Hot Labor Market Leaves Firms Searching for Quants

What do CNN talking head Lou Dobbs and the financial industry have in common (besides the fact that Dobbs hosted "Moneyline" years ago)? The short answer is that both are concerned about having access to a skilled workforce.

Dobbs has been on the warpath of sorts, discussing the war in Iraq, the battle over immigration and, most notably, the war on the middle class -- also the title of his new book. But where financial executives should take note is how his views on the middle class and education have been backed up by research.

Despite years of offshoring jobs, manufacturers are having a difficult time finding qualified U.S. workers, according a study from the National Association of Manufacturers. Come again? Estimates are that 3 million manufacturing jobs have been lost since 2000 as a result of offshore outsourcing and the shuttering of domestic manufacturing. So where are all the workers? They haven't gone anywhere, but they are still unemployed because they don't have the skills to succeed in today's economy.

Until now, financial firms have not faced a true labor shortage. Firms always have had to swallow large salaries for certain hard-to-find skills, but the skills could be found. With an increasing reliance on electronic trading and risk management, however, will financial players be able to find qualified workers?

The "Robert Half Technology IT Hiring Index and Skills Report," a survey of CIOs, indicates that 17 percent of financial firms will increase IT hiring in Q1 2007, with 80 percent saying that staffing levels will remain stable. Early in 2006, CIOs already were concerned that the IT labor pool resembled the hot labor market of the late '90s; 2007 isn't looking any better if you're searching for IT labor.

With firms increasingly relying on quants to develop more-complex algorithms and risk calculations, will the labor market be able to fill the demand? U.S. students trail their peers in other nations in standardized math test scores. U.S.-based universities also produce fewer mathematicians and engineers than schools from almost all other industrialized nations. So with trading desks needing quants to develop trading algorithms, insurance companies needing quants to analyze insurance exposures and portfolio managers needing quants to analyze market risk, the evidence suggests that the existing educational system will not be able to produce the talent that financial organizations require, forcing firms to take on a lot of the training, and the costs, themselves. Maybe Dobbs' next book could be titled, "The War on the Educated Class."