The United States has barely recovered from the financial crisis and Europe will soon face a sovereign debt crisis. Unemployment has reached an average 9.9 percent in Europe in June 2011, but ranges from 4 percent in Austria to 21 percent in Spain.1 Meanwhile, London witnessed three nights of intense rioting mainly by gangs of unemployed youth.
Across the Atlantic, the United States received its first ever Standard and Poor downgrade due to a loss of confidence in the U.S. government’s ability to broker a compromise on the debt ceiling. If the new debt commission is unable to find a solution, severe cuts will be made across the board, further reducing services to the needy and the elderly.
One magical solution to jumpstart economies worldwide is job creation. Governments’ deficits will decrease because more people will be able to pay taxes. All jobs though are not created equal. Sustainable jobs leading to new career paths or, at the very least, job providing new, transferrable skills are essential to the long-term health of the economy.
While one cannot create jobs out of thin air, experts around the world have proposed the following actions: increasing workforce preparedness, helping small businesses and entrepreneurs, and going green.
Increasing Workforce Preparedness
About 21 million jobs need to be created by 2020 for the U.S. to return to full employment.2 Currently though, there are three million unfilled job openings in the U.S. because there are no qualified candidates.3 There is a major skills gap facing the United States. Europe faces similar problems as the needs of challenged youth are not being met at school.4 Different solutions are being proposed to increase global workforce preparedness.
Jeff Imelt, chairman and CEO of GE and chairman of the President Obama’s Jobs and Competitiveness Council and Ken Chenault, chairman and CEO of American Express Co. recommend increasing private sector partnerships with community colleges and vocational schools to match career training with real-world hiring needs, such as in manufacturing.5 The McKinsey report suggests increasing the involvement of businesses in developing curriculum for community colleges and vocational schools and by creating a nationwide jobs database to help inform student decision making on their course of study.6
Mary Landrieu and Patty Murray, Democratic Senators from Louisiana and Washington, recommend reauthorizing and reforming the Workforce Investment Act,7 a former federally funded job training program used by states and local officials to train adults, dislocated workers and youth. Landrieu and Murray also recommend “earn and learn” strategies that allows learners to work while receiving training.8
Helping Small Businesses and Entrepreneurs
Stagnant consumer spending and tight credit markets have put pressure on small businesses. Small and medium-sized enterprises (SMEs) account for 60-70 percent of jobs in OECDA group of the world’s most advanced and wealthiest economies that is both a forum for and an active participant in debates about international economic policies. It was established in 1961 and now has 34 members, including the United States, Canada, Mexico, Japan, South Korea, and most members of the European Union. countries and account for a disproportionally large share of the new jobs.9
SMES face high interest rates, especially for new firms, and regulatory burdens, such as costly, complex, and lengthy compliance procedures associated with research and development and with new technologies. Other challenges include market failures in capital markets, indirect labor costs, access to foreign markets, and difficulties in recruiting qualified staff and skilled workers.10
To help SMEs, access to financing is crucial. Burecratic burdens need to be reduced through the use of information technologies. Technology diffusion programs can help SMEs improve their efficiency and ensure quality control. Managers should be able to access training or consultative services to increase competency. Governments should develop measures to ease international market access and public procurement by SMEs.11
Increasing efficiency is also crucial. A technology blogger notes that while jobs will initially be lost, true competition will lead to new jobs in more efficient companies. Legacy players would not be propped up by legislation or government, but would be forced to compete.12 Alison Craiglow Hockenberry of Ashoka’s Changemakers agrees:
Real job creation is about new jobs in expanding markets that provide products and services that are growing in demand. But all too often, increasing employment means propping up failing industries, supporting artificial labor markets or giving people a paycheck for making and doing things the demand side doesn’t need them to do.13
Governments can create opportunities for SMEs and entrepreneurs. Andy Kessler, a former hedge-fund manager, recommends that the U.S. government can help by:
- freeing up bandwidth on the spectrum to allow for the creation of new devices and apps
- allowing Medicare to pay for cost-saving diagnostic test or devices, leading to new tests and devices
- ending the mail monopoly for first and third class mail
- allowing the fracking of America’s shale deposits to release natural gas as long as the companies agree to pay any environmental damages, thus allowing this nascent industry to grow
- developing a government platform to ease citizen interaction with governments and spurring the development of new apps.14
Entrepreneurs and SMES would also benefit from a better business environment. Mckinsey recommends reducing the U.S. patent office backlog and creating “plug and play” enterprise zones that reduce red tape.15 Similarly Immelt and Chenault recommend improving the visa processing system to win back market share in the U.S tourism industry, one of the key growing employment markets in the country.16
Making industry more sustainable could provide new jobs worldwide. An ILO report on green job spells out the opportunities.17 The report defines green jobs as jobs that reduce environmental impact, reduce energy, and avoid waste generation.
