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.