Retooling the workforce

Retraining programs, many steering workers toward blue-collar jobs, flourish in Europe.  What can the US learn?

Koldo Mentxaka was always considered the “brains” in the family. So it was no surprise when he, the oldest of four brothers, completed a university degree – the only one in his family to do so – and then went on to get his master’s in computer engineering. After working at IBM and later as a computer consultant in his hometown of Bilbao, on Spain’s northern coast, he lost his job in 2013 in the wake of the global financial crisis.

“Not you,” he remembers his mother saying to him at the time. “Of the four of you, not you.”

He tried to keep his cool. After all, he’d already had a successful career spanning almost two decades. Yet months of joblessness passed, one after the other. “I was sending out résumés everywhere, doing online courses, but at the end you lose hope. You think, ‘am I so bad that no one wants to hire me?’”

After 2-1/2 years of unemployment – and at age 40 – he made a decision. He would forget his elite university degree, his long business lunches. He was going to trade school. “This was my way out, the way to recycle myself,” he says on a recent morning, a few months away from finishing a two-year course that’s positioned him for a job programming machinery at an industrial software company.

Mr. Mentxaka is undergoing the kind of retraining and career reinvention that societies will increasingly face as the world confronts some of the biggest workforce changes in more than a century. Technological change, the decline of manufacturing, the restructuring of “white collar” industries, globalization – all are dramatically changing the nature of work and the types of jobs that will be available in the future. 

“Clearly the period of rapid industrialization in the 1800s, the creation of the factory economy, was a big change, but that occurred over a pretty long period,” says Mark Muro, an expert in advanced and inclusive economic development at the Brookings Institution in Washington. “I actually think this is one of the most disruptive moments we’ve seen, because there are more types of occupations facing more challenges.”

Most attention has been paid to blue-collar workers whose industries have been wiped out by dislocation and technological progress. Yet they are not the only laborers suffering. In Europe, the debt crisis has eased, but low-growth economies mean a dearth of job openings – particularly high-quality jobs – has persisted for all types of workers, including midlevel career people such as Mentxaka. And youth unemployment rates of more than 30 percent in some European countries have given rise to a generation of underpaid college graduates surviving on temporary contracts.

Even among those who have jobs, change is the new reality, adding to the importance of retraining. In the United States, for instance, the average person now can expect to change jobs 10 to 15 times over a working lifetime, often with changes of career in the mix. Years ago people pursued a single career path for the majority of their lives.

In Europe, where labor laws make it tougher to hire and fire people and professional reinvention is not as prevalent, the churn is less pronounced but no less significant. One survey in 2015 found that nearly half of all workers in the United Kingdom intended to switch jobs within three years. The average in Europe overall was 34 percent.

To help ease these transitions, Europe is offering some of the most innovative solutions. While its rigid laws and zealous unions make labor reforms difficult, Europe nonetheless far outspends the US on labor market programs, puts more emphasis on apprenticeships and vocational training, and generally places higher value on helping displaced workers.

The US, to be sure, has an economy that is outperforming Europe’s. But many experts say that Americans still have a lot to learn from Europe as workers struggle to find their way in the new economy, not to mention that retraining programs can change the tenor of politics: Some say they could act as a buffer against the more radical elements of populism sweeping the world, fueled in part by angry, unemployed workers. 

“We know full well that the proper handling of the [economic] ruptures has to do with proper social safety nets: with education, with training, with the capacity of the labor market to relocate people,” says Pascal Lamy, former director general of the World Trade Organization and now president emeritus of the Paris-based think tank Notre Europe/Jacques Delors Institute. 

Globalization has been disrupting jobs for decades. That’s why the US Labor Department enacted the Trade Adjustment Assistance (TAA) program in 1962 – to help workers displaced by jobs moving offshore and bolster support for trade liberalization. Europeans were thinking about it even earlier, in 1951, when they formed the bloc that would later turn into the European Union.

Such programs have gotten a new look as automation has added to uncertainties about the future of work, especially after the recent financial crisis. And the pace of change is only likely to pick up. A McKinsey & Co. report in 2015 showed that 60 percent of all occupations could see 30 percent or more of their activities automated in the future. That’s not just low-skilled work but jobs in fields such as mortgage lending and health care.

Brahim Ben Addi could easily have succumbed to the changes sweeping through industrialized economies – especially globalization. He started work right out of high school at the French car manufacturer PSA Group, mounting airbags and brakes at a plant outside Paris. He thought he’d work there until he retired, just as his father had. But PSA closed the factory in 2013, in the face of increased competition from overseas automakers.

“It’s like going 180 kilometers per hour, then braking to 10,” says Mr. Ben Addi, a father of three, who worked at the plant for 13 years.

