William J. Holstein

Let’s Get Serious About Jobs
MARCH 12--

The United States needs to generate about 10 million jobs to make up for the awful damage that has been inflicted on the American worker, but there is a startling ignorance in the debate in Washington about what kind of jobs should be generated and how to guarantee that those jobs are more than a flash in the pan.

The first basic reality is that the United States is suffering through a structural shift in its economy, not just a cyclical one in which everything “returns to normal” if we just wait long enough. Millions of the jobs that have disappeared are gone permanently. They were either the result of inflated bubble spending in retail and construction, or they have been rendered nonviable by international competition. Economists and other pundits waiting for job growth to magically pick up again are in effect, waiting for Godot, in the play of the same name by Samuel Beckett. And Godot never shows up.

Do we want to stimulate consumer spending and encourage shoppers to run to Wal-Mart to buy big screen televisions made in China? Or do we want the governmental sector at the federal, state and local levels to be the employer of last resort? Those approaches do not create high-quality, value-producing jobs. Legislation for tax breaks for businesses that hire unemployed workers is just political theater. No chief executive officer is going to hire workers just because the 6.2 percent Social Security tax has been waived. Infrastructure spending is slightly better than these other alternatives because it has a broad positive economic impact, but there’s a limit on how much government can spend on bridges and roads, and for how long. Jobs associated with stimulus projects simply may not last.

What the United States really needs most is jobs that flow from disruptive innovation coming out of its universities, laboratories, medical institutes and other “idea factories.” As it has done repeatedly in the past, America must create new industries to stay ahead of the global competition. This means we need an explicit recognition that manufacturing really matters, an idea that has been conspicuously lacking in the jobs debate. Yes, jobs need to be reinvented and saved at General Motors and Caterpillar and Boeing, but an absolutely critical ingredient of the jobs crisis is creating new enterprises in new industries. The problem is, the United States is generating these ideas, but losing out to Asian competitors in the race to commercialize them. That’s the heart of what must be fixed.

In view of complete partisan gridlock, no real legislation is possible—nor is it necessary. The government is already spending tens of billions of dollars through the Department of Energy and its weapons labs, through the military and NASA, through the National Science Foundation and through the National Institutes of Health, to name just a few of the channels. These monies usually flow to the local and state level where clusters of innovators are trying to create new industries—simulation and modeling in Orlando, smart grids in Austin, robotics in Pittsburgh, lithium ion batteries in Boston and Michigan, new materials in Corning, N.Y. and genomics and biotech in San Diego. I have been on the ground to study how both large and small companies in these clusters create jobs that are sustainable for the long term. The federal government cannot waive a magic wand in Washington to create jobs, but its spending could be better focused and coordinated to have a major impact on the creation of the kinds of jobs that America needs. These ideas need to be developed and commercialized through smart partnerships among the educational sector, businesses, governments, investors and other players. The ecosystem that supports commercialization must be right.

Is that a kind of industrial policy? Absolutely. It’s the kind of policy that creates jobs that endure.