This week, the U.S. Government announced that the private sector had shed another 39,000 jobs in September [“US private sector sheds 39,000 jobs,” by Alan Rappeport, Financial Times, 6 October 2010]. That is not the kind of news unemployed workers were hoping to hear. At the conclusion of yesterday’s post, I indicated that I would look at what some so-called experts are saying about the future job market. One of those experts is entrepreneur and venture capitalist Luke Johnson [“Time to work on the jobs of the future,” Financial Times, 25 August 2010]. Johnson writes:
“What the hell are the jobs that everyone is going to be doing in the future? That is the question that no one seems able to answer. Not many of those in power even appear to be thinking seriously about it. Yet it is perhaps the most important single issue facing the west: what are the industries and professions that represent our salvation, and how do we prepare our citizens for them? Work and jobs are two very serious subjects, but I read very little genuine debate about them. Meanwhile, I see how desolate the opportunities are for young job-seekers right now; and I wonder what they will be doing to secure a livelihood five years’ hence. Paying jobs do not just crop up through chance or political dreaming. New jobs in the private sector that add value generally only arise when there is optimism and new capital formation, in locations that are competitive in terms of costs and skills.”
Johnson seems to support the ideas of Michael Porter of Harvard University, who has been preaching for years that local governments should look for advantages that their people and their locales possess in abundance and then determine what kind of economic cluster is best-suited for their circumstances. Johnson continues:
“Three main structural trends are apparent in the world of work in the west. First, jobs are being shipped offshore to lower-cost economies such as China and India. Second, perhaps more significantly, technological advances mean many sectors such as manufacturing, mining and agriculture are much more efficient than they used to be, so less labour is required for a greater output. And third, employing people in countries such as Britain has become much more expensive: not simply because of wage inflation but other obligations such as increased holiday, entitlements such as maternity and paternity leave, higher payroll taxes and so on. The recession has accelerated moves by industry to cut costs. replacing people with machines or outsourcing using cheap labour in Asia. Debt, property market bubbles and financial engineering delayed the pain but now places such as Spain, Ireland and the US are suffering alarming levels of unemployment. Over-borrowed governments are also having to slash public sector payrolls because capital gains, property taxes and other boomtime receipts have collapsed.”
Up to this point, Johnson hasn’t told us anything that we didn’t already know. The question we really want answered is what can we do about it? Johnson asserts that the sectors he has heard most about when people discuss economic areas with the potential of creating new jobs “are healthcare, education and green energy.” In yesterday’s post, the three sectors most often mentioned were health care, information technologies, and jobs in sectors yet to be created (cleantech perhaps being among them). Johnson, as you shall see, does not believe that governments have yet grasped the severity of the situation or aligned policies with rhetoric. Although he points out some actions that can be taken, he admits he doesn’t have any better idea than most folks about what new jobs are really going to emerge. He concludes:
“There is superficial talk of ‘green’ jobs and clean energy. Perhaps inventions will emerge to replace fossil fuels and create new industries. But the short-term burden of carbon-limiting legislation will increase costs and lead to more job losses, as companies shift yet more production to cheaper places. Service and support professions such as healthcare and education will no doubt require more people – if we can afford to pay them. Yet even in growth sectors such as pharmaceuticals and software, our competitive advantages are being swiftly eroded. A society needs to know which sectors are likely to offer the best hope for the future. It will inform policy on education, taxation, zoning and welfare. Governments should dramatically reorganise education to prioritise technical and applied skills that are relevant to the 21st century. Banks that lend to small businesses, which then use the cash to hire staff, should be relieved of onerous new capital requirements that are forcing them to restrict facilities. There should be tax breaks and relief from aspects of employment legislation for companies that invest in genuine research and development and hire new staff. Think-tanks, civil servants, trade associations and business schools should be combining their intellectual resources to tell us where investors, entrepreneurs and the state should be directing their energies so as to boost job prospects.”
