With US unemployment back to single digits, finding entry-level talent—white- and blue-collar alike—has become a pressing issue for firms large and small. Indeed, according to a Bridgespan analysis of Bureau of Labor Statistics data, nearly six million entry-level jobs suitable for young people will be created across a range of industries from 2012 to 2022. Companies unable to fill these positions will face lower productivity and revenue.
The solution is hidden in plain sight. There are some 5.5 million 16- to-24-year-olds out of work and out of school. But these "opportunity youth" (see "The Demographics of Opportunity Youth," below) have a problem too. Research shows that even one year without a job takes a heavy toll on a young person's economic future. Consider two males with the same education, place of residence, and family background. If one spends a year unemployed before the age of 23, 10 years later he can expect to earn 23 percent less than the other. For females, the gap 10 years out is 16 percent. Meanwhile, supports such as unemployment insurance and healthcare subsidies during such stretches of unemployment rack up costs to society.
Connecting this untapped talent to unfilled entry-level positions will take matchmaking and skills building—both hard skills like how to use a computer-assisted design program and soft skills like how to manage up—often by nonprofits and city workforce agencies. Many opportunity youth have survived family strife, struggled to stay in school, and even had run-ins with the law. But refining this raw talent provides compelling opportunities for companies, youth, and society—a rare trifecta—that industry leaders are betting on.
The Demographics of Opportunity Youth
Among 16- to 24-year-olds in the United States. an estimated 5.5 million are not in school and unemployed. Half are chronically disconnected: they have neither studied nor worked since age 16. Forty percent come from families with incomes below the federal poverty line. Roughly half are either African American or Hispanic.
Nearly two-thirds of these disconnected young people face a serious life challenge, meaning they either have a child, receive food stamps. have a work-limiting disability, or live in temporary housing. Under the circumstances, it's not surprising that family challenges and responsibilities compete with schooling, academic challenges suffer from lack of educational supports, and few have awareness of alternative paths to careers.
Meanwhile a 2012 study by Civic Enterprises, The Economics of Investing in Opportunity Youth, found that the annual cost to taxpayers for each opportunity youth totals $13,890 and the broader social costs come to $37,450. leaving room for government to reimburse lesser amounts for workforce development and come out ahead.
The Advantage of Youth
One company at the forefront of this movement is State Street, which provides financial services to institutional investors. State Street faced stiff competition for entry-level hires some years back, as Millennial college graduates flocked to high tech. At the same time, it wanted its hires to better reflect the diversity of its customers. Connecting these dots, the company built an opportunity youth talent pipeline through a lens of corporate social responsibility that is now vital to its workforce hiring and retention. Alana Hans-Bodden—a young African-American woman who overcame significant odds to graduate from a local public college—came to State Street via Bottom Line, a nonprofit supported by State Street that helps low-income and first-generation students gain entry to college and careers. The company hired Hans-Bodden as a manager at it global headquarters in Boston, and she is now working toward becoming an assistant vice president—two levels above her current role—in six years, by age 30.
To make the most of youth talent, human resources teams need to build pipelines based on competencies, instead of past roles and diplomas.
Companies evolving youth employment as a source of strategic advantage also include Starbucks, CVS Health, Walmart, and JPMorgan Chase, which joined with more than a dozen other large US companies last year to launch the 100,000 Opportunities Initiative—one of a number of philanthropic bets to build career pathways for youth. Today, nearly 40 employers use the initiative to offer internships, training programs, and jobs for "disconnected" 16- to-24-year-olds who face systemic barriers to employment and education.
Though these companies are front-runners, they aren't alone in wanting to hire young people. A 2014 Penn Schoen Berland survey of 350 executives from larger US employers—part of a study The Bridgespan Group undertook with the Rockefeller Foundation—found that more than 80 percent favored hiring youth under 25, even those without a college degree, in part because they wanted staff to reflect more diverse or younger customers, and believed it was easier to train younger workers, particularly in technology-based skills.
The biggest challenge, according to respondents, was matching youth to the right jobs. In this article, we draw on three-plus years of studying youth employment—including recent research on career pathways for low-income and minority individuals; joint research with the Rockefeller Foundation and the US Chamber of Commerce Foundation; and Bridgespan site visits and more than 50 interviews with human resource directors, managers, and entry level trainees—to offer practical insights on investing in opportunity youth.
Brokering the Win-Win
To get started, companies need a matchmaker that can broker opportunity youth into roles at which they can excel. Bottom Line is one of several helping State Street. Another is Year Up, a Boston nonprofit founded in 2000, which now has more than 13,000 alumni across 16 cities. Year Up teaches youth the dress and demeanor expected in a professional setting, as well as the skills they need to pursue a career in IT, operations, finance, sales and marketing, or customer service. Year Up's State Street interns who become full-time hires (68 percent) stay an average of 45 months—compared with just 16 months on average for 20- to 24-year-olds across America.
