Unemployment hangs at 9.1% and for the foreseeable future (2012)Â it will stick there per the White House.
In a recent interview posted as video at McKinsey Quarterly Kelly Services CEO laid out the structure of future employment for individuals is becoming more a free agent model. and NL Michael Spence points to the fact that virtually all newly created jobs since ’95 where in the non-transferable sector (a.k. service industry), meaning we have significantly less fully employed people, and the jobs have shifted from high-skill manufacturing to low-skill service. The service industry however kept going bust in the last of the three crises.
To add insult to injury, In ’95 the top 1% earner took home 9.5% of the income pot, in 2007, the top 1% took home 23.5% of the total income pot. So we have a factual redistribution of wealth to the top (the part of the population that vehemently opposes closing of tax loop holes or any taxes at all). While the top 1% certainly enjoys the additional 14% of the income pot, that money is missing in the middle class where it would be used in everyday consumption (not for Lear Jets) hence greasing the economy. So the redistribution of wealth has a dragging effect on the national economy.
Conversely the resolution would be to have broad swaths of consumers spending salaries, that they earn at higher levels, which would leave money on the table to be taxed so the deficit can be tackled. But how dow we get to those jobs?
Robert Reich recently referenced the German model, how Germany excels in exports and is apparently able to stem a whole European crisis by way of the strength of its internal manufacturing industry as it did not abandon the middle class jobs while paying decent salaries that keep the economy humming due to internal consumption, and further invests into high-end jobs.
The underlying model goes back into the early ’70s, when Germany faced the loss of the shipbuilding and steel industry and other markets to Japan and Taiwan. It was a wake-up call and the thesis developed at the time was to become a land of blue-print designers, while ceding assembly to other countries. However, the national challenge was: How to make sure there is enough salary to go around for all to be employed. The answer was/is that everyone needed to be lifted up in terms of education so that the jobs to be had would be highest-value add jobs. That requires a high-performing educational system for the benefit of the future of the national economy. Education as a strategic imperative of national importance. Hence, an educational system that was not based on a for-profit concept, drowning its graduates in debt and robbing their freedom. This approach was also replicated in France (already since Napoleon), and Scandinavia (in Denmark it was realized that the only resources the country has are its people). The result is that in the US less than 30% have an education level of a bachelor or higher, in Germany it is 70% and that constitutes the innovative, high-end workforce that pulls a decent salary and drives the economy.
That workforce in Europe is made up of two major parts, the academically trained, and the vocational trained. Important is to understand that the vocational trained still go through three years of post-high school education, add another two years, and then can graduate over another two years to a professional masters degree. Those are the specialists that manufacture and out pace in quality and ingenuity the global competition. The underlying system dates back to the formation of trade guilds from the 12th century onwards.
If America wants to pay back its debt, it will need to provide high-value added export oriented products whose revenues allow taxation at the salary and corporate level. For high value added products, it needs the workforce and the workforce needs cutting edge education. Germany set the elements in motion in 1973/4, some forty years ago, had no debt issue in th ’70s when the foundation for its educational and export strategy was laid, and is reaping the awards now. In the US we lack a deep vocational training system and our educational system is largely proft-oriented and we are in 2011 with debt mounting and the educational discussion is not even started.
