Things are getting tougher at home. I run into a former neighbor who stated he was looking for work. He was a corporate manager for a Fortune 500 company. Sadly, the company had made some bad business decisions that left it with the decision of laying off staff. My neighbor was one of these causalities of downsizing.
He had been earning over $80K. He stated that he was getting many job offers because of his experience that were offering him about $40K. He could not understand his plight. I explained the employment research I had been doing over the years. It is a buyer’s market with companies being the buyers.
Therefore, my neighbor was part of the blue plate special for businesses. These companies were searching for highly qualified workers at the fraction of the cost while staying away from recent college grads or inexperienced prospects. Unfortunately, this is the reality of employment in a financial crisis.
Last week, the Labor Department reported job growth had slowed and thousands of Americans were giving up on their job search. Of course, these results received attentions on all political fronts in America because it is a presidential election year.
On the campaign trail, President Barack Obama explains how the economy is improving but slowly. His opposition, Republican Presidential candidate Mitt Romney, attacks the Obama administration for failed policies on the economy. Both presidential candidates set an interesting discussion on the role of the federal government in the economy. However, the most underpinning issue is who is best suited for job creation to 23 million unemployed Americans.
The global economy is struggling even in emerging markets like China. Why would America be different? According to the Labor Department, the economy added only 96,000 jobs in August, which was down from 141,000 jobs in July. Additionally, unemployment fell to 8.1%, from 8.3%. This is not a positive statistic. The unemployment rate fell largely because 368,000 people stopped looking for work.
In fact, 64% of the working–age population was either unemployed or actively seeking work which was a record 30 year high. According to some economists, at least 150,000 jobs are needed each month to simply keep pace with population growth.
Job creation is a difficult concept. According to the financial dictionary, job creation is a “process by which the number of jobs in an economy increases.” In this partisan political environment, job creation is a hot buzzword without much practical application.
Some people may argue that the government is a job creator. Yet, the federal government, being bureaucratic and having a host of mission-oriented functions, is not equipped to handle this responsibility alone.
Others folks taunt businesses as the ultimate job creators. However, businesses were never started to be job creators as its primary mission. Ricky Griffin and Michael Pustay, authors of International Business would argue that businesses were designed solely as job creators: “The fundamental reason for the existence of a business is to create value (usually in the form of profits) for its owners.”
Therefore, a multinational company’s business strategy may not be in tune with job creation in America. Outsourcing relates to pulling various tasks from within an organization and getting this particular service outside of the organization. Outsourcing continues to be a major tool for businesses.
Thomas Friedman, author of The World is Flat, makes a distinction between outsourcing and offshoring: “Offshoring, by contrast, is when a company takes one of its factories that is operating in Canton, Ohio, and moves the whole factory offshore to Canton, China.
Therefore, it produces the same product in the very same way, only with cheaper labor, lower taxes, and subsidized energy, and lower health-care costs.” Countries search the globe for cheaper labor without considering the long-term perspective of their business strategies. I think you need to give the definition of outsourcing here to complete the comparison.
Consequently, shipping more jobs abroad has a rippling impact across the globe. Globalization creates a more equitable average wage across the world while reducing the earning power of developing countries and increasing the living wages for emerging countries.
According to the United Nations’ Millennium Development Report, more than1 billion people on the globe live on less than $1 a day. Ironically, as most Americans have watched their wages decrease, most other workers across the globe sees a significant increase.
The world’s middle income class earns between $700 to $7,500 per family member. Therefore, job creation has a different meaning on a global level because it produces a variety of winners and losers. Consequently, Americans must understand that the jobs that are created may not be fully realized in their own country.
How do you define job creation in a global environment? What team arrangement (if any) can U.S. government and U.S. businesses create to help the 23 million unemployed in our nation?
© 2012 by Daryl D. Green
Nu Leadership Revolution Blog 
One major change that the United States Government could make in an effort to keep jobs in the U.S. would be for them to decrease the incentives that businesses receive from moving their operations abroad. Adjusting tax laws for multinational corporations would be one such strategy. “Obama has proposed closing what he calls tax loopholes used by multinational firms, including those restricting the use of foreign tax credits, and preventing companies from deferring taxes on income earned abroad” (Bohan, C. & Dixon, K., 2012). In addition to this action, staying in the U.S. would also be more appealing to multinational companies based in the U.S. if the Government offered some type of tax break or other incentive for keeping jobs inside U.S. boarders. It will be difficult for politicians to create an environment that offers as many (or at least offsetting) benefits to companies as outsourcing or offshoring have in the recent past. However, they must find a way to keep current jobs and newly created jobs in the United States in order to sustain an economic resurgence.