After six months of development, Year Up places participants with one of 250 partner companies, where they gain work experience. Throughout the year-long internship, participants receive a stipend, college credit, job recommendations, and wrap-around supports, such as one-to-one mentoring and social work supports like assistance with transportation, childcare, and housing. Eighty-five percent of Year Up interns are either hired by host companies or enroll in college.
Preparing opportunity youth also requires that human resources teams invest in at least three approaches to youth development:
- Screening in candidates for potential rather than screening out candidates for lack of degrees
- On-the-job mentoring versus formal training programs
- Balancing accountability with empathy as youth develop soft skills
Such investments tend to produce loyal, enthusiastic, skilled workers who stay. Grads of Life, an organization that helps businesses build career pathways for opportunity youth, has documented employer returns in increased retention, faster onboarding, stronger morale, a more robust talent pipeline, access to government incentives, and improved corporate image. It calculates that CVS Health, for example, invested $2.9 million to hire opportunity youth, earning a return of 79 percent based on tax credits alone (see "Calculating the ROI on Youth Employment," above). Gains of this magnitude have deep implications for the roles businesses can play in profitably reviving the American Dream. Here's a look at how these approaches work.
Calculating the ROI on Youth Employment
Although youth employment efforts often start as a way for an employer to give back to the community, the business leaders showcased in this article have all come to see youth employment as a good investment. While there are up-front costs to consider, the benefits more than make up for it.
For example, consider these statistics about retail sales employees. The average employee makes $21,000 per year, and costs about $3,400 to replace. Turnover is 5 percent per month, or 60 percent per year, on average. So for a company with 5,000 entry-level retail employees, annual turnover costs will be just over $10 million. If this company can cut turnover in half by paying a workforce intermediary $5,000 per worker to source and train each, it would save $2.5 million per year.
And that doesn't account for all the other benefits: a more veteran workforce has higher productivity and better morale, improvement in corporate image in the community increases brand loyalty and customer retention, a more diverse staff meets workforce targets and better represents the customer base, and a stronger community and local economy creates a better business environment.
1. Screening Candidates In Versus Out
To make the most of youth talent, human resources teams need to build pipelines based on competencies, instead of past roles and diplomas. Virtually every company we spoke to relied on intermediaries like Year Up to find youth with the right skills, and both the companies and intermediaries put in place appropriate supports to grow young employees into veterans. This approach screens in candidates for skills and aptitudes versus screening them out for lack of formal education or specific track record.
To underscore how this widens the talent funnel, a study conducted by Innovate + Educate, which uses research-based strategies to address the US national skills gap, found that while only 1 percent of unemployed New Mexican young adults met criteria for jobs that required a college degree, 33 percent cleared the hurdle when measured by skills and aptitude.
The national pharmacy chain CVS Health, where entry-level workers comprise approximately one-third of a 240,000-strong staff, screens in to hire 1,000 entry-level workers per week to keep its more than 9,600 retail pharmacy locations staffed with cashiers, shelf stockers, and pharmacy technicians. Responding to that unrelenting demand, CVS Health has established a workforce development team that reaches deep into communities to find overlooked talent.
Supported by federal and other internship funding, CVS Health's apprenticeship program—which varies from state to state but often prepares employees for pharmacy roles—operates in four states and is expected to spread to 10 to 15 states by 2017. The company's efforts include a "training store" in a technical high school in Lowell, Massachusetts, where three-quarters of students are classified as low income. Students who excel get job offers for part-time work in Lowell CVS Health locations, with full-time job offers on graduation. Others catch a vision of becoming a pharmacy technician or pursuing a business degree, and may continue part time through post-secondary training. CVS Health counts young people as 50 percent of entry-level hires.
The company also collaborates with nonprofit and government workforce training organizations, including Goodwill, the Urban League, workforce investment groups, and economic development corporations. These organizations help train youth in a range of soft skills, including how to dress professionally, manage time, and diplomatically resolve conflicts.
In Massachusetts, for example, Jewish Vocational Services, one of the state's largest workforce development agencies, has created a regional learning center for CVS within its program offices in Boston's financial district. It contains a mock store that tailors training to the jobs the company needs to fill. On a gray day in January, we watched job-seeking youth learn about computer inventory and cashier protocols.
The CVS Health team also coaches store managers to look past limited prior experience on candidates' resumes and, instead, determine whether they have the attributes to take care of customers and commit to working their way up.
