Job Creation

It seems to me…

Despite our high rate of unemployment, 300,000 jobs go unfilled largely because many of the unemployed lack the skills needed today as a result of technological progress.”  ~ Kim Campbell.

We have created very few new employment opportunities in the past 20 years whether under Obama, Bush’s malefic tax cuts, or Clinton’s balanced budget and deregulation.  U.S. job gains were matched by job losses resulting in no net gain.  There are certain occupational categories that can not be outsourced: building construction, healthcare, food service…  Technology, another source of employment, has created new companies but overall job creation has been matched by job losses[i].

Economic recovery following the recession of 2000, from 2001 to 2007 under George W. Bush, resulted from job growth primarily in government, health care, and residential real estate while investments in areas that boost productivity and create good jobs simultaneously declined 15 percent as a share of gross domestic product – the recovery was almost entirely from government spending, cheap credit, and the real estate bubble.

The current recovery, while not having created a high number of jobs, is more broad-based and durable.  Business investment has increased 18 percent since the end of 2009.  Manufacturing has increased more rapidly than other sectors adding 334,000 jobs over the past two years.  Exports, which are increasing at an annualized rate of 16 percent, should result in U.S. exports doubling earlier than the 2014 goal President Obama set in 2009.  Labor productivity in the United States is now the highest among G-20 nations with the result that U.S. unit labor costs have dropped more than in any G-20 country except Taiwan.  Due to the recession, costs have dropped making U.S. labor more competitive.  Transport costs have risen, so “insourcing” has become increasingly more sensible.  Growth in natural gas is fueling job growth.  The U.S. government also has been making key investments in infrastructure, training, and research and development resulting in the U.S. becoming a more attractive place for businesses to invest.

It is highly probable that the GOP will nominate Mitt Romney as their Presidential candidate but instead of celebrating Romney’s corporate experience in driving out inefficiency, generating productivity, and creating profitable businesses, other Republican candidates are criticizing him and do not appear to understand the U.S. has a basic problem creating employment opportunities[ii].  The Hamilton Project estimates that even if job creation almost doubles, from last July’s rate of 117,000 per month to the 208,000 jobs experienced monthly throughout 2005, it would still take until 2024 to close the gap opened by the recession.

The winner in this recession has been Germany.  Though in 2008 Germany’s GDP declined more than that of the United States, its unemployment rate quickly recovered.  There are many explanations for German success, but as Elisabeth Jacobs details in a recent Brookings Institution paper[iii], government policies that created incentives for business to think long-term, value their workers, and invest in capacity helped.  The German system gives incentives to train workers and keep them employed.  The U.S. system, in contrast, emphasizes flexibility, the ability to hire and fire, and keep wages low.  Jacobs points out that, in a world filled with cheap labor, rich countries are better off with highly skilled workers, making premium products, with a focus on long-term growth and social stability.  The German system, in other words, might be a better fit for the globalized world.

When asked how they will create jobs, Republicans simply talk about cutting taxes and regulations and getting government out of the way.  Yes, it is important to have competitive tax and regulatory policies but the lessons from East Asia to Northern Europe suggest that government policy and investment can play a vital role in providing incentives for the private sector.  If Republicans want to get practical, they might learn from this.

That’s what I think, what about you?


[i]Zakaria, Fareed.  The Economic Lessons The Rest Of The World Could Teach Us, CNN World,http://globalpublicsquare.blogs.cnn.com/2012/01/19/zakaria-the-economic-lessons-the-rest-of-the-world-could-teach-us/, 19 January 2012.

[ii]Zakaria, Fareed.  The Economic Lessons The Rest Of The World Could Teach Us, The Washington Post, http://www.washingtonpost.com/opinions/the-economic-lessons-the-rest-of-the-world-could-teach-us/2012/01/18/gIQAfSuG9P_story.html, 18 January 2012.

[iii]Jacobs, Elisabeth.  Lessons for the United States from the German Labor Market Miracle, Brookings, http://www.brookings.edu/papers/2012/0113_jobs_jacobs.aspx, 8 Mar 2012.

