Steve Klingaman

Steve Klingaman
Location
Minneapolis, Minnesota,
Birthday
January 01
Title
Consultant/Writer
Bio
Steve Klingaman is a nonprofit development consultant and nonfiction writer specializing in personal finance and public policy. His music reviews can be found at minor7th.com.

Editor’s Pick
DECEMBER 10, 2009 9:10AM

It’s Time to View Good Jobs as a National Resource

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    On Tuesday, President Obama announced a modest but appropriate plan to stimulate job growth in the near-term.  For small business, the traditional engine of rebound job growth, he touted tax breaks, tax credits, and access to capital.  On the energy front, he talked up a “cash for caulkers” program.  In the big-ticket category, he pushed for an initiative to rebuild and expand infrastructure.  All of the initiatives are fine as far as they go, but they will not stimulate even a fraction of the jobs it would take to stem populist anger over the issue.

Unemployment 2009 

            By November 2010, populist anger over joblessness will overshadow charges of overspending, big government, or the deficit, the three primary themes of Republican attack.  But unless a couple million jobs are recaptured in the next eleven months, nerves will be raw, bank accounts will be empty, and the great drifting center will be subject to Republican claims that no one can create jobs like they created jobs in the good old days.

            As pointedly misguided as this rhetoric is, expect the gullible to be swayed, to once again vote against their own interests while buying freedom-brand snake oil.  Why?  Desperation—pure, simple, and unadulterated.  While the devastating effects of job loss have cut across every sector of the working public, this time, educated white, middle-aged professionals and skilled workers have been hit like never before.  Once they would have been called breadwinners. Today, they are called redundant.  There is no guarantee that the economy of the future has any real need for all of them.  While numerically there are more men in this category, women are deeply affected, too.

            It’s not that there is anything wrong with them.  Their skills are strong, and their resolve is steeled by necessity and debt.  There are just too many of them.  And—given their salary histories—they are too expensive.

Jobs are People, Too

            As Robert Reich said in a recent interview, “Many Americans won't be rehired unless they're willing to settle for much lower wages and benefits.”

            Reich, whose analysis I value—and who should be in the White House policy camp—thinks that we need “permanent new investments in the productivity of Americans.”  Or you could just say we need permanent new investments in Americans.

            For 15 years we have taken jobs for granted as some kind of magical outcome of a humming economy.  We were so entitled by circumstance that we literally squandered jobs.  Good jobs.  And we did it to jank stock prices.  We right-sized, outsized, capsized, outplaced, offshored, and deep-sixed millions of them.  And now, as corporate managers and small business owners contemplate rebooting their operations in the wake of the recession, their first thought is, “How can I keep labor costs down?”

            The problem is that we don’t view jobs as a resource—a national resource akin to a natural resource.  If you go far enough into the logic of buying labor, you realize we have onshored jobs instead of using homegrown talent because it’s easier.  Take the issue of H-1-B visas, for example.

“When I joined I.T. in 1992, 95%+ of engineers where I worked were U.S. citizens and permanent residences. Today, 50%+ of engineers where I work are H-1-B (mostly from India) and another 35+% are contractors of Indian outsourcing companies. So basically more than 85%+.”

~Marketplace comment by Van Le, 12/3/09

            In a global economy, the cost of production is critical.  But we have established a culture that excels in a Darwinian reduction that is structurally encouraged by federal tax policies.  Let’s start with a simple assumption:  Governments can use carrots and sticks to promote any set of policies they choose.  Denmark is aggressively green and doesn’t like cars.  The value-added tax on a car there is 180% of the cost of the car.  So a $20,000 car triggers a $36,000 VAT tax.  That’s how heavy the hand of government can get in protecting its interests.

            Take offshoring then.  The federal government could offer an employment tax reduction for every new job created in the U.S.—while at the same time levying a value-added tax to goods and services produced by American companies with offshore labor.  This would help to protect its interests of minimizing the actual costs of unemployment compensation and services for displaced workers. 

            Jobs are a resource, a national resource.  They provide the essential glue that holds the whole enchilada together.  But, by everything I can see, we don’t care.  With 8 million out of work, ours is a Darwinian fantasy.  We have been removing deck chairs on this cruise liner, and when it leaves port again, millions will find they have no place to be.

Boomers Race the Clock

            The baby boomers are such a humungous bulge they create their own weather.  And today they face a drought.  That super-heated economy that keep so many in marketing, IT, and management positions won’t be back for years—and time is precious to boomers.  You hear that 60 is the new 40.  Perhaps that is most true with regard to their ability to retire.  Having been knocked off the assembly line in the midst of a spending spree, some may need to think about working for another 20 years in deadend jobs.  We can’t go back to where we were because it is not there anymore.

