The Jobs’ Crisis and American Employment Policy: A Call for a Jobs Compact

1. The Jobs’ Crisis and American Employment Policy: A Call for a Jobs Compact Thomas A. Kochan MIT Sloan School of Management and Institute for Work & Employment Research Northeastern University Open Classroom Boston, MA September 19, 2012

2. Context • Worst Jobs’ Crisis since Great Depression • Quantity: Persistent Jobs Deficit • Quality: 30 years of stagnant wages: Broken Social Contract • Outdated Employment Policies: Mismatch between changing workforce, work, and economy • Policy Stalemate turned to Political Polarization • Vacuum of National Leadership

3. The Good News • Local Innovations as a base for national policy • 30 years of innovation • 30 years of research, tracking, evaluation • Growing recognition of crisis • Harvard’s “Competitiveness Summit” • And yes there is an election coming….

4. A Proposal • A Jobs Compact: 20 million jobs by 2020 • First step in comprehensive employment policy reform

5. Overview • Dimensions of the jobs crisis—in numbers & pictures • Root causes that need to be addressed • Substantive dimensions of the Jobs Compact • Complementary policy and institutional innovations • How to get there—can we get there???

6. Dimension 1 of the Employment Crisis: Persistent Jobs’ Deficit • 8.1% unemployment; 16-20% underemployment • Deeper, faster employment declines in Great Recession than GDP decline would have predicted • Slower post-recession job growth • Large firms reluctant to invest in U.S. • Longer term decline in new start-ups • Serious cohort problems • New graduates—underemployment will leave long term, possibly career long, imprints on income • Long term unemployed—50+ year olds will never recover

7. Job Loss in Five Most Recent Recessions as Percent of Peak Employment Source: Bureau of Labor Statistics, Center for Economic and Policy Research

8. Dimension 2 of the Employment Crisis: Long Term Declines in Job Quality • Broken “Social Contract” • 1945-80: wages and productivity grew in tandem • Since 1980: good productivity growth; stagnant wages for majority of workforce; trend worsened in past decade • Greatest inequality since 1928—eve of Great Depression • Top 1% of families captured 58% income growth 1976-2007; • Top 10% captured 50% of national income in 2007 • Other job quality indicators • Declines in retirement plans and savings • Health insurance coverage gaps (45 million without employer provided health insurance • Declines in apprenticeship training • Declining job satisfaction

10. Private Sector Defined-Benefit and Defined-Contribution Plan Coverage, 1979-2009 Source: Employee Benefit Research Institute. EBRI's estimates for 1998-2008 were done using Department of Labor and Current Population Survey data. Credit: Alyson Hurt / NPR Source: http://www.npr.org/templates/story/story.php?storyId=124131819

11. Wall Street Journal Estimates of Retirement Income Shortfalls Wall Street Journal, February 19, 2011.downloaded at: http://online.wsj.com/article/SB10001424052748703959604576152792748707356.html

12. Declining Job Satisfaction 1987-2009 Source: The Conference Board. Data used with Conference Board Permission.

13. Root Cause (1): Market Failure • Financialization of the economy • Rise of investor capitalism in 1980s • Leveraged buyouts, hostile takeovers • Deregulation of financial markets and institutions • Rise of shareholder maximization as the sole purpose of the firm • Growth of financial sector—talent, profits, and compensation • Globalization of investment options and markets • Net result: • Gulf between interests of individual firms and national economy • Yet overall business community and national economy interests are more aligned

14. Net Result: Two Equilibria Economy • Some firms compete with “high road” strategies • Focus on innovation, productivity, quality, service • Invest in employees’ human capital development • Employ “high performance” employment practices and labor management partnerships • But are held back by dominant “low road” competitors • Focus on low cost/low labor cost strategies • Outsource lower skill work (domestic and global) • Avoid (successfully) unions • Employ traditional command and control management practices • Oppose any and all employment/labor policy reforms

15. Root Cause (2): Institutional Failure(s) • Mismatch between labor market demand and institutions • Movement to “knowledge” intensive economy; college education and technical training did not keep up • Decline of unions and collective bargaining as • A countervailing power • Source of innovation in employment practices • Retreat of government from labor market policy • Wage norms abandoned • Labor Relations policy breakdown and long term impasse • Weaker enforcement of employment standards • Slow take up of new “two-track” enforcement models • Labor policy relegated to low status as a political problem rather than a set of economic policy tools • Vacuum in business-labor-government-education dialogue

16. Proposal: Create a Multi-stakeholder Jobs’ Compact

17. Needed: 208,000 new jobs per month to 2020!

18. Elements of a Jobs Compact • State, local, and education job investments • Infrastructure Investments • Manufacturing • Recover lost manufacturing jobs • Capture next generation manufacturing jobs • Rebuild Apprenticeships • Diffuse the best Community College-Industry Partnerships • Second Chance College Technical Courses • On-line • In-person

19. Where could these jobs come from?

20. Complementary Employment Policy Changes • New Objectives and Approach to labor law and policy • Fix the basics—assure worker access to unions • Promote labor-management partnerships • Proactive efforts to diffuse innovations and engage in further experimentation and evaluation • Reduce High Road-Low Road Gap aka “Level the Playing Field” • Industry-Region Based Learning Networks • Raise the minimums—minimum wage • Use purchasing power to promote high employment standards • Modernize Employment Standards Enforcement • Internal Responsibility systems • Leverage key points in value chain • Partner with unions, community groups, worker centers….

21. Organizational Reforms: Education • Expand access to on-line courses and technical degrees for underemployed recent graduates • Expand B-School offerings on how to build, lead and manage sustainable organizations that work for shareholders, employees, and society • MBAs, alumni, current and future entrepreneurs • Action Learning – expose students to real problems • Broaden constituents – engage labor and government leaders • Facilitate the Jobs’ Compact in Regions

22. Organizational Reforms: Business • Work together—Strengthen industry, regional networks • Network strategies to spread high road strategies • Learning networks • Joint investments in education/training • Strengthen cross-stakeholder ties—universities, community colleges, labor, government

23. Organizational Reforms: Unions and Professional Associations • Treat knowledge as key source of power • Expand apprenticeships and professional development-certification programs • Focus on becoming the labor supplier of choice • Develop next generation leaders • Create life-long recruitment/membership models • Strengthen cross-stakeholder ties—business, education, and government

24. Organizational Reforms: Government • Bring employment/labor back into mainstream economic policy making • Return to an outreach tradition: Strengthen cross-stakeholder ties: business, education, labor

25. Reinvigorating the Department of Labor • Defining Role: Catalyst for Diffusing Innovations • Rebuilding “Social Dialogue” with broader constituencies • Labor, Employers, Workforce Groups, Community Organizations/Intermediaries, Education, Researchers • Rebuilding Internal Analytical Capacity • Strengthening Links to External Researchers

26. Leading Policy: Secretaries’ Past

27. Or…Leadership from the Outside? • Do we revamp President Obama’s Jobs & Competitiveness Council? • Should we leave it to Harvard Business School? • Can our Research Community Lead the Effort? • Do we sit it out until after the election?

28. And then… Wisconsin

29. And Now…..Massachusetts!

30. What if we Fail to Act? • Continued decline in American living standards • End to the “American Dream” (each generation should be able to do better than the last) • An era of social unrest?