Johnson’s final thought is that “a nation without enough real jobs is a miserable place.” On that score, he is absolutely correct. Andy Grove, the former Intel CEO, has his own ideas about job creation [“How America Can Create Jobs,” Bloomberg BusinessWeek, 1 July 2010]. His conclusions seem to be counter to many of the ideas that I have discussed about job creation in the past. He writes:
“Bay Area unemployment is even higher than the 9.7 percent national average. Clearly, the great Silicon Valley innovation machine hasn’t been creating many jobs of late—unless you’re counting Asia, where American tech companies have been adding jobs like mad for years. The underlying problem isn’t simply lower Asian costs. It’s our own misplaced faith in the power of startups to create U.S. jobs. Americans love the idea of the guys in the garage inventing something that changes the world. New York Times columnist Thomas L. Friedman recently encapsulated this view in a piece called ‘Start-Ups, Not Bailouts.’ His argument: Let tired old companies that do commodity manufacturing die if they have to. If Washington really wants to create jobs, he wrote, it should back startups. Friedman is wrong. Startups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter. The scaling process is no longer happening in the U.S. And as long as that’s the case, plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs.”
Grove is clearly not arguing against entrepreneurs, innovation, or the value of start-ups; rather, he is focusing on the importance of scaling — of creating new business sectors in which thousands of new jobs are created in a very short time. He wants the focus of discussions to be on the back end of entrepreneurship rather than the front end. He continues:
“Scaling used to work well in Silicon Valley. Entrepreneurs came up with an invention. Investors gave them money to build their business. If the founders and their investors were lucky, the company grew and had an initial public offering, which brought in money that financed further growth.”
In this area, Grove certainly knows what he is talking about. He reminds readers of how Intel started back in 1968 when “two well-known technologists and their investor friends anted up $3 million” to start the company.” He continues:
“From the beginning we had to figure out how to make our chips in volume. We had to build factories, hire, train, and retain employees, establish relationships with suppliers, and sort out a million other things before Intel could become a billion-dollar company. Three years later the company went public and grew to be one of the biggest technology companies in the world. By 1980, 10 years after our IPO, about 13,000 people worked for Intel in the U.S.”
Grove notes that other Silicon Valley firms followed a similar trajectory while other companies “died along the way or were absorbed by others.” He continues:
“As time passed, wages and health-care costs rose in the U.S. China opened up. American companies discovered that they could have their manufacturing and even their engineering done more cheaply overseas. When they did so, margins improved. Management was happy, and so were stockholders. Growth continued, even more profitably. But the job machine began sputtering.”
Nowhere is this “sputtering” more evident than in computer manufacturing. Grove reports that there are about 166,000 fewer computer manufacturing jobs than there were before the first PC was assembled in 1975! In the meantime, the Chinese company Foxconn, “has grown at an astounding rate, first in Taiwan and later in China. Its revenues last year were $62 billion, larger than Apple, Microsoft, Dell, or Intel. Foxconn employs over 800,000 people, more than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard, Intel, and Sony.” For an insider’s look at Foxconn, read the 13 September 2010 issue of Bloomberg BusinessWeek [“The Man Who Makes Your iPhone,” by Frederick Balfour and Tim Culpan]. Grove claims that for every job American IT companies create in the U.S. they have been creating about 10 jobs overseas. He continues:
“You could say, as many do, that shipping jobs overseas is no big deal because the high-value work—and much of the profits—remain in the U.S. That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work—and masses of unemployed? Since the early days of Silicon Valley, the money invested in companies has increased dramatically, only to produce fewer jobs. Simply put, the U.S. has become wildly inefficient at creating American tech jobs. We may be less aware of this growing inefficiency, however, because our history of creating jobs over the past few decades has been spectacular—masking our greater and greater spending to create each position. Should we wait and not act on the basis of early indicators? I think that would be a tragic mistake, because the only chance we have to reverse the deterioration is if we act early and decisively.”
Grove indicates that there is a simple way to measure “the employment cost-effectiveness of a company.” He explains:
“First, take the initial investment plus the investment during a company’s IPO. Then divide that by the number of employees working in that company 10 years later. For Intel this worked out to be about $650 per job—$3,600 adjusted for inflation. National Semiconductor, another chip company, was even more efficient at $2,000 per job. Making the same calculations for a number of Silicon Valley companies shows that the cost of creating U.S. jobs grew from a few thousand dollars per position in the early years to a hundred thousand dollars today. The obvious reason: Companies simply hire fewer employees as more work is done by outside contractors, usually in Asia.”