2. Mentoring on the Job
Although the notion of apprenticeships may conjure up craftsmen of yore, many modern professions—such as medicine or plumbing—grow talent by matching entry-level employees with skilled mentors. It conveys learning in the way that cognitive research tells us is most memorable: experientially. The Center for Creative Leadership recommends that 70 percent of training occur "on the job." Not surprisingly, companies successful in hiring youth are also committed to mentoring.
One is SK Food Group, a US food manufacturer and wholesaler with more than $300 million in annual sales. A supplier to café chains and retailers, SK opened a new sandwich plant in 2014 just outside Columbus, Ohio, which became a pilot site for LeadersUp, a youth employment intermediary founded with support from Starbucks.
SK needed hundreds of employees for this new factory but faced hiring in one of the nation's tightest regional labor markets. LeadersUp convinced SK that opportunity youth offered a talent pool that could address the challenge. Like CVS Health, SK screened candidates in for competencies and ultimately hired 220 young people.
Steve Sposari, SK's president and CEO, said: "When we first heard of LeadersUp, it was great timing, because we'd had significant growth over the last five years [and could use new talent]." Sposari, who himself started working at SK as a teenager, added that SK "set out to be a positive influence in the community … but it's [also] turned out to be a really good business decision."
The firm's training and support has several elements. First, SK teaches and reinforces basic workplace skills, such as communicating clearly and getting to work on time. It asks managers to acknowledge unavoidable setbacks, such as transportation failure or child-care crunches, but at the same time, there are consequences on an escalating scale (from warning to docked pay or even dismissal) for those who fail to forewarn supervisors of an impending absence.
SK also asks managers interact closely with these young employees and look for teachable moments. One opportunity youth hire, Jeffrey Duran, advanced from line worker to forklift driver after his production manager helped him overcome shyness. "He gave me the opportunity to become a lead and work with people in all kinds of situations," said Duran. "I'm not afraid anymore of talking." From young employees and managers alike, we heard again and again about how much this kind of day-to-day, informal support meant to young workers' advancement.
3. Empathy, Accountability, and Peer Groups
For employers of entry-level workers, regardless of their age, turnover—which was as high as 70 percent in the Bridgespan-Rockefeller workforce study—is a big concern. And for opportunity youth, personal challenges can exacerbate the trend. In any given 12-month period, more than 72 percent of low-income American households experience a personal challenge that can disrupt job performance. Given such statistics, SK's Sposari wondered if the opportunity youth he hired would amortize his company's investment. But organizations we visited stemmed these concerns by finding ways to engage hires from day one and help them rise within the company, with resulting retention rate improvements ranging from 20 to 200 percent over traditional hires.
Although some companies treat opportunity youth no differently than other employees, most create a career development culture that offers a blend of accountability and empathy. SK management's empathy translates into lowering barriers to success. For example, SK grants time off to handle personal business like court dates and reassigns employees who struggle with morning childcare to later shifts. When Tori Lamont, a promising line worker who had dropped out of college, quickly rose to become a team lead, she became a poster child for the LeadersUp program. One day, she wandered off in the middle of a shift. Instead of dismissing her, Lamont's supervisor took the time to understand why it happened. It turned out Lamont was seeing what others did at the factory and what other jobs she might aspire to. Her supervisor docked that day's pay, but the company reassigned her to the maintenance systems group, where she could issue work orders across many factory functions and broaden her purview. Today she is three years in, and embracing direct and constructive feedback as a way to develop on the job.
Tori also has peers to guide and support her at work. That's because LeadersUp helped deliver a group of new hires who could bond and learn together on the job. SK has found that youth in these cohorts encourage and support each other as they confront new challenges—something that would be much less likely in the traditional one-by-one hiring process. Positive peer pressure engenders loyalty in ways that rules and bureaucracy don't.
SK also partnered with local companies to address logistical challenges that opportunity youth face, such as funding a better bus service from Columbus's city center to the factory in Groveport, 12 miles south of downtown, and increasing the availability of child care.
Of the 220 opportunity youth who joined SK since 2014, 80 are still there—a retention rate 23 percent higher than other SK entry-level hires. Approximately two dozen have been promoted. "You have to be patient through some significant challenges," said Sposari. "But it's paid off for us because these young people have battled through and are great contributors."
From Corporate Social Responsibility to Core Business Strategy
A few companies have gone on to scale opportunity youth, hiring across a site, business unit, or even the entire organization. By "scale," we mean efforts big enough to truly be strategic to the business. Yet the evolution from an initiative to a core business function takes more than a strategy. It takes dedicated personnel and corporate champions who, in the case of opportunity youth, can match youth hires with company goals and continuously improve onboarding, mentoring, and development.
