September 03, 2012

Another Labor Day Passes with Little Progress on Creating Jobs

Three years ago, Labor Day 2009, I appeared on The Today Show to discuss the jobs crisis. The appearance was to promote 7 Lessons for Leading in Crisis, a book released about that time which set forth principles leaders could apply to resolving significant crises.

At the time, I argued that we were in a structural jobs crisis and that the Obama administration’s stimulus aimed at creating or “saving” public sector jobs was not effective. The impact of such policies efforts, I predicted, would expire long before jobs bounced back.

Using the “7 Lessons” as a framework, I posited that the U.S. had to “face reality” (Lesson #1) that jobs lost in 2008-09 were not coming back. We had to address the “root cause” (Lesson #3) that American labor was not cost competitive in global markets for low- and mid-scale jobs and lacked the trained workers required for high-skilled jobs.

Three years have passed and the economists still haven’t recognized the root cause.  They continue to believe (and act like) we’re in a cyclical recession. Unemployment remains stuck at 8.3% and underemployment (including part-time workers and workforce dropouts) hovers around 15%. Meanwhile, the temporary jobs created by the stimulus bill disappeared two years ago. The “saved” public service jobs are under enormous pressures from budget cuts at state and local levels shedding 700,000 jobs.  The stimulus bill just delayed the inevitable.

The New York Times published statistics last Friday showing that in this downturn five million high- and mid-wage jobs were lost, and only 1.5 million returned. In contrast, 500,000 more low-wage jobs have been added than were lost in the recession. Thus, average wages declined for those fortunate enough to have a job. Many formerly high-paid workers are now holding down two and even three jobs and still not maintaining their former level of income. But here’s the catch: 3 million high-skilled jobs are vacant with no one qualified to fill them! Clearly, this is a structural crisis.

In the past decade many traditionally high-skilled jobs have been replaced by automation. Today’s skilled jobs require more sophisticated mathematical and computer-based skills. Since we have failed to develop the skilled work force to do these jobs, they either remain unfilled or are migrating overseas. Contrast these results with the decade of the 1990s when we added 23 million jobs, business was booming, and the federal government balanced its budgets for three consecutive years.

There’s an obvious solution to this skills imbalance: government, business and labor need to collaborate to create skills-training programs and apprenticeships in collaboration with local community colleges and vocational-technical institutes. This has been done with success in eastern Michigan by the Big 3 auto producers and in Charlotte by the energy sector, and a promising initiative is underway in Minnesota.

Unfortunately, on a national basis there is little collaboration between government and business. The leaders of both sectors seem to feel they have diametrically opposed objectives. As a result, deep-seated distrust has developed over the past three years. Most regrettably, this has led to “win-lose” relationships, and contributed to the political chasm that defines today’s America.

Our predicament is in sharp contrast to Germany, where workers are doing better than ever, and unemployment is low, especially in the former West German states. In Bavaria, for example, unemployment is 2.2%.  Workers have solid incomes, good pensions, and effective health care.

What’s the difference? Ten years ago then-Prime Minister Gerhard Schroeder brought the leaders of business and labor together and challenged them to develop a plan to make Germany fully competitive in global markets for the 21st century.  Leaders of the three sectors decided to focus on ensuring a skilled, competitive work force in five major industries: machine tools, automobiles and auto parts, chemicals, electrical equipment, and construction. As the direct result of these negotiations, wages and benefits were moderated to be competitive on a world scale, inflation held to around 1%, and government deficits reduced to only 3% of GDP, compared with 7% in the U.S. This rapprochement has not only fostered Germany’s growth but led to a favorable balance of trade of $200 billion, compared with America’s negative $500 billion trade balance. Germany’s trade surplus isn’t just with the European Community; its largest positive balances are with China, India and Japan.

Could the same thing happen here if the political climate supported it? Of course it could. No country in the world can match America’s entrepreneurial drive or innovative genius. The U.S. is by far the best place in the world to start a new company, complete with the private start-up funding and infrastructure required for entrepreneurs. We tower over other countries in the growing fields of information technology, health care and energy. Yet our government constrains all three industries in obtaining visas for foreign workers, approving innovative new products, and limiting energy production.

We also need business, labor and education leaders to collaborate to train and develop the skilled workers required to compete on a global scale. That takes a “win-win” approach, something rarely observed in today’s toxic and highly partisan political arena. We cannot let political differences to continue to hold us back. Now is the time to get on with the monumental task of ensuring America’s economic competitiveness and rebuilding a jobs machine. We did it in the 1990s. What are we waiting for?