American labor market. They can lead the way through D&I to bring U.S. jobs back home.
Andres Tapia is a senior partner at Korn/Ferry International. He can be reached at email@example.com.