I live in Washington, DC so it’s easy to make things political. This town manages to do that with nearly everything. But this is not really about politics even though it may require politicians to truly have an impact. This is about jobs and the crisis that confronts us. A few points to consider:
- This might take a while. Typically in the past the US economy would return to a normal employment outlook six months after a recession, but the McKinsey Global Institute estimates it will take five years this time around. With unemployment stubbornly hovering around 9% consumer demand is down, making job creation even more difficult.
- Corporate America isn’t helping much. Michael Cembalest, chief investment officer at J.P. Morgan Chase, filed a report that indicates “US labor compensation is now at a 50-year low relative to both company sales and GDP.” Since 2000, company profit margins have increased from under 11% to almost 13% and Cembalest writes that “reductions in wages and benefits explain the majority of the net improvement in margins.” American companies produced $1.68 trillion in profit in the last quarter of 2010, yet hiring remains pitiful and wages stagnant or declining. Companies have seen the global light and run with it; emerging-market nations are producing 70 million new middle class workers and consumers each year. There is a clear connection to higher unemployment and lower wages at home. Nobel laureate Michael Spence conducted a study on job creation over the last two decades and found that American companies doing business globally added virtually nothing to American job growth. The US-centric firms that did the heavy lifting in terms of job creation – health care companies, government agencies, retailers and hotels – are hiring mostly in lower skill and wage positions. We have outsourced our skilled positions and it won’t be easy to get them back.
- We are not a mobile society. The rate at which workers move for jobs has been cut in half over the past twenty years. There may be many reasons for this: the crash of the housing market has left many people unable to sell their homes and get out from under their mortgages, unemployed workers in the recession have depleted their savings to the point of being trapped geographically, and the rise of two wage-earner families makes it difficult to coordinate simultaneous job changes. By some estimates there are more than 3 million job openings today, but as opined Rana Foroohar in Time Magazine, “unemployed auto-workers in Michigan can’t sell their underwater homes and retool as machinists in North Dakota, where homes are cheaper and the unemployment rate is under 5%.” We may yet have many of the jobs people need, but how do we get the workers to the jobs?
- We are losing our entrepreneurial foundations. The rate of new business creation has been dwindling for 30 years. The explosion of our economy’s financial sector has taken many innovators with it; there are less forward-thinkers trying to forge their own way at the risk of giving up well-paying corporate positions. Beyond that, credit remains exceptionally tight. How do you start a business without capital investment?
Okay, maybe this is political. My congressional neighbors in Washington, Democrats and Republicans alike, spend a good deal of time pointing up ideological differences and haggling over budget minutia. Surely we can all agree that jobs are central to our ability to thrive as a nation. We need to take steps to bring jobs back to the US, to create an environment that encourages investment and rewards innovation, to better educate our workforce for the types of jobs the global economy requires, to help increase the mobility of our citizens so they can go where the jobs are, and ensure that we are providing fair and growing wages to keep up with our ever-increasing cost of living. There are other countries, Germany in particular, that have faced similar circumstances to our own and are now thriving. Their blueprint may not be a perfect fit for the US, but surely there are valuable lessons to be learned. We’ve won world wars and put men on the moon – this should be well within our reach. It will take unprecedented cooperation between our political parties, as well as between our public and private sectors, but can there possibly be any more worthy goal at this point in our history?