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What Is to Be Done (on Jobs)?

Yesterday, I reported on the latest NCB News/Wall Street Journal poll which, along with other recent data, highlights key role that economic anxiety is likely to play in this November's election. Today's Washington Post has a front page article on how the Bush economic team keeps making mistake after mistake in responding to voters' economic concerns.

Advantage Democrats. But what is to be done to turn this advantage into the maximum number of Democratic votes? That's where things start to get tricky.

Start with the idea that there is something very odd indeed about the current pattern of job loss and failure to create new jobs. Charlie Cook expressed it well in his March 9 column:

For almost a year, I have been on a tirade about the political importance of the jobs issue in this election, even before I saw an eye-popping August report by the Federal Reserve Bank of New York on the subject. The New York Fed study showed that during the twin economic downturns of the mid-1970s, 49 percent of the job losses were cyclical -- or temporary job losses -- such as letting a shift go at the plant. Meanwhile, 51 percent of the job losses were structural, permanent job losses. The study went on to show that during the next downturn -- in 1981 and 1982 -- the percentages were exactly the same, 49 percent were cyclical, 51 percent were structural. The 1991-92 downturn was somewhat different, with only 43 percent of the job losses cyclical, and 57 percent structural.

What about this downturn? A measly 21 percent of the job losses are cyclical ones, while a whopping 79 percent are structural, permanent job losses. Why is this bad? It's bad because we know that it always takes longer to create a brand new job than it takes to call a shift back at the plant.

In December, the CEO of a California-based high tech firm told me that "there is no amount of overtime that we will not pay, there is no level of temporary services that we will not use, there is no level of outsourcing or offshoring that we will not do, in order to prevent us from having to hire one new, permanent worker in the U.S." As I travel around the country, meeting with business leaders, I hear similar, though less succinct thoughts in almost every sector and every part of the country. U.S. wages, health care, and other benefit costs have gotten so high -- and the press by investors for high stock prices is so great -- that the premium is on wringing every last bit of work out of as few employees as possible, to do anything but incur the costs of adding permanent employees.

If this description is roughly accurate, then this dynamic is going to be hard to counter by getting a bit tougher on trade, cracking down on "Benedict Arnold" corporations or providing a tax credit for manufacturers. Instead, it appears to call for a more direct role for the government in fostering job creation through direct spending (likely to be more effective in the short term) and socializing costs like health care and pensions that put US firms at a competitive disadvantage (likely to be more effective in the long run). Kerry does have some ideas along these lines--for example, his state tax relief and education fund, his energy independence plan and his plan to socialize and control some health care costs--but, perhaps because they don't lend themselves as easily to applause lines in speeches, we hear less about them.

That may have to change. A Democratic approach to job creation, in the end, has to sound like it would work. And my guess is that American voters will applaud the lines about Benedict Arnold corporations, unfair trade and the evils of outsourcing, but won't find them convincing as a way to create jobs. They will be looking for a more serious program that gets to the root of the current jobs crisis and the Democratic campaign has to be ready to give it to them.

Comments

Following Ruy's advice of yesterday, I read Ron Brownstein's LAT article on jobs and came away more impressed with the points made in that article about how national security concerns could trump even a solid Kerry strategy on adding jobs. I said it before here and I'll say it again. Events between now and election day will move America's voters to one candidate or another.

Kerry needs to say something significant now regarding a successful effort in finding Osama bin Laden. To look presidential, he can't be seen as being surprised at that event; especially since Rumsfeld has very publicly gone to a full court press on this effort. Kerry needs to be on the rightside ahead of time if bin Laden is captured or killed in the next few weeks. If the effort fails, Bush can catch it from Kerry and others.

If Kerry and his people think that jobs and the economy will be determinative in this election because the situation in Iraq, Afghanistan, Europe and the Americas will remain static between now and November, he will be taking a terrible risk.

He must, very soon, begin to say the kinds of things regarding national securuty that can immunize him against the "I told you so" he and the voters will hear from the Bush campaign; no matter if the event is awful (as Madrid) or triumphant (success in Afghanistan).

(Excerpted from http://www.opportunityservices.com/czarbp.html)

How America Can Learn To Stop Worrying And Love Outsourcing By Becoming The Silicon Valley Of Customized Lifelong Learning And Career Services


For-profit education is on the move.

