1. 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

2. Context 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Great Depression – Quantity: Persistent Jobs Deficit – Quality: 30 years of stagnant wages: Broken Social Contract Outdated Employment Policies: Mismatch between changing workforce, work, and economy Policy Stalemate turned to Political Polarization Vacuum of National Leadership

3. 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 – Harvards Competitiveness Summit – And yes there is an election coming….

4. A Proposal A Jobs Compact: 20 million jobs by 2020 First step in comprehensive employment policy reform

5. Overview Dimensions of the jobs crisisin numbers & pictures Root causes that need to be addressed Substantive dimensions of the Jobs Compact Complementary policy and institutional innovations How to get therecan we get there???

6. 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-up s Serious cohort problems – New graduatesunderemployment will leave long term, possibly career long, imprints on income – Long term unemployed50+ year olds will never recover

7. Job Loss in Five Most Recent Recessions as Percent of Peak Employment Source: Bureau of Labor Statistics, Center for Economic and Policy Research

8. 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 1928eve 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

10. 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: http://www.npr.org/templates/story/story.php?storyId=124131819 Private Sector Defined-Benefit and Defined-Contribution Plan Coverage, 1979-2009

11. Wall Street Journal, February 19, 2011.downloaded at: http://online.wsj.com/article/SB10001424052748703959604576152792748707356.htmlhttp://online.wsj.com/article/SB10001424052748703959604576152792748707356.html Wall Street Journal Estimates of Retirement Income Shortfalls

12. Declining Job Satisfaction 1987-2009 Source: The Conference Board. Data used with Conference Board Permission.

13. 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 sectortalent, 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

14. 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

15. 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

16. Proposal: Create a Multi-stakeholder Jobs Compact Jobs Compact Education Business Labor Government

17. Needed: 208,000 new jobs per month to 2020!

18. 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

19. Where could these jobs come from?

20. Complementary Employment Policy Changes New Objectives and Approach to labor law and policy – Fix the basicsassure 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 minimumsminimum 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….

21. 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

22. Organizational Reforms: Business Work togetherStrengthen industry, regional networks Network strategies to spread high road strategies – Learning networks – Joint investments in education/training Strengthen cross-stakeholder tiesuniversities, community colleges, labor, government

23. 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 tiesbusiness, education, and government

24. Organizational Reforms: Government Bring employment/labor back into mainstream economic policy making Return to an outreach tradition: Strengthen cross- stakeholder ties: business, education, labor

25. 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

26. Leading Policy: Secretaries Past SecretaryAdministrationEngagements with Labor & Employers Arthur Goldberg & Willard Wirtz Kennedy & JohnsonPresidents Labor Management Committee John DunlopFordLabor Management Group Ray MarshallCarterSteel Industry Tripartite Committee Robert ReichClintonCommission on Future of Worker Management Relations (Dunlop Commission)

27. Or…Leadership from the Outside? Do we revamp President Obamas 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?

28. And then… Wisconsin

29. And Now…..Massachusetts!

30. 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?