Obama's Jobs Council, Stacked with Business Honchos, Offers Nothing But Political Theater
July 11, 2011 By John Schmitt, AlterNet
Posted on July 5, 2011, Printed on July 11, 2011
http://www.alternet.org/story/151524/obama%27s_jobs_council%2C_stacked_with_business_honchos%2C_offers_nothing_but_political_theater
In the run-up to his most recent State of the Union address, President Obama announced a "President's Council on Jobs and Competitiveness" as part of efforts to demonstrate his laser-like focus on jobs. In an interim report in mid-June, the council made a set of "fast-action" recommendations, which the president trumpeted in a set-piece economic speech at a high-tech manufacturing facility in North Carolina.
Unfortunately, it is not an exaggeration to say that even if fully implemented, the council's collection of small-bore recommendations would have no discernible impact on the current jobs crisis. The main problem is that the proposals flow from a fundamental misdiagnosis of the jobs problem we face.
We have over 14 million unemployed and almost 25 million "underemployed" workers because employers have no markets for their goods and services --and therefore no need for workers to produce them. The bursting of the housing bubble wreaked havoc on family finances, leading Americans to cut back their spending. In a chain reaction, businesses cut hiring and investment, and the economy went into a tailspin. The only thing that kept the economy from falling off a cliff were the efforts of the federal government to make up for part of the catastrophic drop in demand.
Yet the collapse in demand does not feature at all in the Jobs Council's analysis or in any of its recommendations. Instead, the council mostly places the blame for the lack of jobs on workers and the government. Workers lack the skills for advanced manufacturing jobs, health-care positions and engineering jobs. The government impedes job creation by putting "red tape" in the way of construction and infrastructure projects, by blocking entrepreneurs from immigrating to the United States and by making life difficult for small businesses seeking financing or access to foreign markets.
All together, the Jobs Council presented 13 ideas to President Obama. A quick look at the first three items on the council's laundry list gives a feel for just how inadequate its recommendations are.
The first is a "Better Buildings" initiative to retrofit commercial buildings. This would both create much-needed construction jobs and save energy. The catch is that the council, apparently allergic to talk of tax increases or deficit spending, calls for the private sector to undertake these activities without any government funding.
The second idea, which the president featured in his speech in North Carolina, is an "all-hands-on-deck strategy to train 10,000 new American engineers every year." Having more engineers will undoubtedly be good for U.S. manufacturing --when these engineers eventually come on line years down the road. But, how exactly will this put Americans back to work today or even a year from now? (And what guarantee do we have that these new graduates will rebuild manufacturing? For years, Wall Street, where pay far outpaces what is available in even the best manufacturing job, has been siphoning off our top engineers to model exactly the complex financial instruments and transactions that have since blown up in our face.)
The third suggestion is to build workforce skills in advanced manufacturing. Two prominent members of the Jobs Councils --GE CEO Jeff Immelt and American Express CEO Ken Chenault--touted this idea in a recent Wall Street Journal op-ed. They argued that there are more than two million job openings in the economy today "in part because employers can't find workers with the advanced manufacturing skills they need."
Of course, the basics of supply and demand tells us that if there aren't enough skilled manufacturing workers, then the price of these workers --their wage-- should be rising. By the market logic that CEOs seem to espouse in every other context, higher wages would ensure that the best workers are channeled to the most productive employers, and simultaneously send a signal to less-skilled workers to invest in more training. In the absence of steadily rising wages for manufacturing workers, however, a safe assumption is that these "shortages" are more imaginary than real.
In fact, the economy does now have close to three million job openings. But, any large dynamic economy always has openings. Even in the worst months of the recession, as the economy was losing hundreds of thousands of jobs per month, job openings never fell below two million. What the two CEOs neglected to mention is that there are still almost five unemployed workers chasing each one of the current openings. Improved training is a great idea for the long-term, but will not put people back to work if there are no jobs where they can use their new skills.
The scuttlebutt in policy circles is that the Jobs Council is just a bone the Obama administration has thrown to its business critics. Twenty-two of the 26 members are business leaders taken from the highest echelons of business. The composition of the council and the timidity of its recommendations certainly supports the view of the council as a sop.
But, if the Jobs Council is political theater, what is the Obama administration really planning to do about the jobs crisis?
John Schmitt is a senior economist at the Center for Economic and Policy Research.