Slides from Lessons for Employment Policy in the New Administration: LERA-EPRN Panel 1-4-2013

Lessons for Employment Policy in the New Administration: LERA Panel, Jan. 4, 2013 San Diego ASSA-LERA Meetings For audio of the panel, go to http://archive.org/details/LessonsForEmployment PolicyInTheNewAdministrationLeraPanel1-4-2013

Lessons for Employment Policy in the New Administration Jan. 4, 2013 2:30 pm, Marriott Marquis & Marina, Laguna Labor & Employment Relations Association Lessons for Employment Policy in the New Administration (Panel Discussion)

Panel Moderator: Thomas Kochan (Massachusetts Institute of Technology) Lisa M. Lynch (Brandeis University) Matthew J. Slaughter (Dartmouth University) Daniel J.B. Mitchell (University of California-Los Angeles) Note: Some presenters skipped selected slides in their presentations.

Slides are stacked in the order of the speakers shown above which was also the order of presentation.

For audio of the panel, go to http://archive.org/details/LessonsForEmployment PolicyInTheNewAdministrationLeraPanel1-42013

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 EPRN/LERA/AEA Session January 4, 2013

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• Outdated Employment Policies: Mismatch between changing workforce, work, and economy • Policy Stalemate turned to Political Polarization • Vacuum of National Leadership

A Proposal • A Jobs Compact: 20 million jobs by 2020

• First step in comprehensive employment policy reform

Dimension 1 of the Employment Crisis: Persistent Jobs’ Deficit • 7.7% 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

Job Loss in Five Most Recent Recessions as Percent of Peak Employment

Source: Bureau of Labor Statistics, Center for Economic and Policy Research

The State of Working America, 2012 edition, Economic Policy Institute.

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

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) and cost increases – Declines in apprenticeship training – Declining job satisfaction

450 400 Index (1947 = 100)

350 300 250

200 150 Productivity Household Income Average Hourly Earnings

100 50

0 1950

1960

1970

1980

1990

2000

2010

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

Where could these jobs come from?

Contributions to Closing the Jobs Deficit GDP Growth (7.5 million) Infrastruture (4 million) Recaptured Manufacturing (2 million) Next Gen Manufacturing (1 million)

Apprentices (2 million) Community Colleges (2 million) Second Chance College Tech Courses (1.5 million) State/Local Government (0.6 million)

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….

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

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

Leading Policy: Secretaries Past Secretary

Administration

Engagements with Labor & Employers

Arthur Goldberg & Willard Wirtz

Kennedy & Johnson

President’s Labor Management Committee

John Dunlop

Ford

Labor Management Group

Ray Marshall

Carter

Steel Industry Tripartite Committee

Robert Reich

Clinton

Commission on Future of Worker Management Relations (Dunlop Commission)

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?

Lessons for Employment Policy for the New Administration

Lisa M. Lynch Dean, The Heller School for Social Policy and Management Brandeis University January 2013

Today’s Employment Report • Headline Numbers: – U rate 7.8% – New jobs +155,000, private sector +168,000, • govt -13,000

– Average hours up – Average hourly earnings up 2.1% – Upwards revisions in past employment numbers

• Overall a solid report but still not enough to make a rapid dent in overall unemployment

Opportunity Deficit • 9 million net new jobs needed

9 million jobs needed

Opportunity Deficit • 9 million net new jobs needed • Decent work – Pay – Benefits – Working conditions – Training opportunities

Productivity and Compensation

Increasing Inequality

Opportunity Deficit • 9 million net new jobs needed • Decent work • Poverty

Poverty • 46 million living in poverty • 10 million working poor • 1 in 5 children living in poverty

Opportunity Deficit • • • •

9 million net new jobs needed Decent work Poverty Lack of opportunities for our children

Lack of opportunity for our children • Disparities in access to early childhood care • Disparities in educational opportunities – 43% of black and Latino children attend schools with poverty rates of 80% or more v. 4% of white children

• • • •

Disenfranchised youth Youth unemployment Working without pay challenges for undocumented youth to access public education

Opportunity Deficit • • • • •

9 million net new jobs needed Decent work Poverty Lack of opportunities for our children Failure to introduce immigration reform

Opportunity Deficit • • • • • •

9 million net new jobs needed Decent work Poverty Lack of opportunities for our children Failure to introduce immigration reform Aging infrastructure is holding back our growth and capacity to innovate

What to do?