References
Bohan, C., & Dixon, K. (2012). President Obama to propose tax plan aimed at keeping jobs in U.S. Retrieved from http://www.huffingtonpost.com/2012/01/11/obama-jobs-tax-plan_n_1199064.html
Josh,
Interesting! Do you see any unintended consequences of disincentivizing businesses to ship operations abroad?
Professor Green
Josh-
I believe that the government is not the only answer to the problem of creating jobs. Possibly the MNCs could create jobs simply by diversifying as is described in this quote below pertaining to Starbucks creating a grant fund to create mugs that are made in the USA for them to sell. “According to the company, the fund has already raised more than $11.5 million, which Starbucks used to get loans for about $80 million in financing. Starbucks estimates the fund has helped create or retain 4,000 jobs so far.” So maybe it is not one entity’s problem to create jobs but in a spirit of cooperation the government and the MNCs working together to think outside the box to help create a brighter working future for Americans both at home and abroad.
Reference: Forer, B. (2012). Starbucks sells made in America mugs to create jobs. Retrieved from http://abcnews.go.com/blogs/headlines/2012/06/starbucks-sells-made-in-america-mugs-to-create-jobs/
I agree the government is not the only answer to the problem of creating jobs, but perhaps they are part of the reason for the slow rate of new business creation. McKinsey Global Institute [MGI] (2011) reported “six sectors illustrate the potential for job growth in this decade: health care, business services, leisure and hospitality, construction, manufacturing, and retail….They account for 66 percent of employment today, and we project that they will account for up to 85 percent of new jobs created through the end of the decade” (p. 9). However, many businesses that I work with aren’t hiring and they are considering downsizing because of the uncertainty of the impact from healthcare reform. Obama’s plan could cause small businesses to close their doors because they can’t afford the healthcare for part-time and prime-time employees.
McKinsey Global Institute. (2011). An economy that works: Job creation and America’s future. Retrieved from http://www.mckinsey.com
Per (Grove, 2010) “A new industry needs an effective ecosystem in which technology knowhow accumulates, experience builds on experience, and close relationships develop between supplier and customer.” I believe this statement is true. The MNCs should gleen the assistance of the baby boomers who still want to work and have valueable experiences to impart on the up and coming workers. This could possibly be done via mentoring programs which the government may help develop (especially in the areas of technology and linguistics where we as a nation fall very short). One other area that the governement may assist in creating new jobs is to provide government contracts in conjuctions with some of the MNCs to create jobs in communication and technology industries to aid the business with marketing their products to new/untapped markets and possibly contracted military work. The government could also appropriate more funding to local schools to provide early on training for business and linguistics skill so that our children are trained to compete globally at a much earlier age.
Reference: Grove, A. (2010). Andy Grove: How America can create jobs. Retrieved from http://www.businessweek.com/magazine/content/10_28/b418604358596.htm#p3
Congress should eliminate the special interest tax breaks that litter the code and reduce the overall tax rate to no more than 25% for businesses and individuals including small business owners. This would make the tax code flatter, fairer, and simpler. Common sense changes to the tax code will ensure that everyone pays their fair share, lessen the burden on families, generate economic expansion, and create jobs by making America more competitive. So that businesses could create more jobs with the money that they save with the tax breaks. The government should also give more incentives to the companies to create more jobs for Americans.
Reference:
Hensarling, J. The facts about the House Republican Plan for America’s Job Creators.www.gop.gov
Brandy,
Good points! If the government does as you suggest, what would be the results, positive and negative?
Professor Green
If we can’t find new ways to keep jobs in the United States then we are headed for a disaster. McKinsey Global Institute [MGI] (2011) reported that “the United States will need to create a total of 21 million new jobs in this decade to put unemployed Americans back to work and to employee its growing population.” We have to find a way to give U.S. companies the same breaks to start businesses as we give to multinational corporations. It shouldn’t be easier for a MNC to come to America to start a business than it is for a U.S. citizen.
McKinsey Global Institute. (2011). An economy that works: Job creation and America’s future. Retrieved from http://www.mckinsey.com