Three years ago, Labor Day 2009, I appeared on Today 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In the past decade many traditionally high-skilled jobs have been replaced by automation.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?
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This is more rhetoric from those who want to discuss the issue without resolving it. The labor gap was creating by a decade long run of slashing labor costs. Firms enjoyed gains through decreased labor costs by demanding more & more out of their skilled employees instead of expanding the pool of candidates. Now firms are left with the labor gap they created by not spending the resources required to develop the next generation workforce. Now they cry about a "lack" of talent and go overseas to pay someone 1/3 of what they would here.
It worked for Germany because their Govt. was willing to reinforce their manf. sector wheras ours is willing to sell out.
and fyi "competitiveness in the global labor market" means that our workers won't work for pennies a day.
Good article George...but quit beating around the bush and say what you really want...
We are a country confronting the capital/technology fate of midas. Rupert Murdock said it best in front of the Levenson Committee "technology is killing the newspaper business".
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You were right on #1 but wrong on #3. We can't become "cost competitive" because labor in China is barely over a buck an hour, and the whole notion of not enough trained workers is a cruel myth promoted by people who wish to push American wages down further by bringing in foreigners.
The real problem is that there are not enough jobs. Period. If you take all the effort that it requires to make everything that can be sold, it doesn't add up to enough jobs to employ everyone. It's really that simple. Why has this happened? Because we have become so productive that we now have surplus productivity.
Capitalism as we know it is on its way out. It won't survive the century because it just won't employ enough people to sustain itself (remember that there must be a profit). Whether we move to some sort of sustainable mix of capitalism and socialism or just go straight back to feudalism will be interesting to see.
To compete on a global scale takes a globally competitive wage rate. Imagine American workers working for the same wage rate as the Chinese worker! I am bewildered at the collegiate failure to comprehend this fundamental of economics. It's referred to as factor price equilibrium.
Right... the solution to US unemployment is to bring in yet more foreign workers. They're all lying to us, even those who claim to be concerned. We need to start hanging economists, business professors, and fat cats.
In the video attorneys explain how they assist employers in running classified ads with the goal of NOT finding any qualified applicants, and how they disqualify even the most qualified Americans in order to secure green cards for H-1b workers.
"Our goal is clearly NOT to find a qualified U.S. worker ... our objective is to get this person a green card ... so certainly we are not going to try to find a place where applicants would be most numerous. "
This is what Politicians and companies really mean by a shortage of skilled U.S. workers.
http://www.youtube.com/watch?v=NPQtpnJPSZI
Germany, after the early 70s, went from evenly balanced trade to perpetual trade surpluses. Why? Because they knew from experience that long-term prosperity and full employment comes from producing, not printing... especially because they did not have the ability to print counterfeit dollars, like the Fed does. When globalism threatened, Germany cut wages (with union consent) and geared up for battle. We, on the other hand, went on a debt-fueled consumption spree - the Keynesian prescription for success.
And Germany acted the way it did not because it knew about "long-term prosperity and full employment." No, in every country there is a tension, a perpetual struggle between the wealthy class and the rest of the country over how the GDP dollar is going to be split. In our country, the wealthy class has won. In Germany, the wealthy class was pushed back. After all, prosperity and full employment are bad for the wealthy class. Prosperity diminishes the power of the wealthy class, and full employment pushes wages up. The wealthy class doesn't like that.