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"In the past 18 months, the education and training services industry has performed exceptionally well, delivering 150% aggregate returns...All of these companies provide some form of post-secondary education targeted at the adult working student over the age of 24.

Yahoo! Finance
March 9, 2004

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The future of education is customization.

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"Corporate managers and human resources directors from 134 companies in 20 countries responded to BusinessWeek's survey of executive education this year...Nearly 42% of respondents said they were sending fewer employees to open-enrollment programs than they did five years ago, citing an unclear return on the investment and courses that are too generic and therefore not helpful enough once an employee is back on the job. But rather than abandon training altogether, some 50% of respondents said they were sending more people to customized programs...This year saw huge momentum for providers of customized executive education -- with full programs that can cost $5,000 to $10,000 per participant for a weeklong course. For the Top 20 providers on our list, custom programs were often more than 50% of revenues, topping $190 million."

Business Week
October 20, 2003

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Providers of customized education will support lifelong learning.

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“The continuing professional education of adults is the No. 1 gross industry of the next 30 years.”

Peter Drucker
Business 2.0 magazine
2000

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Credibly sustainable providers of lifelong learning will also offer career services.

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"The Professional Employee Organization (PEO) was the fastest growing business service during the 1990s."

"[the PEO's] clients, even the biggest, [lack] the critical mass...to manage, place and satisfy the highly specialized knowledge [worker]...This is what the PEO can provide."

"PEOs can take care of almost every task in employee management and relations: record keeping and legal compliance; hiring, training, placements, promotions, firings, and layoffs; and retirement plans and pension payments."

Peter Drucker
Harvard Business Review
April 2002

"PEOs are increasingly popular."

"When you sign with a PEO, your employees are lumped with the thousands of employees the PEO manages across many small workplaces—great for attaining aggregate health benefits."

Entrepreneur magazine
February 2004

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America is ideally suited to be the Silicon Valley of customized lifelong learning and career services (CLLCS).

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"The European Commission recently published a painstaking ranking of the world's best universities, compiled by researchers in Shanghai. Of the top 50, all but 15 were American."

The Economist
January 22, 2004

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America cannot rely on existing providers of non-customized education to fulfill the promise of CLLCS.

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“If history is any guide...customized programs will continue to improve until they threaten even the most famous educational institutions.”

Clayton Christensen
Professor
Harvard Business School
January 2003

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America, then, needs CLLCS startups.

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"Frank, you are a good man. Have you thought about joining this team? Your only alternative, of course, is venture capital. But their usual models require getting rid of the 'originator' within the first eighteen months. With Netscape it took a little longer, but you get the idea."

Randy Hinrichs
Manager, Learning Sciences and Technology Group
Microsoft Research
November 1998

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Randy sent this e-mail after he and I had met and my business plan for a CLLCS provider had been circulated internally at Microsoft. What follows is the current version of my business plan.

Let the 'good jobs' creation begin! :-)

Agree -- Kerry needs to CLEARLY lay out his differences on National Security with the Bush WH, and drive his points in over and over again. He doesn't have a long time to work on this -- otherwise Bush will nit pick him to death with one old vote after another, and make it impossible for him to define himself as competent on Foreign Policy, National Security, Homeland Security -- and how these all integrate with each other.

And without question, he should express his great confidence in the US forces now in Afghanistan, that if Bin Laden is there to be found, they will do their upmost to find him. High Hopes in the troops, sympathy with their tasks in rugged country, but at the same time Kerry has said in the past we could have gotten him at Tora Bora, but we were shy about using the 10th Mountain Division and Marines, and instead hired locals, who took money from both sides, and led him to Pakistan to safe haven. Kerry should remind -- and hope for a better outcome this time.

Homeland Security -- I think that covers Trains that have not gotten much attention. Kerry ought to be doing some rasberry on this one. Likewise busses, school busses, Intercity Busses. I heard one Republican say this week that security is difficult on subways because they are for the Public. If there were someway to deconstruct the underlying attitude (and class bias) here, Kerry should run with it.

What I fear is that Kerry has not pulled together his foreign policy - Security team and given them their marching orders for papers and speeches.

Joe-
I think Kerry can give a very succint and appropriate comment to the hunt for Osama- "It's about damn time. What took you so long?" Bush answering that leads to the morass of Iraq.