The IT sector is the one most familiar to Grove, but he notes that “the job machine breakdown isn’t just in computers.” He looks, for example, to the alternative energy sector where many of the breakthroughs have been made by U.S. companies.
“Photovoltaics, for example, are a U.S. invention. Their use in home energy applications was also pioneered by the U.S. Last year, I decided to do my bit for energy conservation and set out to equip my house with solar power. My wife and I talked with four local solar firms. As part of our due diligence, I checked where they get their photovoltaic panels—the key part of the system. All the panels they use come from China. A Silicon Valley company sells equipment used to manufacture photo-active films. They ship close to 10 times more machines to China than to manufacturers in the U.S., and this gap is growing. Not surprisingly, U.S. employment in the making of photovoltaic films and panels is perhaps 10,000—just a few percent of estimated worldwide employment.”
As alarming as he views the exporting of jobs, Grove is just as concerned that “both scaling and innovation take place overseas.” He explains:
“Such is the case with advanced batteries. It has taken years and many false starts, but finally we are about to witness mass-produced electric cars and trucks. They all rely on lithium-ion batteries. What microprocessors are to computing, batteries are to electric vehicles. Unlike with microprocessors, the U.S. share of lithium-ion battery production is tiny. That’s a problem. A new industry needs an effective ecosystem in which technology knowhow accumulates, experience builds on experience, and close relationships develop between supplier and customer. The U.S. lost its lead in batteries 30 years ago when it stopped making consumer electronics devices. Whoever made batteries then gained the exposure and relationships needed to learn to supply batteries for the more demanding laptop PC market, and after that, for the even more demanding automobile market. U.S. companies did not participate in the first phase and consequently were not in the running for all that followed. I doubt they will ever catch up.”
Grove isn’t simply throwing up his hands and lamenting the loss of jobs, he spends the rest of his article explaining what he thinks can be done to turn the situation around. He continues:
“Scaling isn’t easy. The investments required are much higher than in the invention phase. And funds need to be committed early, when not much is known about the potential market. Another example from Intel: The investment to build a silicon manufacturing plant in the ’70s was a few million dollars. By the early ’90s the cost of the factories that would be able to produce the new Pentium chips in volume rose to several billion dollars. The decision to build these plants needed to be made years before we knew whether the Pentium chip would work or whether the market would be interested in it. Lessons we learned from previous missteps helped us. Some years earlier, when Intel’s business consisted of making memory chips, we hesitated to add manufacturing capacity, not being all that sure about the market demand in years to come. Our Japanese competitors didn’t hesitate: They built the plants. When the demand for memory chips exploded, the Japanese roared into the U.S. market and Intel began its descent as a memory chip supplier. Despite being steeled by that experience, I still remember how afraid I was as I asked the Intel directors for authorization to spend billions of dollars for factories to produce a product that did not exist at the time for a market we could not size. Fortunately, they gave their O.K. even as they gulped. The bet paid off.”
Grove notes that as difficult as the decision was to expand back in early 1990s, it was made easier because “China wasn’t yet open for business.” Even “more importantly, the U.S. had not yet forgotten that scaling was crucial to its economic future.” Since scaling is the key to economic growth and job creation, Grove rhetorically asks, “How could the U.S. have forgotten?” He continues:
“I believe the answer has to do with a general undervaluing of manufacturing—the idea that as long as ‘knowledge work’ stays in the U.S., it doesn’t matter what happens to factory jobs. It’s not just newspaper commentators who spread this idea. Consider this passage by Princeton University economist Alan S. Blinder: ‘The TV manufacturing industry really started here, and at one point employed many workers. But as TV sets became “just a commodity,” their production moved offshore to locations with much lower wages. And nowadays the number of television sets manufactured in the U.S. is zero. A failure? No, a success.’ I disagree. Not only did we lose an untold number of jobs, we broke the chain of experience that is so important in technological evolution. As happened with batteries, abandoning today’s ‘commodity’ manufacturing can lock you out of tomorrow’s emerging industry.”
