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12 Myths about America's Jobs Crisis

Scott Bittle and Jean Johnson

Reprinted from The Huffington Post - February 6, 2012

When Americans head for the polls this fall, a lot of people will be voting on just one issue: jobs. But so far, much of the political rhetoric sounds like it could be coming from one job that's pretty much obsolete - a carnival barker. It's awash with sweeping generalizations and vast oversimplification.

There's almost no talk of the enormously difficult, long-term challenges we face on jobs. "Elect (or re-elect) me, and everything will be fine," the candidates seem to say. The reality is that the Great Recession destroyed 8.4 million jobs, and technology and a competitive global economy have changed the rules on what it takes to create and keep good ones here in the United States.

In our book--Where Did the Jobs Go--and How Do We Get Them Back? (William Morrow, $16.99)--we examine some of the myths and oversimplifications voters need to watch for. Political campaigns tend to gloss over the details. We'll see the candidates in their jeans or khakis standing in front of factories shaking workers' hands. We'll hear them praise American workers and entrepreneurship. They'll express their concerns about people who've lost jobs or whose businesses have failed. But that doesn't mean they have solid ideas for addressing the problem.

We need to grasp the depth of the challenge and be open to a whole range of old and new ideas for creating jobs. And we need leaders who will be straight with us. We're deep in the hole already and fighting powerful global trends. We're not going to rev up our economy's job creation capacity in just a few years. Anyone who says otherwise is selling something - usually themselves.

So when you hear candidates say things like this, it's time to ask some tough questions.

Myth No. 1: Cutting taxes is a surefire way to create jobs

Most Americans are deeply unhappy with our tax system, and it is true that job creation can stall when taxes are too high. But after the Bush tax cuts in 2001 and 2003, U.S. federal income taxes are already at historically low levels. Yet between 2000 and 2010, our economy lost about as many jobs as we created. Taxes matter, and tax reform and specific kinds of tax cuts might well be helpful, but just cutting taxes, in and of itself, is not a foolproof recipe for job creation.

Myth No. 2: Once the economy picks up steam, we'll be fine

Final figures aren't in, but our economy grew an estimated 2.8 percent in the fourth quarter of 2011--well below growth rates throughout most of the last decade. When growth picks up, unemployment will fall, and job creation will increase. But we're way behind on the jobs front. Not only did we lose millions of jobs in the recession, a growing population means we need to create 100,000 to 150,000 new jobs a month just to keep up. And increasingly, businesses can get their work done with fewer employees. When businesses can reduce costs by using technology or moving jobs overseas--and that's what their competitors worldwide are doing--then those jobs aren't likely to come back just because the economy picks up.

Myth No. 3: Balancing the federal budget will create jobs

In the long run, our rising national debt is one of the most dangerous problems our government has, and we have to tackle it. Unfortunately, what's needed to control deficit spending--cutting federal programs and raising taxes--slows economic growth and job creation in the short run. On the other hand, letting deficit spending mushroom could up-end the entire economy down the road. Sometimes politicians talk like this is a simple problem to fix. It's not. It's going to be very tough. Some argue that we can let the federal red ink flow forever, but the only honest debate is over how quickly to move.

Myth No. 4: Better educated people don't have to worry

There's a fierce debate over whether college is a worthwhile investment, given the high level of student debt. Still, there's no question that, statistically speaking, college graduates earn more and are less likely to be unemployed than those without a degree. The real myth is that being better educated automatically makes your job safer in today's economy. Technology and globalization mean some kinds of high-level professional work can be done anywhere in the world. A study by the National Academies reported that Australian radiologists already read MRIs of American patients, Costa Rican accountants help prepare the tax returns of U.S. businesses, and big companies like GE do much of their R&D overseas.

Myth No. 5: Off-shoring can happen to anyone

There's no question that offshoring has moved beyond manufacturing and call centers. But a study by Princeton economist Alan Blinder found the key factors in whether work moves offshore aren't wages or skills, but whether the job has to be done in a specific location, and whether it requires face-to-face contact. By that standard, the vast majority of U.S. jobs, about 100 million, aren't going abroad. Still, he calculated roughly one-quarter of U.S. jobs could be done elsewhere, or more precisely, anywhere, including computer programmers, graphic designers, welders, and in a nice touch of irony, economists. These jobs won't necessarily go offshore--often its more trouble than it's worth--but they could.

