Job creation, as Dr. Ben Bernanke has said, is the most important problem facing the US economy. Harvard’s Dean Nohria has bemoaned the breaking of the Wealth-Jobs link in recent decades.
The reason why the Wealth-Jobs link is broken is that business’s approach to growth is broken.
The link can be restored, and enormous numbers of jobs created, if we wake up to one simple realization: Much of today’s business growth simply redistributes the economic pie. If business and government seize opportunities that grow the pie, jobs will follow.
Such growth is not Utopian (nor is it pie in the sky !). The simple, practical growth opportunities outlined here are but a sample of how business can find plentiful such 'grow-the-pie' opportunities.
Unemployment is a huge and complex problem - it has preoccupied experts, eminent economists and leaders of government and business. Trenchant unemployment has confined large numbers of people to poverty, and is holding the economy back from robust growth. Thus the potential of the US economy, and that of its people, is being held back by this problem, that many believe to be intransigent.
The United States enjoys a slew of strengths: its economy is the world’s largest and most diversified; it is home to many high technologies, and is still the best place to birth new ones; mighty US corporations are innovators in technology and management; American consumers are early adopters and willing to pay for quality; most countries still look to the US for leadership in economic matters. Yet when it comes to creating employment opportunities for its citizens, these strengths seem forgotten. The discourse remains stuck in a downbeat, pessimistic, downward spiral.
The weakening of the Wealth-Jobs link in recent decades is admittedly vexing. However, the reason why the Wealth-Jobs link is broken is that business’s approach to growth is broken (I'll explain why, shortly).
The link can be restored if leadership in business and government is willing to recognize, and seize, many growth opportunities that are going untapped. These are opportunities that grow the economic pie. I'll explain below how such growth will help business prosper while creating employment - in the short- and long- term.
Business, in its quest to be competitive, will continue to be about using resources efficiently (and that includes human resources). As the economic recovery progresses, cyclical unemployment in the US will right itself (albeit at a slow pace); structural unemployment caused by the flight of jobs to low-cost locations is more stubborn. In addressing either, one should guard against measures that will make US business less competitive - that can only exacerbate the employment problem !
Fortunately, job creation doesn't have to be at the expense of efficiency. It can be achieved thru business's other imperative - growth.
Much business growth simply redistributes the economic pie. This creates 'winners' and 'losers' - and workers have largely been on the 'losing' side. Indeed, research from the US Bureau of Economic Analysis and the OECD shows that workers' share of the economic pie has been shrinking since the 1970s. The weakened wealth-jobs link is one result.
However, the conventional mindset that sees growth as a trade-off between a business and its stakeholders has had wider pernicious consequences. The untrammeled quest for such redistributive or "share-the-pie" growth has led each company to ruthlessly - and myopically - pursue it's own gain, unmindful of the fact that its growth may be at the cost of competing companies (and frequently and the cost of its own suppliers and even customers). This is why I'm saying that business's current approach to growth is broken. If proof were required of this, one needs look no further than the constant instances of corporate malfeasance; the 2008 financial crisis merely represented the culmination of decades of such ruthless, powermongering and exploitative growth.
Can business break out of this win-lose calculus? Yes, by finding growth in opportunities that grow the pie for all stakeholders - customers, investors, employees, suppliers, competitors and society at large - within the US and in countries the US does business with. Such 'grow-the-pie' opportunities produce more winners than losers, and as shown below, jobs are often a natural outcome.
Isn't such growth impractical or Utopian? Far from it - and it's not pie in the sky either. The simple, practical growth opportunities outlined below are but a sample of how business can find plentiful such 'grow-the-pie' opportunities.
The growth opportunities outlined here show how business, aided by prudent public policy actions, can grow the pie. The significant jobs gained (or saved) will help restore the wealth-jobs link.