Entrepreneurial by nature, Ben Addi had already been learning breadmaking on his own time. His generous wage insurance and payout from the company – more than €65,000 ($73,000) – allowed him to trade working on an assembly line for kneading dough. He opened up his own bakery, La Gourman dise, in his neighborhood in a Parisian suburb. 

In three years, he has become something of a local phenomenon. His flour-dusted “tradition” baguette was named the best in his community, no small accolade in France. Now he wants to open up a bakery in Paris and win best baguette of the city, an honor that would allow him to serve the Élysée Palace for a year.

“It’s hard,” says Ben Addi of being an entrepreneur, as he stands behind the counter of his bakery in a crisp white smock, catering to a lunchtime crowd. “If you lose your job, you have unemployment [insurance]. Here if I lose my job, I lose a lot of money. You have to have courage.”

Ben Addi received some of the money to start his new venture from the European Globalization Adjustment Fund (EGF), which, like the TAA, is intended to help retrain laid-off workers. The EGF recently expanded its assistance to include workers who lost jobs during the global financial crisis and youths in regions disproportionately affected by foreign competition who are neither working nor studying. 

Yet fired European workers get far more help than just EGF grants. According to figures from the Organization for Economic Cooperation and Development (OECD), France and Germany spend much more on labor market adjustment programs than the US does – including on wage insurance, support for starting new companies, and access to training. France and Germany spend 0.99 percent and 0.66 percent of their gross domestic product respectively on such programs, compared with 0.11 percent for the US.

It’s clear that “social protection in Europe is much more developed than in the US,” says Baudouin Baudru, whose portfolio at the European Commission includes the EGF. “It is in the DNA, the history of the development of Europe.”

Some would argue, of course, that too much government help and financial protection are bad for economies: Generous unemployment benefits can discourage people from finding work.

The US, for its part, fosters more of a bootstrap spirit than most countries in Europe. This can be good for workers and creation generally, says Mr. Muro, but not necessarily for those in need. It can aggravate a mismatch between skills and what’s needed for the jobs of the future. “I think that divide is one of the great flaws of the US system,” says Muro.

Many point to Nordic countries as examples of smart collaboration between government, industry, and workers. They have a long history of consensus in labor relations, with unions and employers working together to head off debilitating protests. But the arrangement also serves to prepare workers for the realities of modern economies.

Sweden, for instance, relies on “job security councils” – nonprofits funded by employers that work with employees, employers, and unions to identify where new jobs are and to retrain workers for them. Workers, as a result, are less prone to fight to hang onto jobs that may become obsolete. Eighty-five percent of fired workers in Sweden find new jobs within a year, the highest rate of OECD member countries.

“It makes it possible to push structural change in society,” says Jesper Roine, an associate professor at the Stockholm School of Economics who sat on a Swedish “Future of Work” commission. “You get individual people who are not afraid of change simply because they know, ‘if something happens to me, I’m not totally on my own; there will be some kind of retraining.’ ”

France and other European countries are currently wrestling with how much government involvement there should be in helping workers cope with the new economy. François Béharel, president of Randstad France, the French branch of the global employment agency, says he’d like to see officials doing more to help college graduates and companies that can’t find workers with the skills they need.

In France, the youth unemployment rate is nearly 22 percent; in Spain it’s close to 40 percent, in Greece more than 45 percent. Mr. Béharel says these numbers could go down if governments took a more active role in spelling out which jobs and salaries are connected to specific degrees. “As it is now, the students have no idea, so when they finish [school], they find themselves unemployed,” he says.

At the same time, 50 percent of employers in France report they have trouble finding workers with the right talents, compared with 40 percent in the EU on average, according to European Commission figures. “Every day we are lacking welders, sheet metal workers, plumbers,” Béharel says. “We should be promoting the blue-collar work that corresponds to the needs of the marketplace.”

To do that requires, first, changing perceptions at home. “Parents need to understand that even if they want their children to become white-collar workers, there are many, many more jobs for blue-collar workers,” he says. It’s an idea best exemplified in Germany – in the form of an apprenticeship program that makes blue-collar work seem “noble.”

The country’s widely lauded vocational-training program has helped keep youth unemployment down to about 6.5 percent, far below the average rates in other European nations and in the US. Its two-pronged approach gives students a chance to learn theories in the classroom while honing their skills as drywallers, insulation installers, carpenters, and boat builders on the job through apprenticeships. According to German government statistics, about two-thirds of trainees get jobs with the companies they’ve apprenticed with. “In some fields [young people] with a vocation qualification are even more sought after than university graduates,” a government website proudly declares.

