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The Jobs’ Crisis and American Employment Policy: A Call for a Jobs Compact. Thomas A. Kochan MIT Sloan School of Management and Institute for Work & Employment Research Northeastern University Open Classroom Boston, MA September 19, 2012. Context.

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the jobs crisis and american employment policy a call for a jobs compact

The Jobs’ Crisis and American Employment Policy: A Call for a Jobs Compact

Thomas A. Kochan

MIT Sloan School of Management and

Institute for Work & Employment Research

Northeastern University Open Classroom

Boston, MA

September 19, 2012

  • Worst Jobs’ Crisis since Great Depression
    • Quantity: Persistent Jobs Deficit
    • Quality: 30 years of stagnant wages: Broken Social Contract
  • Outdated Employment Policies: Mismatch between changing workforce, work, and economy
  • Policy Stalemate turned to Political Polarization
  • Vacuum of National Leadership
the good news
The Good News
  • Local Innovations as a base for national policy
    • 30 years of innovation
    • 30 years of research, tracking, evaluation
  • Growing recognition of crisis
    • Harvard’s “Competitiveness Summit”
    • And yes there is an election coming….
a proposal
A Proposal
  • A Jobs Compact: 20 million jobs by 2020
  • First step in comprehensive employment policy reform
  • Dimensions of the jobs crisis—in numbers & pictures
  • Root causes that need to be addressed
  • Substantive dimensions of the Jobs Compact
  • Complementary policy and institutional innovations
  • How to get there—can we get there???
dimension 1 of the employment crisis persistent jobs deficit
Dimension 1 of the Employment Crisis: Persistent Jobs’ Deficit
  • 8.1% unemployment; 16-20% underemployment
  • Deeper, faster employment declines in Great Recession than GDP decline would have predicted
  • Slower post-recession job growth
    • Large firms reluctant to invest in U.S.
    • Longer term decline in new start-ups
  • Serious cohort problems
    • New graduates—underemployment will leave long term, possibly career long, imprints on income
    • Long term unemployed—50+ year olds will never recover

Job Loss in Five Most Recent Recessions as Percent of Peak Employment

Source: Bureau of Labor Statistics, Center for Economic and Policy Research

dimension 2 of the employment crisis long term declines in job quality
Dimension 2 of the Employment Crisis: Long Term Declines in Job Quality
  • Broken “Social Contract”
    • 1945-80: wages and productivity grew in tandem
    • Since 1980: good productivity growth; stagnant wages for majority of workforce; trend worsened in past decade
  • Greatest inequality since 1928—eve of Great Depression
    • Top 1% of families captured 58% income growth 1976-2007;
    • Top 10% captured 50% of national income in 2007
  • Other job quality indicators
    • Declines in retirement plans and savings
    • Health insurance coverage gaps (45 million without employer provided health insurance
    • Declines in apprenticeship training
    • Declining job satisfaction

Private Sector Defined-Benefit and Defined-Contribution Plan Coverage, 1979-2009

Source: Employee Benefit Research Institute. EBRI's estimates for 1998-2008 were done using Department of Labor and Current Population Survey data.

Credit: Alyson Hurt / NPR Source:


Wall Street Journal Estimates of Retirement Income Shortfalls

Wall Street Journal, February 19, 2011.downloaded at:

declining job satisfaction 1987 2009
Declining Job Satisfaction 1987-2009

Source: The Conference Board. Data used with Conference Board Permission.