            For man who lost a $100,000 job in 2008 at the age of 54, it might be another three years before he is pulling down $80,000 again, if ever.  The outplacement industry blithely encourages its captive audience to use social networking, repackaging, and reinvention to survive.  I can’t see how that is fair when the applicant-to-placement ration remains at 80 to 1, no matter how much Botox you use.

The Workforce Infrastructure as a Resource

            Reich implies that the workforce is an infrastructure.  Why not?  The original stimulus package failed at physical infrastructure up to this point, and prospects are wait-and-see going forward.  Maybe a little redefinition is in order.  I heard that President Obama demanded that a surge in Afghanistan start immediately if not sooner.  Well, let’s offer small business tax credits for jobs created in the next six months.  That ought to get some businesses off the fence.

            According to Bloomberg News, total U.S. bank lending has declined by 6.4 percent since November 2008.  Let’s use TARP reserves to offer banks a 20 percent payback discount for every dollar they loan to small business expansion efforts in the next six months.  Call it a surge.  If the banks stall, tell them it’s TARP audit time.  And if the law calls for unused TARP funds to repay the deficit, explain that getting the economy humming with new workers who pay taxes as employees of businesses that pay taxes is what will pay down the deficit.  If TARP-assisted banks won’t lend to small businesses threaten them with more regulation.  Banks who used TARP funds to shore up their balance sheets to pay back the government so they could go back to bonusland can be told they will have to revalue the toxic assets they still carry on their books at present value unless they agree to lend to fund expanded payrolls.  If we can tell insurance companies that 90 percent of revenue must go to fund claims, as has been proposed, we can certainly play hardball with the banks.

            The difficult truth is, it doesn’t matter if the federal government’s No. 1 job becomes jobs because it is relatively powerless to create very many.  What we need is the fastest possible recovery without devolving into runaway inflation.  That means we have to stimulate investment, demand, and an improved psychological outlook so people with money begin to part with it again.  The two best ways to do that are through a tax holiday and freer lending to small businesses.  I find it unbelievable that we can commit another $400 million to Afghanistan but we can’t do this.

            Give the administration some credit for avoiding catastrophe and putting the breaks on the freefall.  The jobless numbers for November were so good they read like a typo.  Now we need to see 100,000 new jobs a month by January and 250,000 new jobs a month by June.  And I am not talking about government jobs, I am talking about jobs that create mercantile or commercial value, so IT professionals, and marketers, and managers can run with it.

            If jobs are a resource, we need to communicate with American business to get this across.  As tempting as one might find it to just smack ‘em donkey-style with a two by four, incentives are probably a good way to go.  But taxes that support responsible policies are also good.  Through a differential on corporate income taxes, the government could reward job creation.  At the end of 2010, any Fortune 1000 company that is showing a fat, say 25% year over year profit based on a 2009 headcount—surtax!  Corporate bean counters should be astute enough to figure out by mid-year if they need to do some hiring to avoid a surtax.  After all, if Denmark can send a nasty message about cars, why can’t we send a constructive message about jobs?

            By the way, the idea of a Depression-style Works Progress Administration jobs initiative is a nonstarter.  This is not a depression, times have changed, work camps are so 1930s, and we don’t need starter jobs.  We need good jobs—jobs that will sustain a mortgage

            If we do little to stimulate job growth in the private sector now, we will be facing a world of hurt, from the electorate, and from an agonizingly slow recovery.  Nothing retards growth like the absence of demand that eight million whacked or underemployed workers represents.  But the fact remains that you can’t just throw money at jobs; stimulation has to be systemic.  Even more, strategic.  And President Obama’s plan is lacking in that department.  So, he needs to direct his Wall Street dream team to get their hands dirty and figure out how to inspire, cajole, corral, and even whip the nation’s businesses into hiring some workers.  Teach them to make their own luck, because that’s what a recovery pretty much comes down to.  Oh, and they should give Robert Reich a call.

 * * *

(Robert Reich is a professor of public policy at the University of California, Berkeley.  He is a regular Salon contributor.  He served as Secretary of Labor in the Clinton administration.)

