Instead of raising the minimum wage, put it towards training

I have been thinking more about the call from the CTU to raise the minimum wage to $15.00 per hour. The more I think about it the more it makes sense not to. And here is why. If you keep on raising the minimum wage sure people get a bit more, but it becomes so hard to break out of the minimum wage trap.

Instead the extra $2.00 to $3.00 per hour that is being suggested should be pulled out and put into employee training. Train the staff up and they are then worth more (to you and society) than the minimum wage. Once they are more skilled they can apply for better jobs, or move up the ranks and become more productive.

This will not only increase the value of education in our society but will allow for young people to start on the minimum wage and build for a future too. As the old Chinese saying goes “Give a man a fish & you feed him for a day. Teach a man to fish and you feed him for a lifetime.”.

It seems like a simple solution really. And what’s more the employers will also get much more benefit out of the skills training than they ever would out of raising the minimum wage by the same value.

The digital age … Job losses & Job gains

Two articles of interest have popped up on the stuff website today that are of interest.

1) BBC to cut 1800 jobs as it confronts digital age

2) 11,000 more IT industry jobs by 2011

There was a lot of talk years ago about how technology would threaten jobs and that it would become harder and harder to get a job. I suppose technically this statement is right. Technology is a threat to jobs. However based on these two articles it is obvious that this statement needs to be added to.

“Technology will threaten jobs that can be duplicated easily, and grow job opportunity in other areas”.

If you consider the record unemployment rates that are all over the globe & the challenge of finding good people. I would have to say that more jobs are being created by technology than lost.

CTU wants a higher minimum wage

An article in Stuff yesterday talks about the CTU (Council of Trade Unions) election campaign to get the minimum wage raised to $15.00 per hour. While I am all in favour of people earning as much as they can, this idea has very far reaching ramifications.

The CTU also talks about pegging the minimum wage to two thirds the average wage. While nice in theory to peg the minimum wage to the average wage, what it will do is will drive up the average wage further. Add to this the Green’s thinking that it will help pull people out of poverty.

This whole method of thinking in my opinion is seriously flawed and here are some reasons why. Firstly if the minimum wage was to increase, as a natural consequence the price of purchases will also increase. And the prices of purchases will probably rise higher than the increase in minimum wage will.

This purchasing price raise will keep those on the minimum wage in poverty. The cold hard fact is that if you are on the minimum wage, you are at the poverty line, regardless on how high this is raised. A better idea is to pour all that extra per hour money into training. Pull people above the minimum wage not lift the minimum wage.

Another major flaw in this theory is that at $15.00 per hour employers will think twice about employing people. They will look first at streamlining the systems they have. One obvious answer is to outsource or send overseas work that can be done cheaper elsewhere. Therefore the number of minimum jobs available will reduce substantially. Ultimately business isn’t a charity and profits driven. If the pressure to pay for unskilled labour becomes to high, they will stop using unskilled labour.

The final flaw I see in this theory is that for the employees themselves, there is no incentive to better their lives. The mentality will become “The government will grow my wage for me”. Anyone that does not get above having a minimum wage mentality will always struggle. The extra dollars per hour should be invested into building up their skills so that they are more employable at the higher rates, rather than force employers to pay higher.

The biggest outsourcing news of last week

Both the stuff & NZ Herald websites have articles on Vodafone’s call centre move to Cairo last week. A rather large announcement. You can find the articles here & here. This is big news for the industry. Not only because it is such a big call centre move, but also because of the suggested reasons behind the move.

It will obviously have some dollar saving attached to the move, however the main reason stated was the difficulty in finding call centre staff. This poses an interesting question. Was it that there wasn’t enough staff in Auckland, or New Zealand? Or was it that there wasn’t enough staff at the hourly rates that Vodafone was willing to pay?

I will be interested to see how the level of service goes. Will the change to Cairo improve quality or decrease quality. I thought it was interesting to see that Vodafone has chosen Egypt as the country of choice. There is a general ground swelling of dislike for the Indian call centres, because of the language differences.

My gut feeling is that Egypt would have a higher level of understandable English than the likes of the Indo-Asian countries. But I am not an expert in this of course.

The other nice thing to note is that Vodafone has announced that there won’t be any redundancies in New Zealand. This maybe a short term strategy or more likely long term. There will probably be a slow ramping down of the New Zealand operation over time I imagine. But I suppose that will depend on how well things turn out in Egypt.

