importance of real work experience before graduation

Importance of Real Work Experience before GraduationInternship in Southeast Asia

Nº1

2014

http://internsinasia.com/Broadsight/GlobalResearch InsightReport

Contents

Introduction

Economic Development

Southeast Asia

Europe

North America

Educational Trends

Globalization increases Employers Expectations

Academic Studies on the Value of Internships

Employer´s Expectations of today´s Graduates

Expected Skills

Relevancy of Work Experience

Expected Length of Work Experience

Purpose of Internship for Employers

Expectations of Employers regarding Interns

The Value of International Experience

Internship in Southeast Asia

Economic Perspective Asia

Different Cultural Environments and Low Living Costs

Conclusion

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ContactsBroadsight

Valentin FischerResearcher & [email protected]

Simon OsborneManaging [email protected]

Cláudia CapeloWeb Marketing [email protected]

AIP

Sainzaya ChuluuntuyaSales & Market Research [email protected]

Daisuke HosokawaBusiness Research [email protected]

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1. Introduction

The purpose of this report is to emphasize the importance of obtaining a work expe-rience before graduating. Due to globali-zation labour markets have become more competitive also for graduates of higher education institutions. Employers today invoke higher standards and are not willing to invest as much in ‘on the job’ training as they used to. A university degree no longer guarantees a good job. Many advanced economies are still struggling to create jobs. Therefore numerous graduates expe-rience difficuties in finding positions that fit their expectation. Part of the problem is that students choose majors that are not in high demand on the job market. A number of countries experience a shortage of peo-

ple with scientific training and an abundance of graduates in liberal arts and social sciences. This leads to a situation with many college graduates who’s skills are not needed. Hence an increasing number of graduates end up working in jobs that don’t require a college degree. For these reasons it has become essen tial for students to refine their soft skills and to increase their employabil-ity at an early stage. Internships have become an important tool to acquire the needed knowledge and experience to land a job after graduation. Due to globalization employees with internation-al experience are in high demand. An internship abroad is a chance to signal adaptability, flexibil-ity and independence to a prospective employer. It will provide the students with the necessary edge to stand out among other applicants and increase their chances to be employed.

The first part of this paper gives an overview of the economic situations in Southeast Asia, Europe and North America, in particular the condition of the labour markets. The second part examines educational trends and the influence of globalization on the job market and employers ex-pectations of today’s graduates. The final part of the report focuses on the value of international experience as a whole and the benefits and chal-lenges to complete an internship in Southeast Asia.

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2. Economic Development2.1 Southeast Asia

Over the past decades the economies in Southeast Asia have grown at a remarkable pace. They are rapidly catching up with the Western world. Singapore for example even surpassed most of the Western countries in terms of living standards and now has one of the highest income per capita in the world (Figure 2.1).

Figure 2.1

GDP per Capita PPP

Source :Gapminder

The emerging markets in Southeast Asia weren’t hit as hard by the financial crisis and growth has re-bounded stronger in 2010 than in Western countries [1] (Figure 2.2). Despite the fact that growth rates haven’t come back to pre crisis level, they are still considerably higher than in advanced economies, which have seen low growth rates following the financial crisis.

Figure 2.2

GDP Growth Rates (%) 2006-2012

Source :World Bank

According to the IMF‘s World Economic Outlook 2014 policymakers fear that the slowdown of growth in emerging markets is caused by the lasting effects of the crisis in advanced economies and is only temporari-ly offset by policy stimulus, which will even-tually run out. However the full integration of the Southeast Asian countries into the AEC (ASEAN Economic Community) in

2015 is likely to support growth and increase trade within the region. AEC will provide busi-ness opportunities for local companies as well as for international firms who would like to enter the market. ASEAN represents a market of over 600 million people who are eager to improve their living standards. Many firms from Europe and North America will reach out to Southeast Asia and try to expand their business into that

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region since the internal demand in their home countries deem weak for quite some time to fol-low. The region will be in need of highly qualified people to meet the demand of the companies that are expanding their businesses in the region.The AEC will not only simplify the exchange of goods but also improve the transfer of human capital by further recognition of professional and academic qualifications.

Growth starting to pick up again in advanced economies and the less expansive monetary pol-icy in the western world will eventually increase

interest rates, likely leading to capital out-flows in emerging markets. This will foster growth through increased competitiveness by their weakening currencies. At the same time according to the IMF (Asia and Pacific Economic Outlook: October 2013 Update) abate concerns related to credit booms in emerging economies. According to the World Bank, sustaining a higher consump-tion share is important to ease the transi-tion from an external to an internal growth model for emerging economies.

