This ages biggest challenge is how to create more jobs, now that companies thanks to the subprime crisis and its global sequels have discovered how to do more with less.
The jobs problem is two-fold: not only are big companies reluctant to hire because they know they dont really need more employees to boost profitability to record levels, but the quality of the jobs does not need to be as high as before the crisis. Why pay high salaries and all those costly fringe benefits when there are thousands of jobless folks out there willing to work for less?
In the United States, the new college graduates who are lucky to find a job are socked to learn that theyll be making 30 per cent less to begin with than their counterparts a decade ago.
In Mexico, the government insists on fantasizing about job creation figures. For example, the administration claims that this year, some 800,000 new jobs will be created. What they dont say is that if such a target is achieved, it would barely be enough to make up for those that were lost during the 2009 crisis, and that the one million young people entering the labor market this year will have nowhere to turn.
Worse, the quality of jobs in Mexico has plummeted. Most are offering renewable temporary conditions, with low wages and virtually no fringe benefits. Its clearly en employers market, and if you dont like it, there are millions of applicants out there just waiting for a chance.
Which is why it seems ironic that some of the powerful executives who advised President Obama this week on how to solve the unemployment problem in the United States are themselves focused overseas for growth.
Indeed, five of the biggest companies on Obamas jobs council, General Electric, Citigroup, Intel, Procter & Gamble and DuPont, rely on foreign revenues for a majority of their sales a shift thats occurred just in the past several years for most of these firms.
As other countries economies recover more quickly, these corporations have taken advantage. Earnings at GE were up 77 percent in the latest quarter. Intel is enjoying record profits.
A basic premise in Obamas economic plan is that private-sector growth will translate into more jobs north of the border. Yet, evidence shows that such a strategy wont fly in todays world, where decades of globalization have undermined the connection between the health of large U.S. firms and the U.S. economy, analysts say.
Taken as a whole, U.S. multinational firms reduced their workforce in the United States by 2.9 million between 1999 and 2009, according to recent data from the Commerce Department. Meanwhile, they added 2.4 million workers overseas.
As reported repeatedly in recent months, U.S. corporate profits have largely returned to their levels from before the financial crisis, and executive pay has come roaring back. But income for most workers has been stagnant and the unemployment rate remains stubbornly high at 9.1%.
The bottom line is, U.S. companies can do very well, said Clyde Prestowitz, president of the Economic Strategy Institute and an adviser to the Commerce Department during the Reagan administration. That doesnt mean the U.S. economy is doing well.
The 26-member jobs council, which Obama created in January, set a goal this week for companies to create one million jobs within two years.
Theres no one silver bullet on job creation, said Jeffrey Immelt, GEs chief executive. This is going to be dozens of programs with metrics and accountability.
The group presented ideas that members said would help U.S. businesses, such as streamlining regulations, improving vocational training, and speeding up the process for tourist visas to draw more foreign travelers to the United States.
Job growth is going to be driven by the private sector but we can make some smart decision to encourage businesses to feel like this is the right time to invest and that the U.S. is the right place to invest, Obama said at the councils meeting.
The United States is facing stiff competition from foreign governments who already offer rich incentives to lure U.S. companies and the jobs they create.
Multinational firms added millions of jobs at home and abroad in the 1990s. But those companies cut back on hiring in the United States in the past decade.
In the last couple recoveries, and especially in this one, youve seen corporate profits improve and even reach their pre-recession levels much quicker than the labor market, said Josh Bivens, an economist at the left-leaning Economic Policy Institute. Multinationals can latch on to a global economy where parts of it are doing much better than the U.S.
GEs Immelt, the leader of the Jobs and Competitiveness Council, represents a company that counts overseas sales for 53 percent of its revenues, compared with 36 percent 10 years ago. In developing countries alone, GEs revenues have more than tripled in the past decade, from US$11 billion to US$37.5 billion.