How Can We Create Jobs in the U.S.?

Power house worker adjusting a steam pump

Steam Fitter
Photo by Lewis Hine, 1920

As we approach the end of this campaign season, both candidates are talking about jobs. It’s about time. The employment outlook is still bleak. Unemployment is running around 8.5% nationally, and is much higher among the young and minorities. It appears to me that neither Democrats nor Republicans have advanced any truly convincing ideas of how to create good permanent jobs for the currently unemployed. It was on September 8, 2011 that President Obama gave his Jobs Act speech to a joint session of Congress. The Senate killed the bill by rejecting cloture on it. Since that time, our grid-locked Congress has done nothing significant to address this major problem in the U.S. economic recovery.

In thinking about the problem of how best to create good jobs in the short term I decided to do a little Google research on the topic. Opening the popular search engine, I entered “How to create jobs in the United States” as my query. In .65 seconds Google responded with 1,499,000,000 hits. It appears there is no shortage of ideas on the subject. Given the large number of search results , I decided to look at several articles on the right and the left, all the while looking for areas of consensus. After several hours of reading, the solutions to the problem of job creation began to repeat themselves and so, I quit reading.

It is no secret that the major positions on how to create jobs are fundamentally opposed. This fact has been largely overlooked by many in the presidential campaign. Anyone who fails to appreciate the different economic approaches advocated by Romney and Obama doesn’t fully understand the key economic issues at stake in this election. Notwithstanding all the talk about the 1% vs. the 99% and the character flaws of the 47%, the candidates’ solutions for job creation are quite different. In case you were absent for this lecture in macroeconomics class, on one side are the Keynesians who want greater government expenditures to stimulate demand, investment, and employment. In the process of increased employment additional tax revenues are generated and the original expenditures are recouped. This is the basic approach, along with tax credits to businesses that create jobs and an increase in taxes on the wealthiest Americans, of the Obama jobs creation plan. Targeted government expenditures include the aging national infrastructure.

On the other side are those who argue that the way to increase jobs is to reduce all government spending, lower corporate income taxes, and commit to no new taxes whatsoever. For the free-market conservatives (sometimes referred to as neo-liberals) the recitation of these measures has become a mantra for virtually all social ills. Mitt Romney asserts again and again that government does not create jobs.This is, of course, in keeping with the neo-liberal view that the marketplace is the best regulator and distributor of goods and services as well as the best determinant of social policy. Proponents of this view often cite Milton Friedman and Hayek (heroes for Paul Ryan) for having laid bare the mistakes of Keynesian economics. It takes only a moment’s reflection, however, to note that both the public sector, i.e., government, and the private sector create jobs. In the United States there are some twenty-two million public sector jobs. As pointed out in the New York Times last week, people holding these jobs are postal employees, soldiers, policemen, teachers, public park employees, city road crews, garbage collectors, bureaucrats, state university college professors, and so forth.

Assuming that either or both points of view are correct, it bears noting that, with the exception of continued military spending, neither perspective automatically creates good or long term jobs. The Keynesians argue that it is important where stimulus funds are spent. Currently, the consensus is that funds should be spent on infrastructure and schools. It is unlikely that arguments calling for expenditures on more gambling casinos or tanning salons will carry much weight in the political debates. Similarly, the neo-liberals argue that the success of investment incentives is in part conditioned by the attitudes of corporate executives. Reportedly, Bill Clinton’s new book criticizes Obama for attacking the elites of the financial sector, thus making them angry and obstinate. And in truth, both approaches to jobs creation operate in a larger environment of speculation, attitudes, fears, expectations, and other phenomena that are best understood as psychological and look very little like economics.

So what are some specific suggestions for the creation of jobs in the United States?

A number of the suggestions I found require that government only set the stage for job creation by creating the conditions that induce businesses to hire workers. For example, it is suggested that the government:

  • Lower the minimum wage.
  • Lower corporate taxes to lessen their tax burden and employ more people.
  • Establish tax credits and other incentives for businesses that invest at home, or bring manufacturing jobs back to the United States.
  • Establish tax credits for corporate research and development activity.
  • Establish a program that offers directs subsidies to businesses for employment. (Zachary Roth)
  • Encourage companies to reduce employees’ hours instead of laying them off. (Zachary Roth)
  • Forgive student loans to those who become entrepreneurs.
Other suggestions are longer term and require greater government participation in the process. They are more controversial, and many are long-term solutions. Various writers suggest that government should:
  • Create a “long-term public-private stragegy in terms of boosting our manufacturing sector” (Jared Bernstein). Other countries such as China and Germany do this successfully. The U.S. has no national industrial policy, and the idea is opposed ideologically by many conservatives.
  • Take steps to combat the trade deficit by first devaluing the dollar 10 to 20 percent (C. Fred Bergsten). In other words, do what China has done to support their export sector. By devaluing our currency we would immediately make our exports more attractive in international markets. This has been done previously.
  • Rebuild the nation’s infrastructure.
  • Invest government assistance to science, engineering, and technical education. We have an increasing lack of talent in high tech industries. Many graduate programs in these fields cannot fill the seats available with students from the United States.
  • Create a Department of Tourism for the United States to support the tourism industry as do many other countries.
On an upbeat note, both liberal and conservative writers agree on a couple of immigration issues.
  • First, we should revise our visa and immigration policies to allow talented foreign graduate students to stay in this country upon receipt of their degrees instead of sending them home. This would significantly help the science and engineering fields. It makes little sense, it is argued, to educate these students in American universities and then force them to return to their countries where they will  become competitors with U.S. business.
  • And second, we should allow immigrants who create jobs here to stay here.

Some of the innovative suggestions for a short-term reduction in unemployment seem, on their face, to be unworkable or simply bizarre. That doesn’t mean they are bad suggestions, but their face validity is suspect. Dennis Kucinich of Ohio, for example, has suggested that we lower the age of retirement for social security from 66 to 60. As millions leave the job force, the unemployed could then fill the vacancies created by the retirements. This idea has been discredited on economic grounds as the effect of so many new people joining the social security pension system at once would prove unsound.

Bill Clinton has proposed that the federal government initiate an employment program to paint all the building tops in the United States white. He claimed that the energy savings alone would pay for the employment of those who do the work. This is innovative thinking, but I read recently that the basic idea is unsound, inasmuch as the energy savings from white building tops would not be great enough to offset the cost of the project. However, Clinton’s proposal that buildings across the country be retrofitted for energy savings like that done for the Empire State building should, I think, be closely examined. Clinton’s idea is that the project would generate immediate employment and support green energy companies. The costs, he claims, would be recouped by the energy companies within five years.

Unfortunately, there don’t appear to be any quick fixes for our employment woes. Some suggestions above might operate rather quickly if implemented. Most, however, appear to be suggestions for the long term, and many are controversial. High-tech jobs might be the future of employment in the United States, but not in the short-term. Changes in the Chinese employment situation, coupled with strengthened Chinese currency and a weakened U.S. dollar might make our workers more competitive. But those are long term hypothetical prospects, not immediate realities. The consensus among the writers I reviewed is that additional long-term prospects will depend on a highly trained work force for high end manufacturing. In the meantime, the outlook is discouraging for those who are unemployed. The best bets for near term employment are to be found in service occupations, especially in health care, sales, food preparation, and construction. These are not high paying jobs.

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