2.2 EuropeEurope is still struggling with the aftermath of the crisis. The youth unem-ployment rate at the end of 2013 in the Euro Area (EU 18) was 23.5% (Eurostat) and is expected to remain high in the next years to come. In some countries youth unemployment has risen to dramatically high levels (Figure 2.2.1).

Figure 2.2.1

Youth Unemployment in % (15-24 years of age)

Source :Eurostat

The level of education plays a crucial role in protecting an individual against unemployment. The higher the level of education the lower the likelihood of falling into unemployment. Howev-er during the financial crisis this insurance effect has been reduced. According to research by the European Foundation for the Improvement of Living and Working Conditons for some of the Mediterranean countries (Greece, Portugal, Italy) the completion of tertiary education no longer lowers the risk of unemployment. The weakening of this insurance effect makes it even more im-portant for students to obtain a work experience during their college years to complement the the-

oretical background and refine their skill set to stay competitive in todays labour market.Research has shown that students who graduate into a bad economy can expe-rience depressed earnings for their whole life (Kahn 2010) (Labour Econom-ics, 2010, vol. 17, issue 2, pages 303-316). The high youth unemployment rates can therefore still have considerable costs in the future for Europe’s economies.For these reasons an increasing number of young graduates contemplate building a career in Asia.

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“I graduated in 2008 with a bachelor’s degree from a university in Portugal. At that time Europe started to be affected by the financial crisis and job offers became scarce. I haven’t had any prior work experience and therefore struggled to find a job. After two consecutive years of unsatisfying occupations I decided to go back to school to earn a master’s degree to stand out of the crowd and broaden my knowledge. After graduating I found an internship in Thailand where I can gain some experience in the field of Marketing before I go back to Europe to find a job.”

- Cláudia Capelo, Portugal

2.3 North America

The US economy is in better shape than Europe’s economies. Growth has rebound-ed stronger and is expected to be higher in the near future. The US GDP is expected to grow 2.8% in 2014 and 3.0% in 2015 compared to Europe where expectations lie around 1.2% in 2014 (WEO 2014). But the labour market recovery has been sluggish since the Great Recession and recent col-lege graduates struggleto find jobs suited for their level of educa-tion. As a consequence there has been a rise in underemployment (working in jobs that do not require a college degree). A study by The Federal Reserve Bank of New York found

that an increasing number of recent graduates are working in low paid jobs or working part-time. Underemployment among recent graduates seems not to be unusual. But it is unusually high at the moment. Recent graduates tend to take some time to transition into the labour force and find a suitable job. Internships during a college education could help determine the fields of in-terest in an early stage and consequently shorten the transition (Abel et al. 2014). In conclusion they say that closer ties between institutions of higher education and employers could help to smoothen the transition. It would help students to decide in which field of work they should enter and therfore choosing their major accordingly.

‘If you are college educated and under 30, there is a significant chance that you would be better off work-ing in a country outside the United States.’

-Mark Manson, Author and Entrepreneur

3. Educational Trends

Over the last 40 Years there has been a drastic increase in the fraction of the labour force that enrolls in tertiary education (Figure 3.1). This goes partly in line with the increased demand for highly educated individuals, produced by the skill biased technological change in many econ-omies. According to Vedder et al. (Underemployed Report 2013) the proportion of people with a college degree has grown faster than the demand for these skills. Therefore the competition among graduates with post-secondary degrees increases.

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Figure 3.1

Tertiary Education Enrollment in %

Source:Worldbank

We can analyse this development in the frame-work of Michael Spence’s job market signalling model (Spence 1973). Employees send out a signal to employers about their abilities in form of the level of education they obtained. The informational value of the signal is based on the assumption that there exists a correlation between an employee’s level of education and his or her ability to perform in the workplace. Imagine a state where no applicant possesses a college degree. Employers couldn’t decide which applicants have greater abilities than others. To distinguish themselves and show there abilities, persons start to get degrees. The ones with the degree achieve higher salaries in the jobmarket. Now if a college degree signals ability and therefore enables someone to land a well paid job, suddenly everyone tries to get a de-gree, provided the opportunity costs aren’t too

high for the bad students. Suddenly we find ourselves in a similar state as before where employers again cannot distinguish be-tween good and bad applicants. The recent increase in the fraction of workers with college degrees goes in that direction. This makes it more important for students to find other ways to differentiate them-selves from other applicants. One of the most effective ways to do this is to do in-ternships in a relevant field of work. Stu-dents can enrich their CV by explaining the projects they worked on and explain how they actually added value to the company. Depending on the work they did, they might even have something tangible to show for, like an article or a report they produced. Furthermore a letter of recommendation has always been very valuable.