root cause 1 market failure
Root Cause (1): Market Failure
  • Financialization of the economy
    • Rise of investor capitalism in 1980s
      • Leveraged buyouts, hostile takeovers
      • Deregulation of financial markets and institutions
      • Rise of shareholder maximization as the sole purpose of the firm
      • Growth of financial sector—talent, profits, and compensation
  • Globalization of investment options and markets
  • Net result:
    • Gulf between interests of individual firms and national economy
    • Yet overall business community and national economy interests are more aligned
net result two equilibria economy
Net Result: Two Equilibria Economy
  • Some firms compete with “high road” strategies
    • Focus on innovation, productivity, quality, service
    • Invest in employees’ human capital development
    • Employ “high performance” employment practices and labor management partnerships
  • But are held back by dominant “low road” competitors
    • Focus on low cost/low labor cost strategies
    • Outsource lower skill work (domestic and global)
    • Avoid (successfully) unions
    • Employ traditional command and control management practices
    • Oppose any and all employment/labor policy reforms
root cause 2 institutional failure s
Root Cause (2): Institutional Failure(s)
  • Mismatch between labor market demand and institutions
    • Movement to “knowledge” intensive economy; college education and technical training did not keep up
    • Decline of unions and collective bargaining as
      • A countervailing power
      • Source of innovation in employment practices
    • Retreat of government from labor market policy
      • Wage norms abandoned
      • Labor Relations policy breakdown and long term impasse
      • Weaker enforcement of employment standards
      • Slow take up of new “two-track” enforcement models
      • Labor policy relegated to low status as a political problem rather than a set of economic policy tools
  • Vacuum in business-labor-government-education dialogue
elements of a jobs compact
Elements of a Jobs Compact
  • State, local, and education job investments
  • Infrastructure Investments
  • Manufacturing
    • Recover lost manufacturing jobs
    • Capture next generation manufacturing jobs
  • Rebuild Apprenticeships
  • Diffuse the best Community College-Industry Partnerships
  • Second Chance College Technical Courses
    • On-line
    • In-person
complementary employment policy changes
Complementary Employment Policy Changes
  • New Objectives and Approach to labor law and policy
    • Fix the basics—assure worker access to unions
    • Promote labor-management partnerships
    • Proactive efforts to diffuse innovations and engage in further experimentation and evaluation
  • Reduce High Road-Low Road Gap aka “Level the Playing Field”
    • Industry-Region Based Learning Networks
    • Raise the minimums—minimum wage
    • Use purchasing power to promote high employment standards
  • Modernize Employment Standards Enforcement
    • Internal Responsibility systems
    • Leverage key points in value chain
    • Partner with unions, community groups, worker centers….
organizational reforms education
Organizational Reforms: Education
  • Expand access to on-line courses and technical degrees for underemployed recent graduates
  • Expand B-School offerings on how to build, lead and manage sustainable organizations that work for shareholders, employees, and society
    • MBAs, alumni, current and future entrepreneurs
    • Action Learning – expose students to real problems
    • Broaden constituents – engage labor and government leaders
  • Facilitate the Jobs’ Compact in Regions
organizational reforms business
Organizational Reforms: Business
  • Work together—Strengthen industry, regional networks
  • Network strategies to spread high road strategies
    • Learning networks
    • Joint investments in education/training
  • Strengthen cross-stakeholder ties—universities, community colleges, labor, government
organizational reforms unions and professional associations
Organizational Reforms: Unions and Professional Associations
  • Treat knowledge as key source of power
    • Expand apprenticeships and professional development-certification programs
    • Focus on becoming the labor supplier of choice
    • Develop next generation leaders
    • Create life-long recruitment/membership models
  • Strengthen cross-stakeholder ties—business, education, and government
organizational reforms government
Organizational Reforms: Government
  • Bring employment/labor back into mainstream economic policy making
  • Return to an outreach tradition: Strengthen cross-stakeholder ties: business, education, labor
reinvigorating the department of labor
Reinvigorating the Department of Labor
  • Defining Role: Catalyst for Diffusing Innovations
  • Rebuilding “Social Dialogue” with broader constituencies
    • Labor, Employers, Workforce Groups, Community Organizations/Intermediaries, Education, Researchers
  • Rebuilding Internal Analytical Capacity
  • Strengthening Links to External Researchers
or leadership from the outside
Or…Leadership from the Outside?
  • Do we revamp President Obama’s Jobs & Competitiveness Council?
  • Should we leave it to Harvard Business School?
  • Can our Research Community Lead the Effort?
  • Do we sit it out until after the election?
what if we fail to act
What if we Fail to Act?
  • Continued decline in American living standards
  • End to the “American Dream” (each generation should be able to do better than the last)
  • An era of social unrest?