• Need additional stimulus – For aging infrastructure – Support public sector – R&D

• Overhaul of employment policy – FLSA – Reframe training (WIA) as Jobs Compact

• Renewed Social Compact

Longer term Structural Issues • • • •

Aging society Global markets for goods and labor Technological shocks Demographic changes in our society – majority-minority

A Warning Sign from Global Companies-and How to Respond Matthew J. Slaughter Tuck School of Business at Dartmouth, NBER, and CFR “Lessons for Employment Policy for the New Administration” AEA/ASSA Annual Meetings January 4, 2013

The Warning Sign (Figures from Slaughter and Tyson, Harvard Business Review, 2012)

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Why Is This A Warning Sign?

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The Many Productivity-Enhancing Activities of Multinational Firms in America

In 2009, the 27.4 million multinational workers earned an average of $69,796 in salary and benefits: about 25% above the U.S. private-sector average.

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Is This Simply Greedy Firms Exporting Jobs?

(Figures from Slaughter and Tyson, Harvard Business Review, 2012)

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So, This Sign Means What?

Canaries in the Coal Mine Warning about the Future 45

Canaries in the Coal Mine • “There is no guarantee that the past will be prologue … Today the U.S. is in an era of global competition to attract, retain and grow the operations of multinational companies that it's never faced before.”

• “Many [CEOs of U.S. multinationals] voice concern about the future ability of this country to attract and grow corporate investment, R&D and jobs. U.S. multinationals will not aggressively invest and hire here at home if they can't realize attractive returns from doing so.”

• “U.S. multinationals are uniquely positioned to help America meet [current] challenges. But this will require far-sighted policy initiatives like liberalizing trade and protecting intellectual property … Will our lawmakers pay attention?”

– Martin Baily, Matt Slaughter, and Laura Tyson WSJ op-ed 7/1/10 46

Listen to the Singing • 26 leaders of U.S.-based multinationals worry that many current U.S. policies—e.g., high and complex corporate taxation, limits on skilled immigration, and bureaucratic hurdles and inconsistencies—handicap their companies, compromising the future ability of the U.S. to attract and grow investment, R&D, and jobs.

(MGI, 2010) • 72.2% of CFOs of insourcing companies say that the environment for doing business in the United States deteriorated over the last year, versus just 13.3% that say it improved. (OFII, 2010) 47

Have We Been Listening Regarding Education?

• America’s dramatic educational upgrading of the 20th century largely stopped in the past 40 years.

– In 1969 the U.S. high-school graduation rate was 77.1%, up from just 5% in 1900. That same rate today is about 75%.

– Rates of male college attendance/completion have also flat-lined.

• Meanwhile, the skill upgrading in many other countries continues—often at an accelerating rate.

– Today among industrialized nations, U.S. ranks 16th in college-completion rates and 20th in high-school completion rates.

– Recently released 2009 PISA results for 65 countries: U.S. 15-year-olds were 15th in reading, 23rd in science, and 31st in math.

– What country scored first in all three categories? China.

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Voices Have Been Singing This for Many Years “The educational foundations of our society are presently being eroded by a rising tide of mediocrity that threatens our very future as a Nation and a people … If an unfriendly foreign power had attempted to impose on America the mediocre educational performance that exists today, we might well have viewed it as an act of war.”

A Nation at Risk, commissioned by President Reagan, 1983

How Long Must the Singing Continue?

• U.S. generals caution that enlistees cannot read training manuals.