4. Globalization increases Employers Expectations

The rise of China, South Korea, India and East-ern Europe over the last decades expanded the availability of highly educated individuals. This allowed companies to outsource assignments to these countries putting pressure on the la-bour market in advanced countries (CERI Re-search Brief 1, 2010). As a result, expectation of employers in advanced countries have risen substantially. « An obvious implication is that candidates who can demonstrate abilities that

allow them to cross boundaries (knowl-edge, cultural, social systems) will be more valued by employers as potential employ-ees. » (CERI Research Brief 1, 2010, p.3). Many routine tasks have been outsourced. Advanced economies, increasingly based on knowledge and information, require a more complex skill set. Universities curricula try to address this shift in skill needs but are far from providing everything a college gradu-


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ate today needs to have in his skill pocket. According to a 2010 study by CERI there are two major reasons for this skill transformation for much of the workforce in the US, but it can be gener-alized to other advanced countries as well. First, there was a shift in job types to jobs that require more soft or people skills. Second, companies tried to save costs by reducing ‘on the job’ training, where graduates normally would acquire these skills and pushed the skill development back to higher education institutions.

Globalization also creates opportunities. International firms have branches all over the world and frequently send their staff to different locations around the globe. Some multinational firms already established trainee programms, where graduates com-plete their programm in 2 or 3 different locations around the globe. Individuals who already gained international work experi-cence have significant advantages to be ac-cepted into such a program, due to the fact that they already proved their willingness and ability to work in different cultures and environments. In addition to that there are lots of examples where western educated individuals, still at an early career stage, have been given great responsibilities overseas, for example in the Middle East

or in Asia. Western educated employees are in high demand in developing countries as project managers, scientific advisors or business devel-opment managers. Especially young individuals possess advantages over graduates in developing countries in terms of work ethics, organizational skills, efficiency and independence. It seems that western education institutions still produce more capable graduates than the ones in developing countries do, although many countries are rap-idly catching up. International firms search for individuals that have experienced relocation and are adaptable to different situations. Spend-ing time abroad and dive into a different work environment and business culture equips stu-dents and young professionals with the necessary skills to stay competitive in the labour markets of a globalized world.

5. Academic Studies on the Value of Internships

Studies that investigate the relationship between internships and job marketability are very scarce.A survey of intern and non-intern business alumni of a northeastern US public uni-versity indicated significant early career advantages for students with internship experience (Gault et al. 2000). It was found that students who engaged in an internship during their studies had to spend less time to obtain a first position, received higher monetary payoffs and experienced greater job satisfaction. The earnings gap contin-ued to widen after graduation between non-intern and intern alumni, which shows that there were considerable long term

Another study that investigates the relationship between internship participation and employ-ment marketability indicates more full-time employment opportunities for students that par-ticipated in an internship. Besides that, average performing interns were more likely to get a full time job and high performing interns were more likely to receive higher starting salaries. Experience seems to be the key factor in differen-tiating among graduates (Gault et al. 2010). The fraction of employers that don’t factor experience into their hiring decisions has dropped to an all time low (NACE, Job Outlook 2014).

According to a survey conducted by the Chronicle in 2012, experience slightly outweighs academic credentials when employers evaluate a candidate for employment (Figure 5.1).


differences in cumulative payoffs within the observed sample.



Figure 5.1

Relative Balance of Experience vs. Academics

Source:CERI

Internships and employment during college seem to be the most heavily weighted factors when it comes to hiring graduates. Maybe surprising to many college students Grade Point Average and College Reputation make the bottom of the list (Figure 5.2).

Relative Importance of Attributes

Figure 5.2

Source:CERI

6. Employer’s Expectation of today’s Graduates6.1 Expected Skills

According to a survey by The Chronicle half of the employers said they have difficulties in find-ing qualified graduates to fill their positions. A college degree has become a prerequisite for many positions but is by far not enough to meet today’s employers standards. In the eyes of many employers, universities seem not to produce successful employees. Some companies complain that applicants lack basic workplace profi-ciencies like communication, flexibility and the ability to solve complex problems. Employers place the responsibility on colleges to prepare

students in written and oral communica-tion and decision making skills. Richard D. Stephens, senior vice president for human resources and management at Boeing said that :«To expect business to bring gradu-ates up to speed, that’s too much to ask.» Nowadays many employees stay with a certain company only for a few years, on the job training makes no economical sense for many companies. That’s why employers would like colleges to prepare the students better for the job market. Philip D. Gard-


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Figure 5.1 displays the results of a survey done by the Chroni-cle.The question asked was: Please indicate the relative balance you would give to academic creden-tials versus experienec for recent college graduates seeking a position at your organization(1, total experience to 10, total aca-demics).