5.5 million 16-24 year-olds aren't in school or working
Our 2015 study with the US Chamber of Commerce Foundation found that the most successful programs had both a champion in the C-suite (like Sposari at SK Food) and a champion closer to the front line who could identify roles that provided tangible value to both the firm and the young people. Some companies found it worthwhile to structure a workforce development program, as CVS Health did with its training centers.
At American Express, which began hiring opportunity youth in small numbers in 2007 through the nonprofit intermediary Year Up, support came from the top: CEO Ken Chenault proclaimed on 60 Minutes that the Year Up relationship was a win-win for the company and the urban communities American Express served. But it was Destin Dexter, vice president of technology, who scaled the company's efforts to meet business objectives related to hiring entry-level IT talent in a highly competitive market.
As a 165-year-old Fortune 50 company, American Express has a reputation as a traditional financial institution—not necessarily a place to which recent computer science graduates gravitate. "It's not that we didn't offer great IT jobs," said Dexter. "They just weren't interested."
Would opportunity youth be more open-minded? If so, Destin believed she could increase the number of Year Up interns who progressed to full-time positions from just 20 percent in 2007.
It was a remarkable success. After a pilot at American Express's Fort Lauderdale offices, Dexter launched an eight-week software engineering boot camp with Year Up and Gateway Community College in Phoenix, a major technology hub for the company. They screened candidates for comfort with logic and numbers, and then brought them to class. "The Year Up interns loved it," said Dexter. "They came to work with smiles on their faces and leaned in. They brought aptitude, and they were ready to learn."
Today, Dexter brings on 80 to 100 Year Up interns annually for tech jobs ranging from software engineering to customer service. The Year Up interns have a 72 percent conversion rate to full time versus about 60 percent for interns from traditional hiring pools. Year Up candidates also stay an average of 44 months versus 18 months for traditional hires. Under the arrangement, interns earn their Year Up stipend the first six months, while Dexter tests potential hires and develops a deep bench of future candidates.
State Street, too, has come to rely on Year Up. Of 1,000 interns State Street hires each year, 40 percent are opportunity youth. Since 2005, 300 of the approximately 650 Year Up interns have become full-time employees. State Street and American Express both contribute to Year Up's program expense, and both see above-average retention rates among the Year Up interns. Other fast-growing workforce intermediaries include BankWork$, which trains opportunity youth for banking jobs, and iFoster, which trains youth aging out of foster care for careers in retail and other industries.
Still, it will take more than the best efforts of workforce intermediaries and in-house initiatives to match six million new entry-level jobs with the available six million opportunity youth.
One scalable approach may be to leverage technology. Today, talent analytics use key words to identify formal education or experience across thousands of resumes at a time. In their current form, these algorithms likely screen out capable youth. Analytics firm Knack, with the support of the Rockefeller Foundation, piloted game-based talent analytics to compare the aptitude of opportunity youth and current jobholders at four companies. Of the 600 opportunity youth who participated, 83 percent scored at or above the company's average performers on aptitudes required for succeeding at one or more roles. While still in testing, these solutions offer potential for scaling youth candidacies.
We may also need to rethink the way we prepare youth for careers. Post-secondary education's efforts to address employer needs offer exciting, long-term ways to develop the youth workforce, including include strong partnerships with companies that help develop curriculum, and support efforts to train and place youth in positions. Here, workforce intermediaries can serve as catalysts; for example, Gateway Community College and Year Up are working to scale Year Up's proven programs.
The Payoff for Companies and Young People
While filling entry-level jobs has made opportunity youth a strategic talent pool, the real payoffs are internal promotions that grow talent pipelines and individual careers. Both State Street and CVS Health have strong cultures of promoting from within and think several steps beyond entry level when hiring. American Express's technology team uses a framework that maps career paths from entry-level software engineer up through engineering director and beyond.
State Street, which has one of the most evolved strategies, has scaled its program by identifying business units that have roles that best fit the skills and talents of potential recruits, and where managers have strong commitments to mentoring. Mentors help youth hires throughout their careers, which may see them move into other business units. Hans-Bodden, who said it felt like "a fairy tale" when she arrived at her standard gray cubicle, keeps mentors' encouraging notes on her bulletin board.
The vanguard in hiring opportunity youth have been generous in sharing their experiences, making it easier for other companies to follow, find workforce partners, and match candidates to entry level needs that are mission critical.
At the same time, companies like American Express, which are new to sourcing opportunity youth at scale, are asking why they didn't think bigger sooner. "We initially approached the Year Up partnership as a great way to support the local communities where we live and work," said Dexter. "But over time it became clear the program could be a breakthrough way to source entry-level talent."
As companies seek to fill a gap of nearly six million entry-level positions suitable for young people by 2022, opportunity youth are becoming a vital part of the solution.
The authors thank editor Bradley Seeman for his contribution.