Ken Troske is the Richard W. and Janis H. Furst Endowed Chair of Economics at the University of Kentucky’s Gatton College of Business and a research fellow with the Institute for the Study of Labor in Bonn, Germany.
Economist Ken Troske is in the business of untangling complex webs of information — sometimes seemingly conflicting — and providing context while identifying prevailing trends.
As a member of the Congressional Oversight Panel, he helped assess the condition of America’s financial markets and its regulatory system. As a researcher, he is particularly interested in how the labor market and human resources affect the economy. And, as a professor at the University of Kentucky’s Gatton College of Business, he teaches the next generation of business leaders to think more critically about these issues.
We spoke with Troske to better understand how national labor trends impact Kentucky.
How does Central Kentucky compare to the national trends? What are some points of differentiation?
Central Kentucky and Kentucky do tend to move and change similar to the rest of the country. We’re primarily a manufacturing state, which has been true for a long time. Our largest industry is the auto industry, particularly the auto parts industry.
We have three major auto manufacturers in the state: GM, Ford and Toyota. But more importantly, we have a lot of businesses in this area that make parts for those folks and other manufactures around the region.
We also have a lot of aerospace and production of various parts of planes and things like that. We tend to be a manufacturing economy, so we’re going to grow and contract based on the performance of those industries and the broader economy as a whole.
We continue to struggle with the fact that we are below average in education attainment — I think we still rank 45th nationwide in the percentage of adults with a college degree. We’re in the bottom five states in the country in household income. We’re below average in labor force participation rates.
As a result, we tend to be heavily focused on the production aspects of manufacturing rather than on engineering or development.
The Ford announcement is very consistent with that. We are going to be manufacturing batteries here. Okay, that’s great, but we’re not doing the R&D behind the batteries. We’re not doing anything else. We’re doing the manufacturing component, just like we’ve always done.
The New York Times reported that more people voluntarily left their jobs last September than at any point in modern history. What do you make of that?
Many people are quitting their jobs, but there are lots of people looking for jobs. So, it’s not all that surprising. If I told you a lot of people were giving up their apartments, you’d probably think ‘well, those people have to go somewhere.’ And chances are they are finding better places to rent. I believe a major component of lots of people quitting their jobs is a function of lots of people who are looking for better opportunities.
In a tight labor market, where there are lots of openings and not necessarily enough people to fill them, wages tend to go up. So, workers start looking around and say, ‘Well, my current employer doesn’t seem willing to give me a raise. Maybe I could go somewhere else and be just as happy and get paid more money?’
Retirements have also increased with the spread of COVID. I think there’s still a lot of concern about COVID among some workers, which may be what’s prompting some of that behavior. Once things settle down, we’ll see whether those people decide to come back into the labor market.
There’s also evidence that child care has a bigger impact on women’s labor market participation than men. Rightly or wrongly, it remains the case in our society that women tend to be the primary caregivers in taking care of the young, the sick and the elderly.
Some claim that expanded unemployment insurance benefits have kept people out of the labor market. Research on that looked at variations across states in terms of benefits availability and where they’ve ended before most of the country. They didn’t find a lot of evidence that once benefits ended people came flooding back into the labor market.
What can employers do to keep their talent pipelines filled?
First, they must figure out how to pay wages that will attract workers. There’s a demand side of the market and a supply side, and where those two curves cross, that’s the wage you should be paying in that market for the types of workers you want to hire. If you’re unwilling to match those wages, then you’re going to struggle to find workers.
But studies have also shown for years that it’s not just wages that attract workers: How accommodating are you to the difficulties in your worker’s lives? How flexible is your scheduling? How do you handle conflict? How do you encourage your workers to do better? Are you providing a positive, encouraging environment where people want to work? That makes a big difference to folks.
Everybody says the new leadership style will be a Ted Lasso-like coach. Not to be flip, but when I teach MBA students managerial economics or HR management, that’s part of what we talk about. Study after study shows that businesses worldwide with good management practices significantly increase productivity and profitability with reduced turnover.
When you look at other states, particularly those surrounding us, we’re not an exceptionally business-friendly state, and that’s another thing that tends to hold us back. We have tax policies that are antiquated and not very flexible. We have a lot of occupation rules about starting a business and licensing requirements that are onerous.