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Internships

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College Major

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Figure 5.2 displays the result of a survey done by the Chron-icle.The question asked was: How much weight do you give each of the following educational credentials when you evaluate a recent college graduate’s resume?

ner, director of the Collegiate Employment Research Institute (CERI) at Michigan State University says: “The mantle of preparing the work force has been passed to higher education.” The response from the Univer-sities is different, some of them try to im-prove their career centers and design pro-gramms with more practical coursework. Others argue that education should train broadly and not narrowly. For them the business world is asking too much. According to Peter Cappelli, professor at the University of Pennsylvania the situation is not that bad: ‘’I understand that those doing the hiring in ancient Greece complained about the same thing.’’ Employers always complained about gradu-ates not having the right skills.


Michigan State University has identified 12 es-sential traits that todays graduates need to have in order to succeed in the workplace:

1. Communicating effectively 2. Solving Problems 3. Balancing Work and Life 4. Embracing Change 5. Working effectively in a Team 6. Managing Time and Priorities7. Navigating Across Boundaries8. Acquiring Knowledge9. Thinking Critically10. Performing with Integrity11. Developing Professional Competencies 12. Working in a diverse Environment

6.2 Relevancy of Work Experience

Many students have concerns about the relevancy of their internships for the future jobs they apply for. Most of the employer surveyed by CERI, replied that they expect a ‘moderate relevance’ of the previous internship experience. Approximately one in seven employers did not require that the internship done by the job candidate has anything to do with the job they are applying for (CERI Research Brief 6 - 2013). Therefore, essential for employers to see is that the applicant has been exposed to the real business life and knows how to act in a professional environment. It is seen as beneficial if the work experience overlaps with the tasks at the new job but is not always required. Internships are a very powerful tool for students to boost their resume even if the gained work ex-perience is of moderate relevance. The 12 traits in the list above are not specific to certain jobs. They can be acquired in different work environments. Also extracurricular activities like pro-fessional clubs and athletics are often valued more than Grade Point Average.

6.3 Expected Length of Work Experience

In a study done by the Collegiate Employment Research Institute approximately 70% of the com-panies expected applicants to have at least 6 months of full time work experience. The study re-vealed differences in the length of the work experience expected by employers across economic sectors. Whereas the finance industry requires around 6 months of work experience forming the lower bound, government and health services require a minimum of 12 months of full time experience upon graduation. While the expectations vary greatly, there is a consensus that an applicant needs to possess at least one longer preferably continual work experience.


BROADDEEP

7. Purpose of Internships for Employers

Respondents to surveys done by Collegiate Employment Research Institute (CERI) mentioned that internships are among the best recruiting strategies they utilize, leading to the highest return on investment.

According to Recruting Trends 2012-2013 the top two reasons for employers to provide intern-ships is to ‘identify and develop talent for full-time employment and workforce succession plan-ning and to supplement staffing for special projects and targeted assignments. Therefore there is a good chance that an internship already leads to a full time job offer if the student is performing well.

8. Expectations of Employers regarding Interns

‘We expect from interns honesty, confidentiality and respect of rules. Interns should be dedicated to their work, able to integrate in the team and generate fresh ideas. Creativity and curiosity are important traits that interns should posses.’

- Bernard Collin, Safe Coms Thailand

Employers like to see initiative from their interns. Besides the training they might get from the company, interns should create their own knowledge and already try to add value to the company they intern in. The internship should provide students the opportunity to gain the necessary skills to succeed in the

business environment. These skills can’t be acquired by sitting in the library and studying books. Students have to be exposed to different situations and take initiative. In return employers expect them to be full members of the team who don’t have to be spoon-fed.

‘We want the interns to learn every aspects of the company, so we expect enthusiasm and willingness to be part of our team. We expect them to understand that we are trying to show them the business.‘

-Sasi Kantapak, Expat Ladies Thailand

9. The Value of International Experience

The business world gets more and more international, with companies spreading across the globe. This creates international career opportunities. International exposure at a young age makes young professionals very valuable for companies which want to expand their business overseas. Having worked in different cultural environments can help employees anticipate difficulties in enterning new markets. ‘If you have international work experience, you’re likely to be confident and have an outgoing personality, which helps you engage with stakeholders.’ says Ben Searls, a senior manager at the recruiter Badenoch&Clark. Many employers will be impressed to see inter-national work experience on a students resume.