As can be easily seen, none of these opportunities involve inordinate investment or intolerable risk. None is politically difficult, or demands abstruse managerial skills or extraordinary leadership. And certainly none depends on altruism – these grow-the-pie opportunities are driven purely by business sense.
* US strength as a tech powerhouse is underutilized - translate it into jobs
Thinking grow-the-pie unlocks potential that's lying hidden, often waiting to be tapped. The US Patents Office database is by far the world's most extensive. It's also well-known that 90% of all patents lie idle. The USPTO can work with patent holders to selectively throw a subset of unused patents open to any company worldwide, the quid pro quo being that R&D or manufacturing of products that use those technologies should be done in the US .
The US has the world's finest university system, and emerging nations such as China and India have legions of students waiting to be taught. That's a match waiting to be made. US universities, thinking like businesses, can leverage their powerful brands to provide distance education from US-based campuses, train faculty from overseas universities in the US , and help overseas universities that want to replicate the admired US university model.
Emerging nations yearn to proclaim their arrival on the world stage by showcasing their sporting prowess. They often fall short on this aspiration owing to poor infrastructure for sports training, much of which is high-tech today. Training sportspersons in the US can help these nations boost their medals tally - and the jobs tally for US sports trainers and makers of sporting equipment.
America has failed to build thriving industries on many technologies spawned by the ingenuity of her inventors. One example: America has played a leading role in creating the compact flourescent lamp (CFL), yet has been unable to build CFLs economically. And GE in September closed the last US factory that made incandescent light bulbs, sending those jobs to China . The company abandoned a plan to retrofit the plant to make CFLs, as it proved uneconomical. Tax breaks or other incentives can help retrofit an obsolete factory for new uses - and save jobs. Government revenue lost can be made up by boosting taxes on factors of production other than labor such as energy and natural resources.
* Harness overseas prosperity by adapting to overseas tastes
American brands are aspirational, and overseas customers value the 'Made in USA ' tag, particularly for high-value products and services. US companies have unmatched product design and development skills in many industries; these can be put to work to engineer products for overseas markets. This often needs a deeper understanding of customer needs in the growing markets of Asia and Latin America (which are often very different). Harley-Davidson sells motorcycles in the Indian market that are made from parts manufactured in US plants; it soon plans to launch a bike specially designed for the Indian market - the world's second largest for such vehicles.
The Chinese government has recently specified leisure boating as a focus area for developing tourism. The US exports yachts worth over $2 billion - very little of those exports go to China . Designing yachts tailored for the Chinese market can help boost these exports - as an example, yachts are typically bought for business use rather than for leisure in China . Chinese yacht buyers also expect a configuration different from that Western buyers do, with a Karaoke room being a must.
Thus there is hunger for products designed and manufactured in the US , adapted for local markets. Most importantly, creating products at home and selling them abroad keeps jobs at home.
The vast, advanced US services sector too can boost its jobs by leveraging emerging nations' new-found prosperity - with a little effort to understand local context and needs. US states and cities are beset by budget deficits and layoffs. At the same time, rapidly modernizing emerging nations need help setting up public services such as healthcare, public transport, education, law enforcement and urban administration. That's a business opportunity US states and cities can avail, and have their public services staff help their counterparts in emerging nations set up these services.
Air travel is taking off in emerging nations and growing to the sky - US airlines can help airlines in those countries set up networks, and perhaps even provide experienced pilots and staff.
* Don't slam the doors on willing talent
Few things erode public trust in business as much as the sight of companies prospering at the cost of the workforce. The wealth-jobs link in the public mind suffers each time a layoff or a factory closure is announced; yet business often sees these measures as a quick route to stemming losses or boosting profitability.
