Will our Workforce be Ready for Smart Grid?

The economic reports continue to trickle in and fears of a double dip recession are abating.  Too bad it does not yet feel like recovery.  Economists tell us that employment growth is typically a lagging indicator and so it is this time as well.  There are enough data points for experts to characterize this recovery and compare it to past experience, and some things are different and worth noting.

The Good, the OK and the Still Ugly

The Conference Board Leading Economic Index (LEI) for the U.S. gained 1.4% in March, 0.4% in February, and 0.6%in January. The LEI rose at a 5.2% annual rate between September 2009 and March 2010, slightly slower than the increase of 6.2% (12.8% annual rate) for the previous six months.  Meanwhile, the Coincident Economic Index (CEI) for the U.S. rose 0.1% in March, 0.1% increase in February, and no change in January. The Lagging Economic Index (LAG) grew 0.2% in March, following a 0.1%increase in February, and declined -0.3% in January.

That is good news according to John Silvia, Chief Economist at Wells Fargo Securities Economics Group writing in a newly released report entitled, “Character of Recovery II: Differences Persist[1] is that while industrial production fell sharply in the recession the recovery which began last June is more robust than in the past seven recessions he studied.  He said that the March Institute of Supply Management, one of those closely watched leading indicators, showed expansion in orders, production and employment along with longer delivery times suggesting spending on more durable goods.  Over the first three months of 2010 manufacturing overall grew 8.7% and high tech spending was up double digits.  Taken together the durable and longer term nature of spending suggests the threat of a double dip recession has abated.

Real manufacturing and trade sales are OK tracking the pattern of the past seven recoveries even though they are below the historic trend lines.  The reasons are thought to be the deleveraging going on across the economy and the real or self imposed limitations of credit. Wells Fargo Economics’ forecast of 2010 real final sales growth is less than 2% compared to the pre-recession 2.5% in 2007 caused primarily by the drop in consumer spending.

Jobs growth remains the ugly spot in the economic prospect reports and here the demographics of the employment base do not necessary help since the US has had an oversupply of low and semi-skilled workers and become much more dependent on H1-B visa required science, math, engineering and quantitative talent for software and high tech jobs.  This is different form past recoveries when is a less high tech market with more manufacturing jobs we produced more of the talented skills we needed. This supply and demand imbalance is a problem—big problem—going forward for the American economy and argues for a different approach to immigration to make the US more attractive for the skilled talent we need even while we manage the influx of low skill workers to create a sustainable balance.  The impact on today’s recovery of this demographics change is that those unemployed will likely stay that way longer than the historic trend and when the market demand for high tech skills rebounds at a faster pace those workers with such skills will be in big demand.

So what?

So more than 40% of the work force of the typical utility including all those focused on smart grid deployment are approaching retirement age in the next five years.  The good news is this provides a good opportunity to update the work force skills needed for the smart grid future as replacements are sought and we do have a younger overall demographic profile than many other countries including China.  The bad news is there may not be enough of those new skills to go around when we need them most because we do not train enough high skilled workers for the digital transformation of our energy industry let alone our other high tech needs.  From electrical engineers focused on power flow analysis, to software developers and data analysts for the tsunami of smart grid data coming our way, to applications developers and product managers to turn geek speak into simple English so that customers can turn “Huh?” into “Ah-Ha!”  Work force readiness is a big problem not just for utilities but the entire technology sector.  Smart grid technologies increase the demand but do nothing to improve the supply of talent needed to effect this transformation.

Our immigration laws are not our friend because they constrain our talent base (remember the hassles getting H1-B visas in the last boom period?) and our economic competitiveness is likely to weaken if the cost of the current entitlement programs like social security and Medicare fall on a smaller workforce of lower wage workers for the twenty years or more it will take for the Baby Boomer wave to pass. This is especially true if we don’t do something to reduce our looming national deficit.

The consequence of slow jobs growth in the period ahead will make this talent deficiency more acute and the practical impact is that we will become more dependent on other countries for the technical skills that have traditionally driven American’s economic competitiveness.  The answer is to make America a magnet for high tech skills, well educated foreign workers eager for the American way of life, and to reinvest in science, math and technology training at the University and high school levels to build into our workforce readiness need on the horizon.

[1] Wells Fargo Economics Groups, April 19, 2010. Get the reports at: https://wachovia.mworld.com/Econ/alerts.asp


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