Policy Needed for Job Growth
Posted by Vriz on November 5th, 2009
President Obama convened his Economic Recovery Advisory Board at the White House on Monday to ponder one question: how can the U.S. economy create jobs? This is indeed the most important question to ask right now. Many economists are coming to the conclusion that even after the economic recovery, many of the 7.6 million jobs lost during this recession will not come back. It appears that the linkage between the growth in the economy and growth in jobs is broken.
President Obama seems to understand the depths of the jobs crisis. He said: “This is my administration’s overriding focus… We will not rest until we are succeeding in generating the jobs that this economy needs.” This realization is a start. However, reaching the objective depends on creating the right policies for job growth in our economy.
The Advisory Board members told the Administration that for the next three years, they should concentrate on three areas to spur job growth: exports, infrastructure and energy-efficiency technologies.
Currently, exports constitute only about 7% of the U.S. GDP. Some experts say that if we manage to double the exports, the resulting job growth will be between 3 and 5 million. This will not mean that the U.S. will become an export-oriented economy, like China, Japan, or Germany. But some lessons from the German experience in particular, since it is a Western, highly-developed nation with similar to the U.S. input costs, might provide clues to where the U.S. policymakers will need to concentrate their energies.
Since the 1950s, Germany has been pursuing a path to growth built on the strength of its manufacturing industry. And while other developed nations started to abandon their industry in the 1980s and 1990s, Germany stayed focused on and even expanded its export-promoting policies. According to the Social Science Research Center in Berlin publications, key to Germany’s export juggernaut are the following policies: regulation on employers in pay, use and dismissal of labor, the so-called “labor constraint”; public support for industrial finance; state support for industrial R&D; and public policies to foster a skilled labor force.
While the U.S. will have to develop its own set of measures to create a focused industrial policy, it is becoming increasingly clear that the export sector is not going to grow itself. Our government needs to make strengthening U.S. manufacturing and exporting our products to the world its absolute priority in conjunction with encouraging large-scale infrastructure and new technologies investments. The American standard of living depends on it.
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