• 75 percent of young Americans ineligible to enlist in military.

• XVIII Airborne Corps in Iraq found fewer than 5 of 250 intelligence personnel had the “aptitude to put pieces together to form a conclusion.”

CFR Task-Force Report, co-chaired by Condoleezza Rice and Joel I. Klein, 2012

Have We Been Listening Anywhere?

• Uncertainty about the role and scope of government in several key industries: finance and insurance, real estate, autos, health, energy, …?

– “How to Destroy American Jobs” WSJ 2/3/10 – “How To Avoid a Clean-Tech Trade War” WSJ 3/13/12

• The Crumbling Infrastructure: What grade did ASCE assign the United States in 2009?

– “How to Jump-Start American Manufacturing” WP 8/13/10

• The Protectionist Drift away from Open Borders – – – – –

“We Cannot Afford to Spurn the Emerging Investors” FT 1/4/10 “China, Patents, and U.S. Jobs” WSJ 6/6/11 “More Trade and More Aid” NYT 6/9/11 “A Pro-Trade Agenda for the U.S.” WSJ 9/17/11 “Hope for America’s Disillusioned Heartland” FT 10/4/12

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How Likely Is It This Warning Sign Will Be Heeded?

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The Rising Tide Has Not Been Lifting All the Boats • Change in U.S. average real total money earnings, by educational group, 2000 through 2011.

• Group Employment Share LTHS 8.4% HSG 27.4% SC 27.8% CG 23.2% Masters 9.5% MD,JD,MBA 1.9% PhD 1.8%

Earnings Change -12.5% -4.1% -8.9% -8.5% -3.7% +2.2% +3.4%

• 2011 real median income for U.S. households was $50,054. This was $570 below its 1989 level.

(Data from Haskel, Lawrence, Leamer, Slaughter; JEP 2012) 53

Anxious Boaters Have Turned on Globalization • “Americans Sour on Trade” (WSJ 10/4/10 Page A1) – “In general, do you think that free trade agreements between the United States and foreign countries have helped the United States, or have hurt the United States?”

– December 1999: 39% Helped vs. 30% Hurt – March 2007: 26% Helped vs. 48% Hurt – September 2010: 17% Helped vs. 53% Hurt

• “Even Americans most likely to be winners from trade are increasingly skeptical … ‘The important change is that very well-educated and upper-income people compared to five to 10 years ago have shifted their opinion and are now expressing significant concern about the notion of...free trade.’”

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Anxious Boaters Have Turned on Globalization • “I am going to read you several statements others have made about some of the reasons the country’s economy continues to struggle and more people are not being hired. After I read each one, please tell me if you agree or disagree with that statement … U.S. companies are outsourcing much of their production and work to foreign countries where wages are lower.”

– Strongly Agree: 68% Somewhat Agree: 18% – Disagree: 12% Not Sure: 2% – “Americans Sour on Trade” --WSJ Page A1 10/4/10 55

Anxiety About Today and About the Future • “‘People don’t have a sense of control,’ says John Feehery, a Republican strategist … Stan Greenberg, a Democratic pollster, says people have been breaking down and crying during focus groups when talking about the economy.” -Financial Times 11/17/11 • “Do you feel confident or not confident that life for our children’s generation will be better than it has been for us?” (WSJ-NBC) – October 1990: 50% Confident vs. 45% Not Confident – December 2001: 49% Confident vs. 42% Not Confident – August 2010: 27% Confident vs. 66% Not Confident 56

Concluding Thoughts • Globally engaged companies have long been among America’s strongest firms. But their eroding U.S. presence is worrisome. How will the country respond?

• In the short term, to help create millions of U.S. jobs connected to the world America needs aggressive policy liberalization of trade, investment, immigration, and tax.

• In the long term, to help create millions of good U.S. jobs connected to the world America needs to heed the singing and undertake more/better public investments that enhance worker productivity—infrastructure, education.

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