Should we be talking about “Jobs Created or Saved”?

by

After 25 years of speaking with companies about the work associated with positions and about improving the productivity and other metrics associated with those positions, I continue to be intrigued by the on-going conversation about the number of “jobs created or saved” by various economic stimulus initiatives in the United States. I continue to hold the position that people in Washington DC either have no idea what they mean by the phrase “jobs created or saved” or they mean something entirely different than most people I talk to in the private sector.

A job is the work somebody does to earn money.  On the surface getting people jobs appears to be a good thing. Get people to work. Get them paid for doing work. Get the money into the economy to pay for other goods and services. In the short run, creating work for people to get paid for doing may be necessary and appropriate. Longer term, however, shanghai job creation may not be sufficient.

One challenge with job, or work, creation by the federal government is that the sustainability of the work may rely on the continuation of funding by the federal government unless the work created has its basis in the underlying economy. Ideally, for a federal government job creation program to be sustainable and, in the long run, a good thing, the created jobs should fill sustained needs within the respective communities. Jobs associated with a stimulus-funded construction project may be a good thing short term, especially for the individuals hired by the firm, but when the project is complete what work fills the new void for those individuals?

The other challenge associated with the current “jobs created or saved” is that it generally does not seem to consider whether the people doing these new jobs were employed doing something else before coming into the new position. Combined with reports of miscounting, the credibility of the reported results is questionable. On the other hand, if self-reporting of “jobs created or saved” the only metric available for a quick assessment of progress, then that metric should be used with care and with the recognition that the perceived improvement may be short term at best.

As for the sustainability factor, we eventually need to get community leaders, elected and non-elected, looking at long-term community needs and long-term solutions. It seems surreal to be using economic stimulus money, for example, to be addressing long-standing issues associated with the disruptive change experienced by the auto industry and the steel industry in Michigan, Ohio, and elsewhere. Using stimulus money may help people short term, but a short-term infusion of cash cannot remedy 20 years or more of troubled economy. Leaders in long-suffering regions need to identify industries that can be sustainably stimulated, not just jobs. While some argue that “clean coal technology” is unattainable, it is an example of the type of industry that may be needed to sustainably stimulate the economy. While fixing a few roads may provide short-term relief, for longer-term impact somebody might want to look at how to fix roads better or to build roads that need fewer repairs, if at all.

Leadership, Economic Crisis and Stimulus, and Job Creation

by

Leaders worldwide somehow recognized the presence of an economic crisis in September 2008. The crisis was at least in part precipitated by poor leadership. Disagreement seems pervasive about the source and the specific indications of poor leadership. Some blame greed while others suggest the housing bubble and mortgage credit woes have their root in the easing of credit in the late 1990s to enable home purchasing by people previously not qualified as homebuyers. Some in the U.S. propose expanding government spending while others express concern about growing federal budget deficits.

Agreement seems rather widespread that job creation is crucial to recovery from a global economic downturn. The focus of the U.S. media is, perhaps understandably, economic recovery and job creation in the U.S. From the perspective as a business consultant for 25 years, mentoring startups and improving productivity in established companies, very few elected representatives in Washington, DC and in state capitals, or in the media for that matter, seem to have much of an understanding of job creation. The White House’s official tally of “jobs created or saved” treats monthly payroll numbers as if one person working for one month is the equivalent of a job created. Whether this is just an example of clerical errors in tabulation or indicative and symptomatic of widespread miscalculation, the integrity and credibility of reports of jobs created or saved is no better than doubtful.

Economic recovery cannot happen with artificial job creation. Job creation is not easy but is no mystery. Enterprises, public or private, must find new activities for new employees or the work associated with existing activities must rise to the point of stimulating the hiring of additional staff. Net job creation means hiring people previously unemployed but it also means adding paid hours to the work weeks of people previously under-employed. In our collective effort to stimulate the economy and promote recovery for individuals, communities, and nations, leaders need to help individuals, communities, and nations discover new and sustainable ways for real net job creation. Community leaders need to meet together to discover the existing needs within the community and uncover the funding to start addressing those needs. Some enterprises will expand their payrolls. Some new enterprises will need to emerge. Some people will need to learn how to perform new tasks. Some people may need to relocate.

In tonight’s State of the Union address, President Obama talked about improving efficiency, creating jobs, and reducing the deficit. Those are not inherently mutually exclusive topics but simultaneously achieving all three will require leadership and creativity. Improving efficiency and productivity generally implies using fewer resources to accomplish the same work or using the same resources to accomplish more work; on a relative basis, improved efficiency and productivity implies job loss. If we, as an economy, want to improve efficiency and productivity, to accomplish our goal of maintaining or improving our competitive position, and we want to have net job creation, the number of net jobs created will inherently be comparatively larger. Increasing the employment base of the country may increase the country’s tax base and contribute to deficit reduction. Reducing spending is another path to deficit reduction. Stimulating the creation of new jobs seems to eliminate reduced spending as an option. If that is the case, the path to deficit reduction is a program strategically to employ the unemployed and to employ the underemployed better. Then, the ultimate scorecard may need to reflect the expansion of the payroll tax base rather than such difficult-to-measure metrics as “jobs created or saved.”