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Take offshoring then. The federal government could offer an employment tax reduction for every new job created in the U.S.—while at the same time levying a value-added tax to goods and services produced by American companies with offshore labor.
Yes, Yes, Yes!!! I am amazed the the subject of taxing offshore jobs is nowhere to be found. It seems that every government, media and even NGO voice has been bought out by Wall Street and the global corporations.
Then, there is the whole issue of an economy based on consumption (the WalMart model - useless plastic crap for cheap) and the carbon footprint of our current economic process. How should we recast our economy, if we could?
This is a great column and it should be reprinted widely.
I like this analysis very much. Jobs as a national resource - it seems so obvious, and yet it is completely ignored by so many.
It is time to either offshore or make temporary every job possible Steve, get with the plan :)
A trained workforce is one of the most important assets a nation has. The outside world protects their workers in a crisis like this, in order to maintain their skills while they wait for better days, but American politicians seem to have imagined that you could do without a policy to reduce unemployment. The Dems need to come up with one pretty fast if they want to hold their ground in the elections in 2010 and 2012.
the usa could be a socialist democracy, with everyone in work, and earning a living wage. but they choose to be a medieval kingdom, instead. actually, the choice was made for them, in 1789. the choice has been re-enforced ever since, by education and law.

you are not going to get the benefits of democratic socialism while living in a medieval kingdom. if you will not be citizens, can not even imagine being equal participants in the management of your environment, learn to enjoy being serfs.
I'm not so sure that joblessness will persist--even with the chronically unemployed counted in, it's down to the 8% range in most states, California and Michigan being the biggest exceptions since they're ground-zero for the real estate and car industry implosions respectively.

Underemployment has always been the most serious long-term structural problem of the U.S. and the rest of the capitalist world under globalization. I don't see any satisfactory solution to it either. Much of the workforce is just no longer needed by this system--so they will either be employed in bad, low paying jobs, in the so called "rich" countries, or wander the demilitarized zone that is increasingly the norm in so called developing countries (really little more than two versions of the control society). And it's the same in China, where the pool of workers is exponentially larger. The illusion that China is doing well is absurd. They can't ever possibly employ more than 30 or 40% of their labor force, no matter how much junk they sell to us.

Brazil has come up with a unique solution: they pay people merely for being citizens, a subsistence "rent," which allows some wealth to flow back to a fraction of those who are no longer employable. But the idea that this can be solved through some kind of moral imperative--whether through charity or an ecologically inspired apocalyptic sense of urgency--seems to me to be the least realistic answer. Of course, this is the one favored by the political and academic elite. Disastrous.

My own guess is we'll just have to wait for everything to really fall apart before this is confronted. It may have saved us a lot of grief and suffering if the banking crisis had been even bigger.
Thanks for the comments, everyone... Stellaa, you are right and I'm thinking it's not gonna happen. My guess is that we will hit 250,000 jobs added per month for a few of our best months maybe a year from now, but with 8 million unemployed, it would still take two years of adding 250,000 a month every month to re-employ 6 million--and numbers like that are not nearly going to happen. In addition, we still confront the issue of the quality of those jobs, which I'm saying is not going to be anything near what mid-career people would have hoped.

Boko, you are so right about underemployment. The whole point here is that a number of our best thinkers (Reich, Krugman) are thinking we are going to be looking at a good deal more of it. But don't breathe a word of Brazilian-style solutions or our Cato missionaries will hunt you down!
Steve,
I agree, but would say we need to treat American people as natural resource. We've spent a few decades describing them more as potential liabilities, even as we systematically stagnated their real wealth and replaced it with credit.

We don't need jobs, which is convenient because no amount of tax credits will stimulate hiring when the customers aren't there.
We need customers. Stimulate that and the jobs will materialize.
We need a form of wealth redistribution. Because that's a political buzzword term, let's call it wealth reciprocation.
Whatever we call it, it has to be artificial, and it has to stimulate purchasing of domestically produced goods or services.

The pols seem to be dreaming that they can blow another bubble, but we're way out of soap, so to speak. We can't maintain our position in the world, or recover it by being professional consumers based on an unending personal and national debt template.

That seems to be the 500# elephant carcass we ignore as we discuss "recovery." I haven't heard anyone talking about how we end the debt binge, even as it has 'ended" us. I don't see recovery and debt as being possible.

Good post. If it doesn't stimulate jobs, at least it stimulates thinking.
PS...to avoid confusion...we'll have to have debt to generate purchasing. What I'm saying is that, long term, we have to get far closer to at least a trade balance or we'll never recover.
Paul, I agree with you re: a natural resource, I made that connection once in the piece. As to stimulating demand, yeah, it has to be real, and not based on a credit binge.