If Grove makes only one profound observation, that is the one. If we are counting on new industries to emerge as technologies advance, the jobs that come with those new industries will go elsewhere if the U.S. doesn’t have the expertise to manufacture new products. So how do we recapture that capability and knowledge. Grove continues:
“Our fundamental economic beliefs, which we have elevated from a conviction based on observation to an unquestioned truism, is that the free market is the best of all economic systems—the freer the better. Our generation has seen the decisive victory of free-market principles over planned economies. So we stick with this belief, largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better. Such evidence stares at us from the performance of several Asian countries in the past few decades. These countries seem to understand that job creation must be the No. 1 objective of state economic policy. The government plays a strategic role in setting the priorities and arraying the forces and organization necessary to achieve this goal. The rapid development of the Asian economies provides numerous illustrations. In a thorough study of the industrial development of East Asia, Robert Wade of the London School of Economics found that these economies turned in precedent-shattering economic performances over the ’70s and ’80s in large part because of the effective involvement of the government in targeting the growth of manufacturing industries.”
Grove discusses the “Golden Projects” identified and supported by the Chinese government in the late 1980s and 1990s. Support for those projects was critical “to the rapid development of China’s information infrastructure and the country’s economic growth.” There is one caution to remember. Publications like The Economist and the Financial Times continually remind readers that governments have a terrible track record of picking winning technologies. So government support needs to be concentrated on creating jobs not on picking winners. Grove continues:
“How do we turn such Asian experience into intelligent action here and now? Long term, we need a job-centric economic theory—and job-centric political leadership—to guide our plans and actions. In the meantime, consider some basic thoughts from a onetime factory guy. Silicon Valley is a community with a strong tradition of engineering, and engineers are a peculiar breed. They are eager to solve whatever problems they encounter. If profit margins are the problem, we go to work on margins, with exquisite focus. Each company, ruggedly individualistic, does its best to expand efficiently and improve its own profitability. However, our pursuit of our individual businesses, which often involves transferring manufacturing and a great deal of engineering out of the country, has hindered our ability to bring innovations to scale at home. Without scaling, we don’t just lose jobs—we lose our hold on new technologies. Losing the ability to scale will ultimately damage our capacity to innovate. The story comes to mind of an engineer who was to be executed by guillotine. The guillotine was stuck, and custom required that if the blade didn’t drop, the condemned man was set free. Before this could happen, the engineer pointed with excitement to a rusty pulley, and told the executioner to apply some oil there. Off went his head. We got to our current state as a consequence of many of us taking actions focused on our own companies’ next milestones. An example: Five years ago a friend joined a large VC firm as a partner. His responsibility was to make sure that all the startups they funded had a ‘China strategy,’ meaning a plan to move what jobs they could to China. He was going around with an oil can, applying drops to the guillotine in case it was stuck. We should put away our oil cans. VCs should have a partner in charge of every startup’s ‘U.S. strategy.'”
Grove concludes his article with a few recommendations about how to create a “U.S. strategy” for scaling start-ups.
“The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability—and stability—we may have taken for granted. I fled Hungary as a young man in 1956 to come to the U.S. Growing up in the Soviet bloc, I witnessed first-hand the perils of both government overreach and a stratified population. Most Americans probably aren’t aware that there was a time in this country when tanks and cavalry were massed on Pennsylvania Avenue to chase away the unemployed. It was 1932; thousands of jobless veterans were demonstrating outside the White House. Soldiers with fixed bayonets and live ammunition moved in on them, and herded them away from the White House. In America! Unemployment is corrosive. If what I’m suggesting sounds protectionist, so be it. … The imperative for change is real and the choice is simple. If we want to remain a leading economy, we change on our own, or change will continue to be forced upon us.”
There are lots of perils associated with protectionist ideas, including Grove’s. It was protectionist actions that precipitated the Great Depression that led to the unemployment to which Grove alludes to above. However, I’ll let others discuss the perils of protectionism. I just hope that the important point that he is making isn’t lost in that debate. America does need to be able to scale start-ups if jobs are going to be created. That is a challenge worthy of the best minds in America. Do I think it will be easy to develop a U.S. strategy for job creation? Of course, not. Just keep reading.
