The Jobs Imperative
With today’s Senate passage of the new public sector jobs bill, the federal government’s role in stimulating the economy is once again in the limelight. The use of public dollars to leverage jobs in the private sector is even more controversial. Historically (and today) U.S. business wants government to "get out of the way," and let market forces determine outcomes (at least until they themselves need to be bailed out). The priority is "maximizing shareholder value." The fewer workers you need to do that, or the lower their cost, the better.
Still, some worry that the axiom of maximizing shareholder value lately has been taken to a destructive extreme. One of those is Andy Grove, former CEO of Intel and still a consultant to the U.S. chip-making giant. In a recent interview in Business Week, Grove noted that U.S. business is "...largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better."
Grove makes the point, learned the hard way in Silicon Valley, that innovative startups don't create jobs unless they can be scaled up. For the past three decades or more, scaling up meant going off-shore. American innovation created jobs in China and elsewhere, not the U.S. But Grove understands that exporting high paying jobs carries negative repercussions for this nation’s economy and its people. He calls on government to step in:
The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability—and stability—we may have taken for granted.
Today, the private sector's capacity to create good jobs has been weakened to the point where it is often the wages of public sector workers—usually union members—that keep local economies afloat. But inevitably, the jobs of these workers (many of whom provide the critical public services that are most needed during times of economic downturn) fell under the same economic pressures as the taxpayers that support them—thus, the new jobs bill.
If the American economy isn't creating jobs, and public sector employment is under the gun, what's next? As Andy Grove suggests, it's time to rethink old assumptions and to devise improved economic growth models rooted in the evidence of "what works." This implies a stronger role for government, and a public/private sector partnership that aims at creating American jobs, rooted in an evidence-based economic model. That would be a nice change.