How to Resolve America's Hidden-Worker Problem

Most companies rely on recruiting systems that are superficially efficient but consistently ineffective at closing their chronic skills gaps. Is there a dearth of workers or are employers looking for talent in a self-limiting way?

By Joseph B. Fuller October 7, 2021
How to Resolve Americas Hidden-Worker Problem

When Congress ended the federal unemployment benefits introduced at the height of the pandemic, Republicans cheered the decision as a way to encourage more people to return to work, while Democrats warned that it would cause needless hardship for 12 million Americans and their families. Absent from the debate was any mention of an issue that affects many millions of unemployed and under-employed people: how and why they are routinely excluded from consideration for jobs for which they are qualified.

Such "hidden workers" are as diverse as America itself. They include caregivers, veterans, immigrants and relocating spouses. They also include people with physical disabilities and mental-health challenges, those from low-income backgrounds and anyone who was previously incarcerated. What they all have in common is that something in their work history or background causes them to be eliminated early in the recruiting process, "hiding" them from consideration.

In a new Harvard Business School report, my co-authors and I estimate that there are more than 27 million hidden workers in the U.S., equal to about 17 percent of the country's official labor force. This vast pool of underutilized talent, growing for decades, represents a huge missed opportunity for U.S. businesses which are struggling to fill many open positions. During the pandemic that struggle worsened considerably in a range of industries, including manufacturing, hospitality, food service and health care.

A number of factors contribute to America's growing hidden-worker problem. Education systems and other skills providers find it increasingly difficult to keep up with the accelerating rate of change in job requirements fueled by technology.  The skills of those outside the workforce atrophy quickly; in many fields the half-life of a technical skill is one year. Workers seeking to upgrade their skills or reenter the workforce often lack the time and resources to bolster their qualifications and confidence as to what new credential will advance their candidacies.

Perhaps the biggest contributor to the hidden-worker problem is the injudicious use of automated recruiting systems and applicant tracking systems (ATS), now deployed by 75 percent of U.S. employers, including 99 percent of Fortune 500 firms. To be sure, an ATS mostly succeeds in what it's designed to do: sift mountains of resumes quickly and efficiently, according to specific parameters set by the employer. Problems arise when hiring managers set those parameters too narrowly—by, say, demanding a college degree when a job doesn't require one or bypassing applicants with employment gaps, such as parents who take breaks from paid work to care for young children.

Current hiring practices not only undermine the prospects of capable workers who lack perfect resumes, but they also hurt the companies that are supposed to benefit from them. For example, of the more than 2,250 executives we surveyed, 88 percent admitted that qualified, highly skilled applicants are eliminated from consideration because they don't match the criteria created in their companies' job descriptions.  

The great irony is that employers regularly complain that the candidates they do hire lack necessary skills and require additional training to become productive. Similarly, they bemoan the lack of diverse candidates. That raises a fundamental question. Is there a dearth of workers or are employers looking for talent in a self-limiting way?

Hidden No Longer

Businesses desperate for talent should be casting their nets more widely. Companies can recruit and retain hidden workers by implementing several straightforward steps, and in doing so, create a new and valuable pipeline of talent. Those include:

Step 1: Reform talent acquisition efforts.
This requires re-evaluating job descriptions (JDs)—specifically, jettisoning those saddled with legacy requirements and "nice-to-have" attributes. Instead, JDs should rest on a limited list of must-have skills that closely correlate to actual, observed performance in the role. Companies should reduce their reliance on proxies, such as educational attainment or continuity of employment, that they infer correlate to proficiency. It also means replacing metrics—cost to hire and time to fill—for evaluating recruiters with metrics more relevant to business performance, such as new hire productivity, rate of advancement and attrition.

Step 2: Develop a customized approach to hiring hidden workers.
This involves shifting the justification for hiring hidden workers from corporate social responsibility to return on investment. Start targeting segments of hidden workers who are best suited to a company's needs to allow for customized investment in training and accommodations to help those workers become productive faster. Employers including CVS, Bank of America, Verizon and McDonald's have demonstrated that programs designed around the capabilities and needs of hidden workers yield productive, engaged employees. HR can develop an understanding of how to reach hidden workers by engaging social agencies and non-profits that serve relevant segments of hidden workers.

Step 3: Adopt a user experience approach to hiring hidden workers.
Over the past decade, companies have invested in understanding and improving their customers' user experience. They should bring that same mindset when designing hiring processes that focus on the applicant experience. Skills requirements should be stated clearly, and the relative importance attached to various skills and experiences made apparent. The timetable for making a hiring decision should be shared and, ideally, companies would offer applicants the courtesy of informing them when they are no longer under consideration.

One of the more grievous indignities inflicted on hidden workers is to have their applications ignored. If ATS systems can evaluate applicants autonomously, they can presumably be equipped to provide both an acknowledgement of a submission and a prompt notification of a decision.

Most companies rely on recruiting systems that are superficially efficient but consistently ineffective at closing their chronic skills gaps. Workforce demographics, technological dynamism and changing attitudes to employment make the time ripe for companies to revisit their fundamental approach to hiring. The reward for doing so will be more inclusive hiring practices that better serve the needs of businesses, workers and society.

Joseph Fuller is a Professor of Management Practice at the Harvard Business School, where he co-leads the project Managing the Future of Work project. The research cited in this article is available here.

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