U.S. Economy

The Recruitment Economy Hinges on Poaching Workers

Wisconsin is trying to attract a Foxconn factory even though it doesn't have enough workers.

Scott Walker's gambling on luring other states' workers.

Photographer: Joe Raedle/Getty Images

Economic growth keeps a modern economy alive. Stasis is not sustainable. Economies need ever-increasing productivity, ever-more workers, or both. Employers in the U.S. are finding neither.

America finds itself in an unfamiliar position where population growth is very low, especially in certain parts of the country. And productivity growth remains low, with no silver bullet for increasing it.

The country finds itself in a new "recruitment economy," in which the mantra is, "If you can't grow organically, you'd better find a way to buy it."

The most high-profile recent example of the recruitment economy is in Wisconsin. There, Governor Scott Walker is trying to bring a Foxconn factory to the state, offering up to $3 billion in tax incentives, or $230,000 per job. Set aside the question of whether this makes good economic or fiscal sense for the state of Wisconsin. Where would Foxconn even find workers? As of June, the state's unemployment rate was 3.1 percent, its lowest level in almost two decades. Additionally, the state's labor force has grown by only 2.5 percent total over the past decade. There are not enough available workers in the state to fill thousands of new factory jobs.

Which is why the Foxconn strategy is really a bet that Wisconsin can recruit workers from other states. Illinois's unemployment rate is 4.7 percent. Ohio's is 5 percent. So the bet Wisconsin wants to make is that it can recruit a high-profile factory, which will draw in factory workers from other states, and that movement will have a multiplier effect creating even more jobs, leading to even more recruitment of workers from other states. 

It's a long shot for $3 billion. But these are the kinds of strategies that states with low population growth and low unemployment have to use if they shoot for economic expansion.

Maine's taking a different approach. Its unemployment rate is 3.5 percent, and its labor force hasn't grown at all since the end of 2006. Its population is the oldest in the country. But there are 500,000 Mainers who live elsewhere in the U.S., and now the state and its employers want them to come back. Recruiters are scouring LinkedIn for workers with histories in Maine, and the governor is pushing for a bond program to raise money to help young workers pay back their student loans provided they work in the state for a certain number of years.

And it's not just states and employers. Universities are feeling the crunch too, looking for ways of boosting their student pipeline. There are a variety of reasons for this. As the youngest members of the millennial generation age out of their high school years, the upcoming high school graduating classes are somewhat smaller, reducing the potential pool of college students. An improving economy with a lower unemployment rate means that marginal students might be better off forgoing a college education altogether, at least as long as the labor market is tight.

This surge in recruitment has an analogy to the not-too-distant past -- the "peak oil" fears of the 2000s. Back then, the worry was that the world was running out of oil. But in response to a rise in prices, energy firms invested in exploration and technologies to find more oil. The result was the "fracking boom," a surge in supply that has helped emerging economies continue to grow. 

Talent has been so easy to find for so long that organizations became too picky or complacent about recruitment. That's beginning to change. We don't yet know how this recruitment boom will play out, and whether investing in a combination of recruitment, retention, training and higher wages will lead to more people entering the workforce, productivity growth, or simply rapid wage growth and inflation. But the places that succeed at recruiting have the best hope for economic growth. Those that fail will wither.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Conor Sen at csen9@bloomberg.net

    To contact the editor responsible for this story:
    Philip Gray at philipgray@bloomberg.net

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