Dont bet on business for next burst of job growth

October 10, 2011
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(Editor’s note: The Business Journal this week is taking the unprecedented liberty of replacing the editorial with Tom Fehsenfeld’s important comment, in which we find full agreement.)

My family and I are “job providers” (what used to be called “employers”) for over 200 people here in Michigan, and I have been wondering what it would take to get people like me hiring again. I have to admit that I am not overly burdened by regulations or filled with fear about “Obamacare,” so those cannot be the reasons my company is not hiring at a faster clip. The simple truth is, we hire and employ as many people as it takes to get the work done — no more, no less.

We are in the business of trucking fuel around Michigan, and demand for our services is not too bad. It has actually been picking up in the last few months, but we have not been doing much hiring. These days, you can get more work done with fewer workers. The trucks we use are bigger than they used to be, the computerized routing is more efficient, and at least a few of our efficiency initiatives have worked. We are becoming more productive day by day.

It appears that our company is the norm, not the exception. A few simple statistics tell the story. When President Bush took office in 2001, just after the bursting of the tech bubble, there were 114 million Americans in private employment. Although the economy grew slowly over the next few years, we American employers cut back continuously through 2003, dropping our work force to 111 million. It was a full five years before employment again reached 114 million.

Looking at the entire decade from 2000 to 2010, a period during which we went through 9/11, two wars, the bursting of the housing bubble and the financial meltdown, the gross domestic product of the United States actually grew 17 percent and corporate profits grew by 76 percent (both figures adjusted for inflation) — not a bad performance. And what happened to private employment during that time? While the U.S. was producing 17 percent more in goods and services in 2010 than in 2000, we “job providers” were doing it with 3 percent fewer workers than in 2000.

Even more recently, if you compared the records of 2010 with our last good economic year, 2007, you would find that GDP was down by just 1 percent, but we private employers had cut back 7 percent on jobs. Businesses have never been the true job creators in our society; consumers willing to spend are the job creators. There are many things we in business do well — delivering the goods, keeping costs down for customers, improving efficiency, producing profits — but we typically follow demand when adding workers.

What does that mean for the future of our economy and for the millions of long-term unemployed workers who are losing hope in their future? What does it mean for Congress, the Obama Administration and the Federal Reserve? I believe it means that many have been putting their faith in the wrong institution. The record of the last 10 years shows that — even if the economy resumes its slow growth — the chances are slim that business will be creating millions of new jobs any time soon.

The idea of business as the job creator is an illusion held equally by Democrats who try to stimulate jobs through subsidies, by free market Republicans who hope to stimulate jobs by cutting red tape and keeping taxes low, and by the Federal Reserve with its low interest rates. We in business will gladly accept all the subsidies, deregulation, tax cuts and low-cost loans sent our way, but our competitive, investor-owned business system will be relentless in seeking efficiency. You cannot bet on business to create the type of robust job growth America needs.

I believe we need to start taking bolder demand-side steps to create jobs for America. Passing President Obama’s jobs bill would be a good short-term start, but for the long term we need a broader discussion about the kind of America we want to build in the next decade, the work that needs to be done, how we can connect people who want to work with employment, and how to finance it. This will require a great deal of thought about the type of organizations, worker training, demand stimulus, tax policies and institutional support that will directly result in job growth.

Today, I believe, no one knows the answer of how to create millions of new American jobs in our globalized, efficiency-driven economy. Giving up the illusion that business is the answer may be the first step on the path to figuring it out.

Tom Fehsenfeld is president of Crystal Flash Energy.

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