The New York Times asked some experts a series of questions that included: “If so many kinds of jobs are being moved or cut, what skills should American workers develop that will have staying power? Is there any sector that can’t easily be outsourced? Or is this less a question of skills development but rather a question of labor policies and employment structure in the U.S.?” [“Are There Jobs That Can’t Be Outsourced?” 15 September 2010]. Here is how some of the experts responded. The first is Stephen J. Rose, professor at Georgetown University’s Center on Education:
“While some think that there are too many college-educated people out there for the jobs available to them, the changes in pay don’t reflect this. In 1979, those with a four-year degree earned 40 percent more than high school-educated workers; in the last decade, this ‘college premium’ rose to nearly 75 percent. This jump in relative price suggests that there has been a shortage of college-educated workers. In the long term, however, we need to align our workforce with the changing needs of the economy. According to the Center on Education and the Workforce’s Help Wanted report, the fastest-growing job clusters are those found in the occupations that demand the highest levels of education: managerial and professional, education, health care professional and technical, and science, technical, engineering, and mathematics (STEM), and community service and arts occupations. Together, these career paths will account for 31 percent of jobs in 2018. In the economy as a whole, 63 percent of all jobs will require some form of post-secondary education. While the American economy will continue to create jobs, the structure of the economy is continuing to shift in favor of workers with more than a high school diploma. It is increasingly important that young people and working adults are educationally prepared to succeed.”
The next expert, Ron Hira, associate professor of public policy at Rochester Institute of Technology and research associate with the Economic Policy Institute, appears to be at odds with Professor Rose. He writes:
“There has been much speculation about what types of American jobs could be moved offshore and which will remain immune. A number of studies have explored this question. Probably the best known was done by Princeton’s Alan Blinder who estimated that around 22 percent of all American jobs, or around 29 million, are vulnerable to offshoring. His key variable in measuring ‘offshorability’ is whether a particular occupation requires face-to-face interaction or if it could be done remotely. Those occupations that can be done remotely (think computer programmers and medical transcriptionists) are vulnerable while those that require face-to-face interaction (think surgeons and barbers) are not. Two important findings in the Blinder study are worth highlighting because they run against conventional wisdom. First, it found no correlation between the offshorability of an occupation and the level of education it requires. Just because an occupation requires advanced degrees doesn’t make it immune to offshoring. This finding runs counter to the standard prescription given by pundits and many economists that American workers simply need to ‘up-skill,’ get more education, and concentrate on ‘innovation’ and creativity. Second, and even more disturbing is his finding that 35 of the 39 science, technology, engineering and mathematics occupations are offshorable. This again contradicts the conventional wisdom that the answer to offshoring is to train more engineers. Critics have called the study speculative, but we do have some empirical evidence, based mostly on news reports, supporting the contention that a wide variety of occupations at many different skill levels are being moved offshore, even ones based on ‘innovation.’ These include engineering design, software engineering, legal work done by attorneys, insurance claims processing, call centers, financial analysis, accounting, news reporting and editing (for local online papers like the one in Pasadena, Calif.), architecture, animation, and even college professors offshoring their paper grading. We also know that many major American firms are offshoring innovation and very advanced research and development to low-cost countries. But the fact is, we have very little public data about offshoring numbers, so rather than responding to actual trends workers are speculating. The government needs to correct this market failure by collecting data on the types and numbers of jobs that are being offshored. In addition to developing sound data, the government should stop promoting offshoring by immediately fixing the tax incentives and closing the loopholes in the H-1B and L-1 visa programs that speed up offshoring.”
