In last week’s Suggestion Bach’s post, I argued that increasing income inequality is largely a function of jobs, or more precisely, the lack of them.  Certainly, there are other contributing factors, including a misaligned tax system that reduces investment in the US, poor board governance that misrepresents the interests of shareholders, wage and compensation systems that reward the wrong behavior, and an education system that fails to prepare students for 21^st century jobs.  But by far the most important factor, and the focus of today’s discussion, is the breakdown in the economy’s jobs engine.  So the question becomes, “how do we generate more jobs that lead to a middle class standard of living?”

The first myth we must debunk is the idea that jobs can be “created” quickly or easily.  While job growth and new career opportunities generate significant positive benefits across the socio-economic landscape, any government leader who tells you they have a short-term solution for you is either lying or does not understand the problem.  Unfortunately there is no obvious recipe for achieving job growth and no “quick fix” solutions that will work.  Just as it has taken some time for income inequality to widen, it will take time to close the gap as well.

The government’s role in effecting the employment rate requires a delicate balance:  policies need to be “pro-employment” and establish the fertile ground on which new jobs can grow, while at the same time resisting the temptation to just “create government jobs”.  Inevitably, government manufactured jobs lead to significant business model and productivity challenges that run afoul of our ability to stay within our financial means.  In essence, until we re-ignite the private sector jobs engine, many other problems will remain difficult to address.  Although long-term in nature, the following ideas can help:

1. New Trade Craft:

   As the areas of growth in our economy have shifted, so have the types of trade jobs required.  In addition to the tens of thousands of well-paying STEM jobs that we hear so much about (and rightly so), there is a whole new trade craft that involves some level of technical aptitude or specific trade training in areas such as customer service, network administration, device repair and service, and software management tools.  Unfortunately, our workforce is ill-prepared to fill these positions and our education system is not tooled to address that problem.  I could (and will) write a whole chapter about dramatic improvements that are required in our education system, including rewarding quality teaching, spending more time on task, and revamping our vocational and community college system.  The reality is that those entering the work force need more than a high school degree – and yet, not everyone needs a four year degree in computer science or English literature.  What we do need is extensive training and education programs to equip our labor pool, in particular those just entering the workforce, to fill these solid, middle class jobs.  Even in more traditional trades such as construction, we are not training enough workers to replace the large group that is entering their retirement years.

2. Investment, Tax, and Regulatory Reform:

   Risk and uncertainty are very damaging to job prospects.  The lack of confidence in our elected officials to make sound economic decisions has caused business leaders to pull back from new investments and opportunities.  The decade long game of political football that is our federal budget process must end, and as noted earlier, a complete reworking of our tax code is long overdue.  This is not a Democratic or Republican perspective – solutions will require policies that span the aisle as proposed by the Simpson-Bowles Commission.  In short, we must develop a more balanced, sensible economic model for government operations.  The Simpson-Bowles report summarized it this way:  “After all the talk about debt and deficits, it is long past time for America’s leaders to put up or shut up.”  Enacting a consistent, responsible set of economic and tax policies would lead to more investment and more jobs.  We also need to make it dramatically easier to start and run a business and reduce the amount of regulation that affects that process, in particular for smaller, private businesses.

3. Immigration Reform:

   It may seem strange to include this in a discussion of employment, but today’s immigration policy is inhibiting economic growth.  At the lower end of the job market, there are thousands of jobs available which go unfilled today or which live in a shadow, unregulated marketplace.  And while our minimum wage debate from last week may need to be re-invigorated here, the bigger point is creating the jobs out of the gate.  Without stereotyping, illegal immigrants form a large portion of this job pool – and we should want them to embrace these jobs legally and openly.  Legal employment reduces the burden on our social infrastructure, employs youth, and hopefully starts a positive economic cycle for those workers.

   At the other end of the skill spectrum, there are also thousands of engineering and technical jobs that companies can’t fill today, both because our education system is not producing enough qualified engineers and because there are not enough visas available to employ foreign nationals that we’ve educated in our own universities.  Again, filling these positions creates economic activity both at the companies where they work and through their consumer spending – and the multiplier effect of this activity would be meaningful in the economy.

   Historically, immigrants have formed an important, arguably critical component to driving economic advancement in our country.  Through both brawn and brains, they inject an important vibrancy into our economy and culture – and nothing we do, no fences we build, no laws we create – will stop the flow of people.  We should consider that a compliment.  Instead of fighting this trend, we should harness it to our benefit by creating laws that regulate immigration effectively (in particular relative to national security) but enable more to participate in and contribute to the American Opportunity.

4. Infrastructure:

   To the extent that the government is going to address unemployment directly, it should be through investments in much needed infrastructure repair, improvement, and replacement.  Our national infrastructure is more fragile than at any time since World War II with energy transmission, roads and bridges, air traffic control, water management, food quality, and many other areas in need of systematic upgrades and replacement.  Done correctly, this kind of spending has the dual purpose of generating jobs AND improving the environment in which both consumers and businesses operate.  The challenge here is making sure the investments are made in the right areas (see Japan’s bridge to nowhere) and that we invest in fixing core infrastructure elements like energy distribution, transportation and the like rather than every congressional district’s pet projects.  Our country’s infrastructure needs to be rebuilt – it is high time we got started.

   The most difficult aspect of this entire discussion is that very little of what I describe above generates political points on the scoreboard – in part because it is long-term in nature and requires real trade-offs.  With that said, as voters we should demand that our elected leaders tackle the real problems and take responsibility for improving the underpinnings of our country.  We can only build a stronger economy, and in the process employ more people productively with dare I say it, “living wages”, if we build on a rock solid foundation.