Posted by: dstieglitz | February 26, 2011

17 Million Jobs

    To reach full employment, the U.S. economy must create 17 million new jobs this decade: 7 million to replace losses during the recession and 10 million to keep up with population growth. As recently as the 1990s, the economy exceeded that when it generated 22 million new jobs. But with less than 50,000 jobs added last month, what we are doing obviously isn’t working. Small companies are reluctant to hire, and big companies are moving operations overseas at the fastest rate in history. Whether we like it or not, in some key areas we will need more government, not less, to produce jobs. 

   Stealing Our Jobs.  In addition to low wages, China and other Asian countries are stealing our jobs with lucrative subsidies and aggressive spending on infrastructure, workforce training, and education. U.S. companies are taking the bait because offshoring increases profits and lowers consumer prices. Suggestions that the U.S. government give similar incentives have been rejected as business favoritism or protectionism. The result is a wide range of products from shoes to cell phones are almost exclusively manufactured overseas. What’s worse, today foreign governments are upping the ante by offering new subsidies to entice U.S. companies to offshore their R&D programs as well. 

   Jobs vs. the Deficit. A recent poll asked people to identify the two most critical issues facing the nation. Jobs topped the list at 53%, the deficit was second at 27%, and just 16% were concerned about high taxes. That result isn’t surprising given that job creation isn’t keeping up with population growth and the U.S. has had three consecutive deficits over a trillion dollars. Republicans are pushing for deep budget cuts because they see the exploding national debt and associated interest burden as a roadblock to economic growth. Conversely, Democrats acknowledge that trillion dollar deficits are unsustainable, but agree with pollsters that creating jobs is the top priority. Sadly, neither party has offered a viable plan to deal with its own #1 priority, let alone shown a willingness to accommodate the other party’s big concern. The two parties are so entrenched in their positions that the entire government may shut down on March 4th unless they cooperate to pass a 2011 budget or procrastinate with another Continuing Resolution. 

   No Quick Fix.  The truth is there’s no quick fix for high unemployment. Everyone knew economic growth would precede employment growth and that’s what is happening. Multiple factors impede hiring: weak consumer demand, uncertainty about taxes and health care costs, a dormant construction industry, and higher productivity to name a few. But those who beg the federal government to create more jobs must realize it is already doing a lot. Stimulus money is still being spent; Congress has authorized trillion dollar deficits; and the Fed is keeping a lid on interest rates. These policies already stretch the limits of prudent government.

   Structural Unemployment.  Historically, the U.S. job market has rebounded quickly after recessions, in part because workers moved to industries and cities where jobs were plentiful. Today, structural obstacles limit such movement. For example, 99 weeks of unemployment discourages workers from moving by giving them nearly two years to “wait until my old job comes back.” In my opinion, job training should be compulsory for unemployment after 26 weeks. Half the jobs lost in the recession were in construction and manufacturing and, in general, those workers need training to fill positions in growth industries like energy, education and health care. A second obstacle is depressed housing prices: workers can’t move when they can’t sell their current house, can’t get a loan for a new house, and can’t find a firm job offer in another area. But by far the biggest obstacle is that many job seekers don’t have the skills that employers need. Technology is ubiquitous in business, so those who lack experience using a computer in routine job functions have a severe handicap. Language differences exacerbate the digital divide. English is not only our national language, it is the universal language of business and the Internet so those who are not fluent in English are generally excluded from high paying jobs. 

   Boost Research & Development.  The U.S. isn’t creating high-paying jobs like it did in the 1990s. In the past, when manufacturing jobs moved to low-wage countries they were replaced with jobs in new industries built using the results of U.S. research. Many people think Washington lacks the guts to tackle issues like climate change, dependence on foreign oil, rising health care costs, educational deficiencies, and forcing a shift to renewable energy. But Congress could address these issues and create millions of new jobs at the same time by reviving the model that invented the Internet, GPS and cell phones: a public-private R&D cooperative with venture capitalists eager to transform ideas into startup companies. Reinvigorating that model would require: (1) clear national goals in pivotal areas like clean energy and preventive medicine; (2) increased funding for R&D in DARPA, national labs, and academia; and (3) tax incentives to stimulate corporate investments in R&D. These actions would restart the U.S. innovation engine which, after a few years, would pump out new ideas, new companies, and most important of all: new jobs by the millions and products in demand in world markets. Think back to the 1990s when desktop computers and the Internet produced the dot-com boom that spawned mega-companies like Microsoft, Google, Amazon and eBay? 

   The German Model.  Manufacturing in the U.S. could grow if management, workers, and government agencies worked together. For example, Germany (a high-wage economy like ours) has recovered its global competitiveness in the past decade. They did it using targeted government spending, business incentives, and tax increases that stimulated demand for new technologies (e.g., energy taxes). There also were modest tax cuts and labor reforms that enabled companies to invest in R&D and reduce labor costs. But probably the most important change in Germany was focusing the political debate on global competitiveness and accepting the premise that everyone must sacrifice in the short-term to regain long-term prosperity. Similar concepts – plus a commitment to build quality products the world wants to buy – seems to be working in the resurrected U.S. auto industry and could work in other industries too. 

   End of a Dreadful DecadeWithout question, the first decade of the 21st century has been especially dreadful for the U.S., starting with 9/11 and ending with an economic earthquake. The U.S. has fallen into a deep hole: millions of jobs have evaporated and millions of industrial workers, bankers, builders, newspapermen, and others are searching for new careers. The situation is aggravated by angry political rhetoric, polarized opinions, and legislative gridlock. Today we are at a turning point where Congress could do nothing and make things even worse, or it could lay the foundation for a new era of long-term prosperity. Growth will require increased spending on education, R&D, infrastructure, and alternative energy to create jobs and improve our global competitiveness. At the same time, we need spending cuts and tax increases that put the budget genie back in the bottle. Extricating ourselves from this crisis will require our best bipartisan thinking and sacrifices by everyone. But if anything, the U.S. is resilient and we band together in tough times like these. We all know people who can’t find a job – let’s give them an encouraging call and offer helpful ideas.

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Responses

  1. Bravo, very good thought


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