Has the Fed Discovered a Cure for Displaced Workers?

Has the Fed Discovered a Cure for Displaced Workers?
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Ten years ago, as a George Mason University board member, I had the chance to tour the ‘hot cancer’ laboratory that was making waves in the emergent field of “personalized medicine.” Researchers there were on the front lines of a new age in medicine, where doctors prescribe a cocktail of drugs tailored to an individual’s DNA. Instead of designing for the average, therapies could be tailored around the specific response that an individual might have. It could take into account not just an individual’s DNA, but their unique medical history to guide not just dosage, but the nature of treatment altogether. In the decade since, the advent of personalized medicine and treatment has triggered a step change in our ability to mitigate, and someday cure altogether, certain cancers for certain populations.

As it turns out, a similar approach is emerging in response to a very different sort of crisis. In recent months, an estimated 40 million Americans have been displaced from work as a result of the COVID-19 pandemic. And economists predict that 40 percent of the job losses will be permanent.  

That means that to regain their economic footing, millions of displaced workers will have to find their way to not just new jobs, but entirely new positions and sectors. Displaced restaurant workers will be challenged to apply their skills as a contact tracer. A hotel manager will need to translate customer service skills to consider managing an urgent care facility.  

Making the connection between a worker’s existing capabilities and entirely new roles will require a match between an individual’s work history, and the demands of jobs that may be adjacent or closer than anyone expected. It will be especially challenging for low-wage earners, who face long documented gaps in access to the
social capital required to navigate their way to and through a maze of education and training providers to find programs that are both the right match for them — and aligned with local labor market demand. A one-size-fits all approach won’t work — it will require personalization.

According to a groundbreaking report from the Federal Reserve Banks of Philadelphia and Cleveland the advent of personalized workforce development may soon offer a cure for laid-off workers. The study looks across 33 US metro areas at recent job data and to explain how an individual’s unique skills history, paired with more targeted training, might enable them to make the leap to a new occupation with at least a 10 percent salary bump.

By analyzing data from 60 million job postings in 33 major metro areas, researchers were able to spot patterns that help us understand the fastest paths to higher wages based on a similarity score reflecting the skills needed for a pair of occupations. The scores provide displaced workers with an unprecedented, real-time understanding of the skills required to jump to a new career. It helps them to understand how their unique skills and experience, paired with training, can help to cure their unemployment woes.

In Phoenix, Arizona, the research breaks down the labor market DNA of a retail worker making $21,000 a year, and  shows what it takes for them to make the leap into a sales jobs in the same region, which average $48,000 a year. The skills overlap gives the two occupations a very high similarity score of 0.86 (on a scale of zero to one), useful information for a laid off employee, a jobs counselor or a training center packaging skills offerings.

As researchers examined similarity scores between lower-wage jobs and higher paying roles, they saw that “mobility skills” like  communications, teamwork, and customer service, had the most profound correlation with economic mobility. In role after role across the Fed analysis, so-called “soft skills” like problem-solving and organization, paired with digital skills, like Microsoft Excel, provided a skill cocktail that prepared displaced workers to get hired, or promoted within their existing career path. It begs the question: Why aren’t more high schools, colleges or workforce development programs focused on the sort of “mobility skills” that we now know matter.         

This research also offers evidence — and encouragement — for proponents of skills-based hiring as an alternative to a resume-based hiring culture that values where you went to college — rather than what skills you can bring to your job. According to the research, a worker’s skills could lay the foundation to be successful in a number of jobs that are traditionally assumed to require a bachelor’s degree.

Of course, the news isn’t all rosy. The research also suggests that some of these pathways are not commonly followed according to recent job migration data, which suggests we have a lot of work to do to help both workers and employers understand and visualize nontraditional, but promising connections between waning jobs and hot careers.  

Much like DNA testing has unlocked the potential personalized medicine, drawing connections between our work and skill history and the needs of the labor market holds transformative potential. It can guide the creation of lower cost, more precise training programs that capitalize on the unique skills and experiences of displaced workers. The research also offers a skills-based framework for more equitable hiring practices that can remove many of the barriers that low-income communities and people of color face at every level of the talent pipeline. It holds out hope of new —and faster—cures to get Americans not just back to work, but also building immunity as resilient workers.


Kathleen deLaski is founder and CEO of Education Design Lab.

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