Creating good jobs requires a good jobs agenda

Germany has a well-deserved reputation for smart economic policy, including ways in which the government, business, and labor work together to further the common goals of a skilled workforce producing quality output for both domestic and global markets.  The US, on the other hand, though still highly productive and innovative, does not have a coherent set of policies to advance these goals.

So why, then, are many dozens of German manufacturers opening plants in the US, creating thousands of good-paying jobs here, even for workers without college degrees? 

The answer to that question has to do with a broader trend among multinationals to produce where you sell.  We have a broad consumer base, as well as very fluid capital markets and rapidly growing supplies of cheap energy, as a result of the shale oil and gas boom.

But the broader point is a critical one for policy makers to consider: the notion that good jobs cannot exist and grow in U.S. manufacturing and other industries is clearly untrue.  And this microcosm of the German experience here is highly instructive in that regard.

At a minimum, we should dispel the notion that manufacturing productivity/automation is too robust to enable job creation of real magnitudes in our factory sector.  Recent work by economist Susan Houseman shows that properly compared, output per hour in manufacturing has grown no faster than the rest of the economy. This insight leads her to conclude that other factors, such as our persistent and large trade deficits in manufactured goods, are the real culprits in depressing job growth in the sector (as Dean Baker has also argued).

So, if the U.S. can create more good jobs, and not just for the minority of the workforce with bachelor’s degrees (who make up just over a third of the U.S. workforce), why isn’t that happening?  At least part of the reason is due to a public policy failure to pursue a broadly conceived “good jobs agenda,” not only in manufacturing but also in all other sectors of the economy.

What would such an agenda look like?

First, we need to ensure that employers who would create good jobs here can find the workers with the skill sets they need. When the German company Siemens wanted to a build a gas turbine engine manufacturing plant in North Carolina, they first made arrangements with local community colleges and the University of North Carolina to ensure a steady flow of well-trained technicians and engineers before building the plant. The key here is not to provide job seekers with standardized, one-size-fits-all training, but instead to work with local employers to identify sectors with good-paying jobs and strong forthcoming demand, and then make sure the workforce is there to meet that demand.  Many such models are available, including apprenticeships and other kinds of work-based learning, but they all now exist at too small a scale too really make a difference. Given their relatively low cost, scaling them up would deliver a big bang-for-the-buck.

Second, a more sensible immigration policy would also help in this regard. Encouraging highly-educated foreign nationals to emigrate to and then stay in the U.S. would bolster innovation and high value-added job creation here.  Regarding less-skilled immigrants, while we must be mindful of the impact of higher labor supply in periods of weak demand, more education and training - starting with effective adult basic education and then continuing through various career pathways - would benefit both them and the broader economy.

Third, we need to address other economic factors that tend to encourage good job creation overseas rather than in the U.S. Two factors that limit our international competitiveness come immediately to mind: our inefficient corporate tax structure and our overvalued dollar. The former often incents US companies to take their investments, profits, and jobs overseas, so reforms are needed to eliminate those incentives. The latter requires tougher bargaining with countries that deliberately undervalue their currencies to encourage business location on their soil as opposed to ours.

Fourth, we need to make a serious push to improve the nation’s infrastructure.  With borrowing rates still near historic lows, we should be making these investments now, to enhance our future national productivity – and to create good-paying construction jobs for less-educated men and women.

Finally, more sensible and better-enforced domestic labor standards would also help. As a report from the Congressional Budget Office recently showed, a somewhat higher federal minimum wage could generate millions of better-paying jobs without causing great employment loss. And better enforcement of existing laws on overtime, occupational safety and health, and other standards would encourage employers to compete through higher productivity and product quality rather than extremely (and sometimes illegally) low pay and poor conditions of work.

The fact that highly productive multinational firms are locating here tells you something important and salutary about our markets.  But absent an explicit and multi-pronged agenda to create more and better jobs in the U.S., we risk leaving much needed opportunities on the table.  That’s harmful to our economy’s growth prospects, but more importantly, it threatens to continue to hurt the living standards of large groups of potential workers who could, with better policy, realize their potential, raise their living standards, and make a real contribution to society.

Bernstein, senior fellow at the Center on Budget and Policy Priorities (CBPP) and former chief economic adviser to Vice President Biden, is spearheading CBPP’s national dialogue on full employment. Holzer is professor of the McCourt School of Public Policy at Georgetown University and a contributor to the year-long project, which is entitled “The Path to Full Employment: Making Jobs a National Priority.”