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There are many reasons why this is the case:

-Working in another country shows the willingness to go out of your comfortzone.

-You will be dealing with bureaucracy, cultural differences and language difficulties.

-Students, working or traveling abroad will broaden their mindset, learn how to deal with difficult situations without the support of their families and friends.

It shows prospective employers that the student is willing to take action. Most likely, studentsworking overseas will improve their communication and intercultural skills, maybe even acquire a new language. These are powerful skills, regarded as highly useful in an ever globalizing world. Tim Brown, CEO of IDEO, a California based product design firm coined the phrase T-shaped persons (Figure 9.1, I will do one).


Shaped Professional

Figure 9.1 Today’s young professionals should possess depth in at least one field (vertical line) as well as the ability for collaboration accross disciplines (horizontal line). This means besides their major, graduates should possess a wide range of skills, for example social and cultural understanding.

This skills might be acquired by engag-ing in extracurricular activities, trave-ling or most likely by seeking a work ex-perience in a different cultural setting.

10. Internship in Southeast Asia10.1 Economic Perspective Asia

As stated above, the economic conditions in the advanced economies could be bet-ter. Many college graduates searching a first work experience have trouble to find a suitable position. Many countries in South-east Asia still have a booming economy which creates lots of jobs. Countries such as Thailand have a vibrant expat business community which seeks for talented indi-viduals that can engage in their activities. Many of them have trouble to find qualified locals to fill their positions.

Employers appreciate the independence, efficiency and accuracy of western educated individuals.

‘Whereas many parts of the world are in recession, the economies of many Southeast Asian countries are still growing. In particular the middle class is expanding in many developing nations in Southeast Asia, which ensures a solid consumer base for a va-riety of services and products from now on.

It is no accident that many of the best companies in the world are looking at SEA besides China and India.’

-Thomas Ehle, JAC Recruitment

Source: Shaped Professional


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10.2 Different Cultural Environments and Low Living Costs

Interns from Western countries, coming to Southeast Asia, will be exposed to a competely different culture. At first, it can be quite shock-ing to see that things are not going the way they are going in Western countries. Southeast Asian countries are known for their bureaucracy. Stu-dents will realize that one needs to develop patience not to get frustrated when things don’t work out as planned.It can turn out that the work experience is quite a challenge, especially if you work at a domestic company. Hierarchy might be more strict and seniority preferred to richness of ideas. Exciting and at the same time complicated is the fact that business culture is different in every country across Southeast Asia. This can be confusing if you do business in multiple countries. Economies are more network-based than company-based.

Meaning, having access to the right net-works is crucial to do successful business. There are many people from different na-tionalities present, which will give students the possibility to connect with people from all over the world. Southeast Asia is a perfect place to travel around as transportation is fairly well or-ganized and cheap. In addition the living costs in many of the countries are still considerably lower than in the western world, which makes an overseas internship affordable for a wide range of students (Figure 10.2.1). One exception is Singapore, according to the Economist, it is to become the most expen-sive city in the world to live in 2014.

Cost of Living Comparison

Figure 10.2.1

Source:CERI


Figure 10.2.1 displays a compar-ison of living costs between Zurich, Bangkok, New York, Kuala Lumpur, Sydney and London using a Consumer Price Index includ-ing rent by Numbeo. Reference City (100) is New York.

11. ConclusionThere are many reasons for contemplating doing an internship in Southeast Asia. The slow recov-ery from the financial crisis in the US and worse in Europe, left the countries with poor labour markets, unable to provide recent graduates with suitable jobs. Competition among graduates has in-creased, forcing students to differentiate themselves even more from their competitors. It has become harder to get a good job or even to get a job at all. By interning in one of the Southeast Asian countries students will be confronted with a different busi-ness and human culture. The ability to adapt to a different environment, working in a diverse team and gathering knowledge about different business practices are crucial skills to build an international career and definitely increase a students value on the job market. Doing an internship abroad will expand the students business networks and deepen their understanding of how the world works. Stu-dents might even meet a potential employer at a networking event which could lead to a future job offer. Employers are always looking to hire people that gained knowledge about different markets, as they might wanna expand their operations into them. Finally, many students who have the chance to come to Southeast Asia are able to combine their work experience with a travel experience, visiting places known to them only from movies and post-cards.


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