You mean campaign on policy that will actually address the problem -- rather than being a demogogue!?

Well, duh! Exactly !!!

If that excerpt is true, nothing but protectionism or some sort of fair trade will work. Even if the federal government pays for the benefits, new jobs will still go overseas.

For an interesting take on the jobs front and why they're not being produced in this recovery, read David Broder's column in this morning's Washington Post. He gives a lot of credit to Barney Frank (Dem. MA) for his candor on the structural changes in the economy which does not augur well for job increases.

Frank sees a much bigger role for government to cope with the problem and his views are not easily adopted by Democratic candidates without running the risk of catching a lot of adverse blowback from conservatives.

Ruy, good for you, for calling attention to this issue.The problem will not be solved as it was beginning in 1993, by a deficit-reduction plan. Keep writing about it. Jamie

Joe,

On the contrary, my blueprint leaves all possible heavylifting to the private sector -- I'm a CLLCS entrepreneur, after all -- and merely calls for an enlightened version of the manfacturing czar that the Bush administration has pledged to appoint.

So nothing impolitic about the approach...

Best,

Frank

Joe,

Oh, you meant Barney Frank. Whoops...

To do what Ruy suggests would certainly require increased government spending and tax increases, not decreases. To avoid, as much as possible, these falling on middle-class people, things like shutting down the offshore tax havens will have to be contemplated. Hence, the "Benedict Arnold" rhetoric still has a role. These tax-dodgers need to be vilified. They're part of the problem.

Also, someone will have to take on the argument that says every contract must go to the low-cost bidder, such as India today for programming work. The government can adopt a jobs-for-Americans-first stance, but they'd better be prepared from some Wall Street flak if they do.

Sorry, but "quieting down the Benedict Arnold rhetoric" is a recipe for surrender to Wall Street.

I think Kerry has legitimate economics on his side -- I would appreciate more from the professor from Texas. Trade and trade agreements are good for America, but they are only good for all Americans if they include provisions to help displaced workers. You sell free trade by redistributing the increased risk that workers take on in a free trade environment.
The cost of health care for employees as an inhibitor to hiring is a good story that is, I think sellable to voters. It is more of a relative cost than the story gets across, but a strong message aimed at ameliorating the health care costs of businesses might be doubly advantageous. Soon, non-health care business leaders will start getting serious about gettiing out of the health care business, and it would be nice to align with them.
In support of Kerry's positions we only need to point out the actuary who was threatened with firing if he gave honest answers to Congress over the Prescription bill. His findings were that the "privatisation" aspects of the bill would increase the cost for those that wanted to stay in traditional Medicare- see http://www.calpundit.com/archives/003481.html for more

Kerry should use Bush's opposition to stem cell research as a jobs issue. The next wave of technology jobs will be in genetics/biotech. We need to encourage scientific research in this area, not let it go to other countries like the Bush admin has.

The CEO cited hit the nail on the head as to why jobs aren't being created: there is no confidence in this recovery. If business picks up, they will do anything but hire, lest they get hung with new employees in another downturn. Business knows the economy is running on caffeine, and the growth is not sustainable. Although Bush can't be really blamed for the loss of jobs, he can certainly be blamed for the conditions under which nobody wants to hire.

Joe Zainea's comments are on target. Kerry ought to commend the president for FINALLY taking the capture of Osama seriously, an urgent task sidelined by the invasion of Iraq. As with the Dept. of Homeland Security, the president once again drags his feet on national security.

Look around - who doesn't have jobs? They are everywhere - if you are willing to work. I was out of the workforce for 3 years staying home with my kids and then my husband lost his job. We used this as an incentive to start a business - so he stayed home with the kids while the business is getting started and I went back to work. It took me 4 weeks to find a job. I looked hard and found one, maybe not my dream job, but it's a opportunity to get back into the business world. I am paying the bills, my husband is starting a good business - that is bringing in money already and I'm still getting phone calls about work - and with the increase in Manufacturing I expect to find a better paying job by the end of the summer. Of course, my husband is counted as unemployed, but he's contributing to the economy in a very important and undermeasured way - as a small business owner. Get used to it, as the Summer approaches, more stories like ours will come out and the optimism of the American Dream will sound out the pessimism of the Kerry frown!!!!!!