Hira believes that American workers are in a weak position because “some 93 of the private sector workforce is not represented by a labor union.” This means, he insists, that they have no way helping to create better labor policy. Others believe that labor unions have been part of the problem rather than part of the solution in recent years. For that point of view, read “Unions are an obstacle to progress and change,” by Luke Johnson, Financial Times, 22 September 2010]. Hira concludes, “When my students ask for practical advice, I tell them they have to manage their careers and get networked outside of their companies. They also need to monitor movements within their industry sectors since companies are apt to distort information given to their employees.” The next expert polled was Amar Bhidé, a professor of international business at the Fletcher School at Tufts University. His philosophy seems to be “don’t worry, be happy.” He writes:
“The pervasive dynamism that sustains our long-run prosperity inevitably leads to job losses on a large scale, but this is nothing to fret or ‘do something’ about. Simple, low-tech miscalculation is an important reason for job losses. Hopes for a new restaurant or for turning free-standing hair salons into national chains are often dashed. And when enterprise is widespread, so are such mistakes and the job losses that come with them. But as one restaurant fails another soon takes its place. Even a huge inventory of overbuilt homes is eventually worked down and employment in the construction industry resumes. ‘Creative destruction’ by new technologies and combinations is apparently more serious. The jobs eliminated when automobiles pushed aside stagecoach producers and A.T.M.s displaced bank tellers never came back. In the last half century or so we have witnessed a new kind of creative destruction: advances in transportation (like container ships), communications and supply chain management have caused an exodus of jobs to low-wage locations abroad, quite possibly forever. Why then haven’t fears of mass unemployment that date back to 19th-century Luddites been realized? One important reason is that job losses due to creative destruction (domestic or global) are more than offset by what I call non-destructive creation: the development of new goods that don’t displace old ones. M.R.I.s and C.T. scans complement X-rays for instance — they diagnose conditions that X-rays can’t. Moreover, even if the new goods are manufactured abroad, the associated service sector jobs (which are typically more numerous) stay at home. So even if X-rays start being read in India, as long as new “non-destructive” diagnostic technologies keep getting developed, radiologists, nurses and technicians will remain employed. Of course, we can’t predict what new jobs will show up: app developers for iPhones and professional bloggers were on no one’s radar screen just a few years ago. So we can neither train nor anticipate. We have to trust innovators and ensure that their enterprise doesn’t flag.”
The next expert, Hal Salzman, a professor of public policy at the E.J. Bloustein School and the J.J. Heldrich Center for Workforce Development at Rutgers University, disagrees with Professor Rose (and most of those cited in articles above) that more education will help. He agrees with Professor Hira that U.S. workers need some protection. He writes:
“Calling for more education as a bulwark against job offshoring is an intuitively appealing but fundamentally misdirected policy response. A more educated populace is certainly a desirable social goal but will do little to ‘protect’ American jobs. Offshoring now encompasses work across the skill spectrum. As leading firms open research and development labs around the world to meet global needs, we should expect science and engineering job growth to also occur around the world and no longer concentrated in just the U.S. For some fields where doing work remotely is more difficult, like medicine, we see offshore hospitals attracting traveling patients; in fields like law, documents can be researched and drafted by expert legal teams sitting in Delhi and a lawyer in-country of the client is necessary only to meet, greet and execute. Thus, there are now few jobs for which education alone provides U.S. workers an advantage. Moreover, there is neither a shortage of U.S. students who are world-class in their educational performance nor of college graduates with science and engineering degrees. The U.S. can claim the lion’s share of the world’s highest performing (domestic) science students and continues to graduate more than two times the number of scientists and engineers than are hired each year. Meanwhile, we produce an astounding number of very low performing students. Improving education is important but focusing on top tier skills is not a panacea for unemployment or poor economic performance. The challenge for the U.S. is to invest in and support innovation activities that address domestic and global problems (say, pioneering hybrids rather than hummers) while developing a highly skilled labor force at all levels. Job growth requires a coordinated policy response that includes some protection for U.S. workers as well as stimulating demand for domestic products and services.”
Peter Navarro, a business professor at the University of California-Irvine, blames Washington and Beijing for the jobless rate in the U.S. He writes:
“The best jobs program is trade reform with China. Since China joined the World Trade Organization in 2001, it has used a potent set of mercantilist and protectionist policies to shift millions of American manufacturing jobs offshore. Mercantilist policies range from illegal export subsidies and currency manipulation to the acquisition of American technology through piracy, counterfeiting, and forced transfer. China also uses tall nontariff barriers to keep American companies from scaling its great walls of protectionism. Because of these ‘beggar thy neighbor’ policies, China accounts for over 40 percent of the U.S. trade deficit in goods and over 70 percent excluding petroleum. This trade imbalance has shaved close to 20 percent off our annual G.D.P. growth rate, resulting in a failure to create millions of jobs over the last decade. America’s unemployed skilled manufacturing workers – both white-and blue-collar – can only trade down. Ominously, China is using the same mercantilist and protectionist policies to promote so-called industries of the future such as solar power. America can compete in the international environment if ‘free trade’ is also fair. America’s higher productivity can offset lower wages in China. What we can’t do is compete with any country whose competitive advantage is based largely on ‘beggar thy neighbor.’ While industries like wood furniture, textiles, and toys are likely long gone, the industries that we can hold on to range from autos and civilian aircraft production to computers, machinery, machine tools, medical equipment, paper products and steel. China is supporting ‘national champions’ in all or most of these industries and its industrial policy has taken strategic aim at America. With tongue in cheek, I say we need more college students to major in political science so they can go lobby our government to stand up to Chinese mercantilism. In all seriousness, we need much more of an emphasis in our universities on science and engineering. Regrettably, the current generation of unemployed workers is lost until the White House and Congress find backbones to stand up to Chinese trade policies.”