Growing the pie often needs thinking win-win, and actively helping a stakeholder such as a supplier, employee or the community. Investing in stakeholders ensures that they are willing and able to provide support when needed. Also, growth that promotes the well-being of stakeholders is likely to be more sustainable than growth that singlemindedly maximizes self-interest. Before laying off employees, a company can check if a supplier wishes to hire any of them. It's not difficult to do, may help the employee retain a much-needed job, and help a supplier get talent they need. Before closing a factory, a company can check if a supplier (or a competitor !) wishes to use that slack capacity (for a charge, of course!). There are plenty of win-win opportunities among the low-hanging fruit.
Voluntary salary cuts can save jobs in difficult times - British Airways , HP / EDS and US Art Museums avoided layoffs because executives and rank-and-file employees accepted pay cuts. Such cuts may also help a company avoid losing valuable talent that may be costly or difficult to rehire when times turn for the better.
Factories rarely operate in a social vacuum; they are usually deeply embedded in the local community. Working with the community to retrain and rehabilitate laid off employees can help those employees find alternate gainful opportunities - and earn community goodwill that can stand a company in good stead.
Wall Street, focused on quarterly gains, favors layoffs as easy pickings in cost cutting. Government can weaken quarterly financial reporting requirements (having to report in full detail only once a year will give executives much-needed breathing space) and make it easier to delist entirely from the stock exchanges. These measures will reduce business's motivation to pander to stock markets - and promote grow-the-pie thinking.
* Boost viability, confidence and PRIDE in American enterprise
Small businesses are the biggest job creators in the US economy. Government can set up business incubators in partnership with business and universities, particularly in areas where joblessness is high. A US Dept. of Commerce study found that business incubators create jobs at the lowest cost to government (lower than other initiatives such as infrastructure spending).
The 'Made in the USA ' tag has lost lustre in its homeland. One move towards renewing it is thru a "Buy US" campaign in schools, factories, universities and the media which will promote pride, and evoke the heyday of American industrial might.
Employees can do their part to help the US regain its manufacturing competitiveness. GE is adding a factory in Schenectady , NY to make batteries for electric locomotives, and another in Louisville , Ky. that will produce hybrid electric water heaters — heaters now made in China . These factories, which will create substantial jobs, were made possible because unions agreed to significant concessions - a sterling example of win-win, grow-the-pie thinking by employees.
Grow-the-pie thinking is particularly fruitful in mature industries, where growth opportunities otherwise tend to be scarce. The "Cash for Clunkers" program which boosted new car sales by accepting trade-ins of used cars saved 42000 US jobs. The US Dept. of Energy has a similar program for appliances such as dishwashers and airconditioners. Business or government can offer similar trade-in programs for items such as computers, phones, software and office equipment to boost consumption, and hence jobs.
Easing frictions to business will create jobs - the World Bank's Ease of Doing Business study shows the US ranks fairly low on key business activities such as ease of exports and imports, taxation and construction permits.
* Open the doors to unused talent
An irony is that even as unemployment runs high, many jobs lie vacant for lack of candidates who meet the skill or experience requirements specified by employers. This skills gap can be narrowed either by boosting candidates' skills, or by lowering job requirements(!). Let's consider the second one first.
Job recruitment criteria are often over-engineered; this keeps aspiring candidates out of jobs and crimps companies' growth prospects. Often, a lower skill level may be good enough to do the job. Relevant experience can often substitute for educational qualifications - a computer programming job may not need a college degree if the candidate has been writing programs since high school. Companies such as Zappos focus on recruiting at the entry level, and take responsibility for equipping recruits with skills. Such candidates may be happy to work for a lower salary too, for an opportunity to gain valuable experience that may otherwise be shut to them.
Outdated technical skills are often barriers to employment. So are a lack of interpersonal skills and confidence. There's potential to create a whole new industry that specializes in skilling (and re-skilling) here.
These are but a very small sample of the vast opportunities that can be opened up by thinking win-win to grow the pie for all stakeholders. Clearly, many more opportunities in this vein exist. They will go a long way toward winning back public trust in business, and restoring the broken wealth-jobs link. And help revitalize a nation that seems to have forgotten its strengths.
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