That’s something that Ander Cabrera knows all too well. He is in his first year of robotics at the Salesianos Deusto professional training school in Bilbao – the same school that Mentxaka attends. Mr. Cabrera already has a degree in electrical engineering from the University of the Basque Country. But when he graduated last spring, he realized the chances of finding a good full-time job with benefits were slim. He watched as friends accepted temporary jobs that eventually left them unemployed. While he considered getting a master’s degree, in the end he decided that trade school was the smartest choice, particularly given that Spain, since 2012, has modeled its programs after the German approach. “I hope vocational school gives me an edge,” he says.

Classmate Sarai Noriega has her own reasons for wanting to get vocational training. Like many others here, she got a university degree, in this case in construction engineering. She even found a job. But she didn’t like the long hours she had to work, which weren’t viable for her as a single mother of two. She watched her blue-collar counterparts clocking in and out for the same salary that she made and decided to change careers. The price of the full-time program she is taking in automation and robotics is relatively cheap, about €80 ($90) a month, which was also an attraction.

“This was the fastest way to get a new job,” she says, struggling to wire a circuit board. “Many single mothers are in this situation. This could be a solution for them.”

This “reverse migration” from white-collar to blue-collar jobs is a trend gathering force in Spain and across Europe. Yet Juan Carlos Lago, director of studies at Salesianos Deusto, doesn’t necessarily see it as a positive sign. “If things were ‘normal,’ people who studied at university would leave university and start working,” he says. “But with things the way they are, we are starting to see a return of people who already completed their degrees. I’m not sure if it’s a step backwards or not.”

Either way, there’s little doubt that trade school and apprenticeships are becoming more valued in Spanish society. “Trade school used to be for the ‘poor son,’ or the one who had a hard time with books,” Mr. Lago says. “That’s not the case anymore.”

A return to    blue-collar work is not just a matter of pragmatism. When the American writer Matthew B. Crawford, who has a PhD in political philosophy, penned a book about why he decided to work as a motorcycle mechanic in Richmond, Va., he became a cause célèbre. Published in 2009, “Shop Class as Soulcraft: An Inquiry Into the Value of Work” attested to the contentment that can be derived from working with one’s hands instead of doing “knowledge” work. 

“The satisfactions of manifesting oneself concretely in the world through manual competence have been known to make a man quiet and easy,” he writes. “They seem to relieve him of the felt need to offer chattering interpretations of himself to vindicate his worth. He can simply point: the building stands, the car now runs, the lights are on.”

Mentxaka can relate to the gratification. He liked working as a computer consultant. He would have happily continued to do it, but he couldn’t find a way to sustain a career in the industry. Today he says he derives unexpected pleasure from his new vocation. At school they’ve learned how to make electronic switchboards and combine them with programming languages, sensors, motors, and robotic arms – skills he is using at the software company where he’s apprenticing. “It is like a game but for grown-ups,” he says. 

While in the depths of joblessness, he says, he started to understand how people can complain about immigrants getting jobs when citizens can’t find work. Then he said he had a revelation: “You wake up – you realize you [can either] stay behind or you can go ahead.”

The best hope is that all displaced workers can chart a similar path. One major test is under way in the French provincial town of Amiens, a former industrial city about an hour north of Paris. Here, a Whirlpool factory announced it was relocating to Poland, a classic example of outsourcing that became a flashpoint in the recent French presidential election.

Newly elected President Emmanuel Macron, a pro-globalization, pro-EU centrist who was born in Amiens, had been panned by workers during his campaign for not visiting the factory. He finally did, after making it to Round 2 of the race. On the day he showed up, though, far-right candidate Marine Le Pen upstaged him by rallying workers in the parking lot. 

Mr. Macron has said he’ll focus on retraining industrial workers who lose their jobs. In a place like Amiens, where manufacturing accounts for just 13 percent of the economy, his supporters say his vision of a postindustrial future makes sense. “Macron thinks about globalization with a realistic view,” says Olivier Williame, a local teacher. “He says we should try to [retrain] the employees losing the jobs, rather than trying to save absolutely these jobs when the plants are closing.”

The message has not convinced union worker Frederic Chanterelle. “Globalization means always more for the strong and less for the weak,” he said on a recent day as workers streamed in and out of the factory on a shift change. 

“The people are going to rise up one day,” he added angrily.

Searching for solutions for such workers lies at the heart of what members of the Swedish “Future of Work” commission, such as Mr. Roine, grappled with. “These questions have been put forward many times in the past, even in the early stages of computerization, in the ’50s and ’60s,” says Roine. “Now a lot of people think this time is different because of different aspects of technological change. This means that quite a lot of people that previously did something will now have to retrain.”

But, he adds, retraining will have to be done in a smart way – a way that both reduces the earnings gap in societies and brings workers a sense of hope about the future. Otherwise, more people are going to be rising up – and not just in Amiens.

“If you think, as I do, that the free market economy is the way we should organize society ... we have to think about [the future] in ways that actually show that this system has something in it for everyone,” he says. “Otherwise there is a backlash lurking around the corner.”