There is room for growth. Imagine ramping up green infrastructure the way we usually do military build-ups. It would be interesting to have robust environmental contractors lobbying Congress for the B1 solar-to-geothermal conversion network. Countries like Spain are ahead of us on some of this stuff--I mean making it and selling it worldwide.
Excellent post, thanks for this.
This is right about most things, wrong about one thing. We do need a thirties-style job program (without the camps) and we need it fast! Our schools, parks and civic buildings are crumbling. Our teachers and librarians and recreation programs need aides. There are many thousands of worthwhile jobs out there that would appeal to young people, and they could be put to work right away. The way to save the states is to get tax money flowing immediately into the coffers. The rest will follow.

I own a small manufacturing business and we make signs for public projects. Those projects have been closed down because the state is broke. You can give me all the tax credits in the world, but I can't hire anyone, because I can't afford to. Businesses that are showing a loss can't use tax credits, because we don't owe any taxes.

Believe me, if California could quickly employ a lot of young people for wages between $10 and $15 an hour, we could accomplish a lot of good, and get money flowing into the state because those people would not only pay some taxes, but they would eat out, make purchases, go to movies, etc. Food stamp use could go down. And young people like my grandson would not have to drop out of college and join the army because there are not jobs. This is a crisis and it needs to be treated like one.
Mostly I agree with you. While education is important, mosr knowlege worker jobs require empirical knowledge that is gained only by participation in the workforce. Everytime a business farms out work overseas, hires an offshore contract worker or an H1B worker, an American born worker is displaced and he or she falls behind in critical cutting edge skills. Or their skills are premantly lost to the workplace. The result is an obsolete American workforce.

But, saving jobs in exisiting industry is just the short term solution. And deficit spending to sustain them creates debt that will have to be repaid through future porductivity gains and the profits from new markets. Yes, our grandchildren will repay our debts, but only if they are smarter, more productive and EMPLOYED. We need to look at economic progress, not on a quarter to quarter basis, but on a generational basis.

The corporations will not do this. Not in any capitalist form of economy. Only the government can encourage the constant innovation and creation of new markets and industries that will keep us ahead of the race.

This is a tall order indeed. But, while Americans fight the "war on terror" at great expense, South Asia and the Far East are fighting a "war on the American economy." We have to gear up and fight back.
Sharon: re: a WPA-style program--If I heard someone articulate a workable model, I could get behind that. Of course, we are not in a depression, but a severe recession. The idea of work camps for me is a nonstarter. But a VISTA-style program designed, for example, to maintain, repair, and improve abandoned properties in order to sell them to low-income families--rather than let them languish in bank inventories would be fantastic. But the type of legal machinations required to pry them loose from the mortgage holders, or to somehow split the proceeds with mortgage holders seems daunting in the least. I'm sure other could come up with workable ideas on this score.

Upstate: "Saving jobs in exisiting industry is just the short term solution." I understand what you mean. That is why I am a big proponent of a major green jobs initiative--one that goes beyond more insulation for old houses--and at least in part reinvigorates our moribund manufacturing sector.
Ditto what Ardee said. I've been wondering the exact same thing. It would be so easy to create tax incentives for bringing jobs back to the US or else taxing those that remain overseas. Why has no one in Washington thought of this yet?

You offer such sane solutions. I hope that you've sent this column to everyone you can. I certainly will. The fact that we are pumping more money into Afghanistan while ignoring the jobless here in America is unbelievable to me, too. Thank you, thank you, thank you for this most excellent analysis, Steve.
I am one of those humungous bulges! Today I read China is the #1 country for exports.... yes, I believe this to be true. They have surpassed the USA and are also exporting our jobs. Even Americans who were transferred to China are now being replaced by Chinese and are being sent back home with no job prospects, many forced into retirement.
Steve, this is yet another excellent, grim post. Tomreedtoon's reply feels the most accurate to me. Here's the bleak response inspired by our predicament: We The Unemployed must soon realize that America has become the Titanic. We must determine where the lifeboats are, and spare no effort to secure space on them, and escape. Save ourselves while we still can. There's no swimming away from this, and no waiting for help to arrive, because by then it will be too late.
Another pie in the sky misconception. There is nothing natural about any job. Lowering the minimum wage law or eliminating it would put plenty of people to work if they wanted to. More government meddling won't create any work except the mess that must be cleaned up after they disrupt,redistribute and devalue.
Dalen, I suppose that would make you a proponent of unfettered, laissez faire, self-regulating markets. You won't find any takers here. Even Alan Greenspan admitted he was wrong, wrong, wrong.