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About lewbornmann

Lewis J. Bornmann has his doctorate in Computer Science. He became a volunteer for the American Red Cross following his retirement from teaching Computer Science, Mathematics, and Information Systems, at Mesa State College in Grand Junction, CO. He previously was on the staff at the University of Wisconsin-Madison campus, Stanford University, and several other universities. Dr. Bornmann has provided emergency assistance in areas devastated by hurricanes, floods, and wildfires. He has responded to emergencies on local Disaster Action Teams (DAT), assisted with Services to Armed Forces (SAF), and taught Disaster Services classes and Health & Safety classes. He and his wife, Barb, are certified operators of the American Red Cross Emergency Communications Response Vehicle (ECRV), a self-contained unit capable of providing satellite-based communications and technology-related assistance at disaster sites. He served on the governing board of a large international professional organization (ACM), was chair of a committee overseeing several hundred worldwide volunteer chapters, helped organize large international conferences, served on numerous technical committees, and presented technical papers at numerous symposiums and conferences. He has numerous Who’s Who citations for his technical and professional contributions and many years of management experience with major corporations including General Electric, Boeing, and as an independent contractor. He was a principal contributor on numerous large technology-related development projects, including having written the Systems Concepts for NASA’s largest supercomputing system at the Ames Research Center in Silicon Valley. With over 40 years of experience in scientific and commercial computer systems management and development, he worked on a wide variety of computer-related systems from small single embedded microprocessor based applications to some of the largest distributed heterogeneous supercomputing systems ever planned.
This entry was posted in Economy, Elisabeth Jacobs, Employment, GDP, Germany, Hamilton Project, Investment, Mitt Romney, Recession, Recovery, Recovery, Unemployment and tagged , , , , , , , , , , , . Bookmark the permalink.

12 Responses to Job Creation

  1. berlioz1935 says:

    Learning anything from Germany? Not in a Blue Moon. Brand Germany has been totally discredited, especially in the Anglo-Saxon world, because of two World Wars. Germany has and is dominating our modern life but the general population is not aware of it. Taking any lessons from Germany?

    The Greek financial crisis is a good point too. They don’t want to listen to Germany preaching fiscal irresponsibility.

    The education revolution started in Germany when Wilhelm von Humboldt founded the University in Berlin in 1810. Today the universities in the US are being run on the same principal, research and study. That was not always like that. Since the commercial enterprises have such short term goals the government has to play a bigger role, setting goals and guide lines.

    Washington bashing is a folk sport in the US and the Republicans are running with it once again.

    You were asking what I think – this is what I think.

    • lewbornmann says:

      Agree with you (as usual). Whatever the reasons, much of the world seems unable to accept Germany’s success.
      The U.S. political system does not seem able to form broad coalitions necessary to resolve complex issues. We need to implement meaningful reforms, reduce wasteful spending and subsidies, increase savings, expand STEM education and technology, reform our tax code, correct immigration policies, develop a comprehensive energy plan, and make adjustments to our health and welfare programs. Other than for that, the rest should be easy. 🙂
      Progress on any of these issues will require compromise and long-term perspective on all sides – something difficult to achieve given the current divisive political environment. Any politician that advocates for compromise or sensible solutions is marginalized by their party leadership, loses special-interest support, and publicly attacked by members of their own party. While I would like to place all the blame on the Republicans, both sides must bear equal responsibility.

  2. berlioz1935 says:

    I like your smiley. Understanding an issue and being able to do something about it are two different things. We, you and I, live in societies were freedom of expression is allowed to the individual, the media, the parties, the interest groups and to the Federal States. They all sing their own tune and hardly ever in harmony.

    “Any politician that advocates for compromise or sensible solutions is marginalized by their party leadership, loses special-interest support, and publicly attacked by members of their own party.”

    Absolutely. Here they even sacked an opposition leader, because he was willing to work with the government on climate change.

    Love your Blog, an island of knowledge in a sea of ignorance. 😉

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    • lewbornmann says:

      Since the average business has fewer than sixteen employees, many more people work for small businesses than for larger ones. Yes, start-ups are key to job creation but the U.S. has not had a net gain in new high-end jobs in over twenty years. Education costs have increased significantly and student enrollment in STEM-related subject majors has declined resulting in fewer high-tech startups. Many of the top graduates that previously would have gone into research and development now realize they can improve their income potential by going into finance rather than science or engineering. We definitely need to recognize the necessity of encouraging innovation but history has shown that is directly dependent on public-sector funding for education and research. I am not encouraged by the current political environment demanding further reductions in those areas.

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