Myth No. 6: We can't compete with low wages overseas

Lots of people argue that low wages in developing countries means we simply can't compete. Federal statistics show that in 2006, the average American production worker made $25.59 per hour, compared to $2.92 in Mexico and an estimated 81 cents in China. But wages aren't the only factor in a company's decision. If workers in another country earn less, but they're also less productive, it's a wash as far as business is concerned. Businesses also need stable governments, reliable business practices, and reasonably honest legal systems. When you factor all those in, the World Economic Forum still ranks the United States fifth in the world for global competitiveness--at least for now.

Myth No. 7: We should fight technology that eliminates jobs

Technology both creates and destroys jobs, usually at the same time. Smartphones are killing land line jobs, but they're producing new jobs that never existed before. Could Alexander Graham Bell have anticipated that someone would earn money creating Angry Birds? Technology tends to eliminate a lot of routine, repetitive work (Ask a typesetter if you can find one). Jobs that require problem-solving or communications skills are another matter. But the key question isn't education anymore; it's the nature of the work. Routine tasks that are now conducted by doctors and lawyers--like taking medical histories or poring over documents in discovery--could be automated soon.

Myth No. 8: Immigration takes jobs away from people already living her

Actually, the best evidence suggests that labor markets adjust and absorb immigrants. In Miami, after the 1981 Mariel boatlift of Cuban refugees, unemployment rose briefly when the local workforce swelled by 7 percent. But by 1985, Miami's unemployment was back to normal. Remember, immigrants aren't just workers, they're also consumers. So while they compete with native-born workers for existing jobs, they generate new demand for goods and services--which ends up creating jobs. It's not clear how much native-born and immigrant workers compete directly: a Federal Reserve study found lower-educated native-born workers tend to be in manufacturing or mining, while lower-educated immigrants are in agriculture or personal services.

Myth No. 9: Closing the income gap is the answer

If big incomes at the top automatically boosted job creation, the fact that CEOs now make 263 times what average workers make (compared to 30 times in the 1970s) should deliver amazing job growth. Instead, the private sector only added 1.1 million jobs between 1999 and 2009. And there's persuasive evidence that countries with smaller income gaps have longer periods of economic growth. But will reducing the income gap actually create jobs? That depends. Let's say we raise taxes on wealthier Americans. Should we use the money to modernize airports, bridges, and the electric grid, which creates jobs in the short run? Or should we reduce the deficit which improves the economy over the long haul?

Myth No. 10: Cutting government spending reduces unemployment

Americans say federal government is too big, and most economists agree that if government gets too big, it can eat up money that might be better used elsewhere. Experts in the "dismal science" are currently nuking it out over whether we're at this point or not. Whatever the case, we should be honest that cutting government spending does eliminate jobs--it has to. Roughly 2 million Americans work for the federal government--85 percent of them outside of Washington. Then there are all the people who work for Lockheed, Boeing, Raytheon, and other companies with big government contracts. Cutting government spending will eliminate some of those jobs. We need to recognize the trade-off.

Myth No. 11: Most jobs come from small businesses

The vast majority of Americans work in the private sector--not in government--and there is one type of business that wins the job creation prize hands down. It's not small businesses, as many people assume. It's new businesses. In fact, nearly two-thirds of new jobs in the U.S. economy are created by businesses less than five years old. That's a big hint on how to rev up the job creation engine. Let's figure out how to encourage the innovation, entrepreneurship, business climate, and sheer guts it takes to start a business. It could be one of the most powerful strategies we have.

Myth No. 12: Presidents create jobs

So you're standing in the voting booth asking yourself which candidate is better for jobs. It's worth thinking momentarily about what the president--any president--can actually do to create jobs. Successful businesses that hire lots of workers need many things--great ideas; skilled, imaginative leaders; trained, conscientious, honest workers; good transportation and communications; a rational, well-functioning legal system, good local government and more. Some of those come from government, and others, businesses have to do on their own. We tend to hold presidents accountable for jobs created or lost on their watch, but realistically, they're usually secondary players. Politicians don't hold all the cards, and frankly, we don't think they should.

Myth No. 12: Presidents create jobs

So you're standing in the voting booth asking yourself which candidate is better for jobs. It's worth thinking momentarily about what the president--any president--can actually do to create jobs. Successful businesses that hire lots of workers need many things--great ideas; skilled, imaginative leaders; trained, conscientious, honest workers; good transportation and communications; a rational, well-functioning legal system, good local government and more. Some of those come from government, and others, businesses have to do on their own. We tend to hold presidents accountable for jobs created or lost on their watch, but realistically, they're usually secondary players. Politicians don't hold all the cards, and frankly, we don't think they should.


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