The problem with recruitment agencies

Many people I talk to find dealing with recruitment agencies very frustrating. Some horror stories as well. Just like real estate agents they seem to charge the earth but deliver very little. Let me caveat my last statement with that there are good agencies out there. But in general the reputation isn’t that hot.

Anyway the main dissatisfaction that I hear out there is that the quality of the candidates sent through don’t seem to be high enough. In some instances people get the impression that they are just firing anyone that answers the ad. If this is the case why do you bother with the agency in the first place?

The main reason for the lower quality is that in general the agencies don’t get the best people on their books. They get people looking for jobs but not the best people looking for jobs. Here is my reasoning.

If you rated candidates from 1 – 100 in a recruitment drive the results would look something like this

The top 1-10 candidates don’t use recruitment agencies, they network. These people are the cream.

The next 11-20 candidates are the best candidates that the recruitment agencies can attract. These are the ones that get sent for interviews.

Followed by 21-40 candidates, you may get some of these if none of the 11-20 candidates applied. The agency doesn’t come back and say no one suitable they just go down the list.

finally 41 -100 candidates. You should never see these candidates but it has happened. Sometimes the odd one will slip through on their personality sales

So the main problem is that in general agencies can’t attract the cream. That is why the frustration creeps in. And of course the worse the agency, the worse the candidates, and the worse your problem becomes.

An article stating the obvious, but a good read

Computerworld today has published some thoughts on the skills shortage in the IT market place. It is an article well worth a read. You can read it here. People hiring technical people are increasingly finding it difficult. I found it interesting that this article points to the more technical skills being the hardest to find.

Part of the reason that the more technical skills are harder to recruit for that hasn’t been mentioned is that those with more mature skill sets see the advantage and capability of contracting. They understand the value of their services and can get more income & flexibility through contracting.

This isn’t necessarily a bad thing. One area that Professionals on Demand is putting a lot of time and energy into is how we can help companies find and hire and retain these contractors. It is about facing up to the fact that it is happening, and then finding a vehicle that will allow companies to tap into these resources easier.

Is it really an employees marketplace

The Stuff website recently reported on a survey from Westpac (Westpac McDermott Miller Employment Confidence index) about confidence in the job market. There are more optimists than pessimists according to the survey.

I agree that the job market is definitely tight, and I also agree that this tightness is likely to continue for the foreseeable future. The market is tight and employers are having to be less picky or wait longer for the right candidate to come along. However the thing to remember amongst all this optimism is that the employer still makes the ultimate decisions.

In many of the lower skilled positions, the tight labour market won’t make a huge difference. You can train up people to take on these roles quite easily. In the higher skilled positions yes it is harder, and employees are expecting more from positions. However if they demand too much, as the employer you can simply not employ them.

This can of course place strain on existing staff and the company. However patience is the great game leveller. The right person will surface.

And then of course there are options opening up that could be explored. Bringing people in from the global market place, or outsourcing portions of the business.

The box seat still remains with the employer. Even the general feeling of confidence that the job candidates have can be a benefit rather than a concern.

Dependence on a single employee

Lots of companies that I have come across have a huge dependence on one individual within the organisation. Although most of these companies wouldn’t go out of business if that person were to leave, they would face substantial hardships.

Luckily many of the most reliable people are the people that like to have a structure they know and are used to. So the chances of them leaving are lower. However I think that many companies get a little too comfortable with the fact that these dependable employees are there.

An example to highlight this recently was when an administration manager moved out of Auckland. The commute was going to be too far and therefore the decision to leave the company was highly likely. It was at this point that the owner realised how exposed they were and has taken measures to reduce the impact.

Every company should review their staff roster from time to time and see where these areas of weakness lie. The key is to look for ways to strengthen these areas of weakness. This doesn’t necessarily mean bringing on new staff but looking for ways that reduce the risk.

It could mean for example providing the staff member with more flexible working hours & locations. Another option could be to cross core components of that persons position across other staff members. Another option is to look at the position and see if any components can be outsourced.

What I find is that these very dependant staff members are heavily laden with responsibility and duties. It is critical that their positions are reviewed regularly. The ultimate goal is to help them be happy in their role. This not only lifts productivity but also reduces the risk they will leave.