Construction is particularly important since it accounts for approximately ten percent of global GDP and seven percent of the world’s workplaces. Green construction consists of constructing new buildings and refurbishing old ones to reduce energy consumption. New technologies are used, requiring a new skill sets. For example to refurbish buildings, specialists are needed to install and service photovoltaic (PV) equipment for heating, water pumps and insulation activities.
New jobs can be created in sales, transport, and maintenance of liquefied petroleum gas (LPG) stoves and hot plates for cooking, which are affordable for low income populations. LPG stoves and hotplates are cleaners than most source of cooking fuel in the developing world, since most people in developing countries rely on charcoal, wood, agricultural waste and animal dung for cooking fuel. For this to be viable though, replacement policies need to be in place and supply needs to be maintained.
Other jobs to reduce domestic energy consumption include selling, installing and repairing water heating technologies. Solar heating has proven to be the most effective in developing countries. If governments implement aggressive plans to increase domestic solar penetration, more than 355,000 new jobs could be created. Domestic energy consumption can also be reduced by installing efficient appliances, such as air conditioners, refrigerators and lighting fixtures. Improving appliances has provided many jobs in the Asia Pacific region. Asian countries have also created jobs installing better insulation technologies.
Many in the U.S. are proposing similar green jobs, such as the Fix America’s Schools Today Act, proposed by House democrats to repair and upgrade America’s school buildings, the program costs could be offset by ending tax breaks for fossil fuels.18
It seems that the regulatory and financial environments are key obstacles to job growth in the U.S. and around the world. Obviously leadership is important. Many are calling for President Obama to create a U.S. Jobs program. Similar calls are being made to leaders around the world. The responsibility though for implementing job creation programs lies in legislations, the U.S. Congress, and similar bodies worldwide need to pass job creating legislation.
Governments though are not solely responsible for job creation. Businesses need to jump on board. A recent New York Times editorial called for a new social contract that focuses on long-term growth rather than short –term. The author notes that many would not want to take the plunge so groups such as the Business Roundtable needs to form partnerships with many companies agreeing to start hiring at the same time.19
There is a role though for individuals as well. If they are shareholders in companies, they need to communicate that they are willing to wait for long-term gains, rather than focus on short-term ones. Individuals can take their buying-power to companies that are hiring, thus reinforcing the businesses. Students and job seekers need to be informed of job creation trends highlighted in the media and seek out opportunities to gain global workforce skills.
1 Rappaport. Sarah. “European Job Creation Remains Weak.” Business Insider. August 1, 2011.
2 Manyika, James and Lund, Susan and Auguste, Byron and Mendonca, Lenny and Welsh, Tim and Ramaswamy, Sreenivas. “An Economy That Works: Job Creation and America’s Future.” McKinsey and Associates. June 2011.
3 Landrieu, Mary L. and Murray, Patty. “How to Close the Skills Gap.” The Wall Street Journal. August 10, 2011.
4 Thomas, Landon Jr. and Somaiya, Ravi. “London Riots Put Spotlight on Troubled, Unemployed Youths in Britain.” The New York Times. August 9, 2011.
5 Immelt, Jeff and Chenault, Ken. “How We’re Meeting the Job Creation Challenge.” The Wall Street Journal. June 13, 2011.
7 Landrieu, Mary L. and Murray, Patty. “How to Close the Skills Gap.” The Wall Street Journal. August 10, 2011.
9 “Small Businesses, Job Creation and Growth: Facts, Obstacles and Best Practices.”
12 Masnick, Mike. “Politicians, Innovation & The Paradox Of Job Creation.” TechDirt. August 10, 2011.
13 Hockenberry, Allison Craiglow. “Getting Real on Job Creation.” Huffington Post. August 5, 2011.
14 Kessler, Andy. “Five Ideas to Kick-Start Job Creation.” The Wall Street Journal. August 8, 2011.
15 Manyika, James and Lund, Susan and Auguste, Byron and Mendonca, Lenny and Welsh, Tim and Ramaswamy, Sreenivas. “An Economy That Works: Job Creation and America’s Future.” McKinsey and Associates. June 2011.
16 Immelt, Jeff and Chenault, Ken. “How We’re Meeting the Job Creation Challenge.” The Wall Street Journal. June 13, 2011.
17 Keivani, Ramin and Tah, Joseph H.M. and Kurul, Esra and Abanda, Henry. “Green Jobs Creation Through Sustainable Refurbishment in the Developing Countries.” 2010.
18 “A Jobs Agenda, Anyone?” The New York Times. August 14, 2011.
19 Nocera, Joe. “What Is Business Waiting For?” The New York Times. August 15, 2011.
* Image of aftermath of London riots: George Rex.