The final expert, Michael J. Handel, an associate professor of sociology at Northeastern University, believes that workers looking for jobs do need to be highly skilled but he also believes that better public policy is required. He writes:
“There are three parts to this issue — how to ensure an abundant supply of high-quality jobs for all Americans, whether offshore outsourcing is a serious threat to this goal, and whether skills can offer sufficient protection. Data from the Mass Layoff Statistics program of the Bureau of Labor Statistics shows that 1 to 3 percent of all non-seasonal layoffs in the first half of 2010 were due to outsourcing overseas with manufacturing bearing the brunt, according to employers. My survey of employees in 2005 found that 4 percent said work was transferred to other places, domestic or foreign, in the previous three years. The figure was much higher — 13 percent — for blue-collar jobs, particularly in manufacturing. Both the B.L.S. data and my survey probably underestimate the true extent of the problem. Workers don’t always know where the jobs went and employers aren’t always willing to say. Neither accounts for imports from non-American firms. Predicting the future is uncertain, but it is probably reasonable to conclude that globalization currently represents a small to moderate problem for the labor market in general. But it is a more significant problem for manufacturing and a few other sectors, and the workers and communities that depend upon them. Are skills the key to job security? At any point in time more education means higher wages, better working conditions, and lower unemployment. But the share of jobs in white-collar occupations that require some education beyond high school has been rising gradually over the last 50 years in the U.S. and most other economically advanced nations. Official projections in the U.S., Europe, and Australia indicate the pace of change will remain unexceptional over the next decade. My own survey shows that less than a quarter of all workers use any kind of math beyond fractions and decimals or write documents longer than five pages as a regular part of their jobs. There are many non-college jobs that remain, and will remain in the future. This is not to say that workers should forgo education or training. Improving educational quality and access have always been good ideas. But a prime mover of the job market is, not surprisingly, the state of the economy’s overall health. Employment and living standards were buoyed by strong growth during the second half of the 1990s. But even at that point, the economy struggled under the legacy of the recession of the 1980s: tougher policies toward labor, increased consumer debt to prop up living standards, and vastly greater financial rewards for top managers who contributed to this situation. The rewards became even richer for a financial sector whose speculative activity produced the current recession and the job loss experienced by millions with no connection to the industry or real estate. Global competition is a serious issue and acquiring skills is an important personal strategy for staying on top of the job market. But workers also need protection from a poorly managed macro economy.”
That’s probably more information about the future of jobs than you were looking for; and, perhaps, you are now more confused than you were when you started reading. If so-called experts can’t agree on what the problem is and how to correct it, it should come as no surprise that politicians in Washington don’t have a clue either. My fundamental premise — one that I’ve held for some time — is that you reward companies that create jobs and foster conditions that encourage such companies to grow. Washington Post columnist Robert J. Samuelson agrees [“The real jobs machine: Entrepreneurs,” 4 October 2010]. He writes:
“Americans like to create; they’re ambitious; many want to be “their own bosses”; many crave fame and fortune. … The bad news is that venture capital for start-ups is scarce, and political leaders seem largely oblivious to burdensome government policies. This needs to be addressed. Entrepreneurship won’t instantly cure America’s jobs’ deficit, but without it, there will be no strong recovery.”
We know that skills in the IT and health care sector are going to be in broad demand and that computer skills are also going to be essential for many of the jobs created in manufacturing and service (i.e., positions like automotive repair). Accounting skills will also remain important in the future. There will be jobs that require manual labor, but it will be difficult to make a livable income in such occupations. If you’re looking for a job, discover what you want, then find out if jobs are available or predicted to become available. If there are jobs in the field you desire to join, zero in on the skills required in that profession and enjoy the journey.
