The Challenge of Building American Jobs
With worker productivity gains on par with economic growth, the prospects for dramatic, or even optimistic, growth in employment are slim. The ranks of the unemployed, while slowly inching downward, are still uncomfortably high. But there are other issues at stake when it comes to American jobs that raise critical questions. Where will jobs come from? Are we prepared for the jobs that are coming down the pike? What is the role of government? And importantly, do they pay as well as they should? Is it time to revisit the minimum wage?
The Challenge of Building American Jobs
Aspen Ideas Festival transcripts are created on a rush deadline by a contractor for the Aspen Institute, and the accuracy may vary. This text may be updated or revised in the future. Please be aware that the authoritative record of Aspen Institute programming is the video or audio.
THE ASPEN INSTITUTE
ASPEN IDEAS FESTIVAL 2013
1000 N. Third Street
Friday, June 28, 2013
LIST OF PARTICIPANTS
KEVIN J. DELANEY
Editor in chief, Quartz
Professor of Economics, University of Chicago
School of Business
ELAINE L. CHAO
Former secretary, U.S. Department of Labor
Co-founder and co-director,
Restaurant Opportunities Centers United
President, American Action Forum
* * * * *THE CHALLENGE OF BUILDING AMERICAN JOBS
MR. DELANEY: We're going to get started. My name is Kevin
Delaney. I am editor in chief of Quartz, which is a sister news
organization to the Atlantic. We are all digital, and we're focused on
global business. We're online at qz.com and you may have seen our
morning e-mail newsletters which we printed out for you around the
campus here. So the panel today is talking -- we're talking about "The
Challenge of Building American Jobs." We're going to leave plenty of
time for questions from you all, so please save them up and we will have
people come around with microphones after we've launched the
discussion for a little while.
We have a great panel here representing different parts of the
discussion around job creation, one of the most important issues -- it's pretty
easy to argue -- facing our country right now. I'm going to start at the end
with very quick introductions. We have Secretary Elaine Chao. She was
the secretary of Labor of the United States from 2001 to 2009. She's
also served as president, CEO of the United Way of America, director of
the Peace Corp and deputy secretary at the U.S. Department of
Transportation among other things.
I'm going to move next to her there, Saru Jayaraman. She is
co-founder and co-director of the Restaurant Opportunities Center United
which organizes restaurant workers. And she is director of the Food Labor
Research Center at the University of California, Berkeley. She also has a
book which is called Behind the Kitchen Door, which you can buy in the
bookstore outside if you want to, following the discussion.
Next to her is Douglas Holtz-Eakin, he is president of the
American Action Forum, co-director of the Partnership for the Future of
Medicare. He serves on the board of the Tax Foundation, and is on the
research advisory board of the Center for Economic Development. He
served as director of domestic and economic policy for John McCain's
presidential campaign from 2007-2008 and he was the director of the
nonpartisan Congressional Budget Office.
Sitting next to me, Austan Goolsbee, he's professor of Economics, University of Chicago School of Business. He was chairman
of the U.S. Council of Economic Advisers and was the youngest member
of President Obama's cabinet.
MS. CHAO: Wow.
MR. DELANEY: So there we are, you can see we have a great
group here. And we're going to dive right in with two of what I think are
the most important questions we want to walk away with answered. First,
we're going to talk about what the state of U.S. job creation is today, and
then secondly, we're going to talk about what the most important things
are to be done about. What are the big ideas to actually solve this
problem and make sure there are good jobs for us and for our children
down the line?
So Secretary Chao, I want to -- I'd like to start with you to help
us set the stage for thinking about what job creation -- the dynamics
around job creation today and then I'll ask the others to come in as well.
Can you start us off?
MS. CHAO: Well, obviously the current economic situation is
not very rosy. The last GDP growth has just been downgraded a bit to
1.6 percent GDP growth which is far more anemic than everyone had
hoped. Unemployment rate is 7.6 percent. The level of discouraged
workers who have left the workforce is of great concern. And the actual
numbers of people who are unemployed plus who want to have full time
work, but can't find it and are marginally attached to the workforce, you
know, the real unemployment rate is actually nearer 14 percent.
So I think the whole aspect of our job creation, having dignity
at work, having a purpose to work is one that concerns our nation
dramatically. Obviously, employment is very important because it gives the
person a sense of purpose and all the studies that we have shown, that we
have done, and the studies that I have done outside the department have
shown that when people go to work they are much more psychologically
healthy. They are also physically healthier. So job creation is very
important.Unfortunately, we've had an economic crisis in 2008 from
which the rebound has not been as quick as many -- all of us would have
liked. Job creation doesn't really come from the government sector and
you're going to get some push back on this from -- I'm sure some of the
other panelists. And also, we are now in a globalized economy where
we don't control the number of jobs -- we are not the only instigators of the
factors of successful job creation.
And so one of the key questions which I think you will be
thinking about as this discussion goes forward is, what is the role of
government in fostering the kind of environment through which the private
sector can increase jobs? Most of the job creation occurs with small
businesses. In fact, 66 percent of the net new jobs being created these
days are created by small businesses. So the plight of small businesses,
how regulations affect them, how taxes affect them, how overall
confidence of the employer becomes very, very important.
And so you're going to hear, obviously, a discussion about
that, but job creation is in fact in many ways, you know, pretty basic. It's
countries that have shown consistently lower tax rates, less regulations --
less burdensome regulations, greater fiscal discipline and greater
transparency, respect for the rule of law have generally done a much
better job in job creation.
MR. DELANEY: Sara, do you want to jump in --
MS. JAYARAMAN: Sure.
MR. DELANEY: -- what's your view of the state of job creation
in the U.S. right now?
MS. JAYARAMAN: So I think it's important to think about the
sectors of the economy that actually are growing right now. They happen
to be the two fastest growing sectors of our economy right now are retail
and restaurants. And I know a lot about restaurants, I wrote a book about
it. And the restaurant industry right now is over 10 million workers. It's 1
in 12 American workers and it happens to be the fastest growing --
actually -- sector of the economy. It actually was one of the -- only sector of the economy to not suffer dramatically during the economic crisis of the
last couple of years.
In fact, the industry has just posted record sales coming out of
the economic crisis. There is still job growth actually; they are posting job
growth right now. So they are doing really well. Unfortunately, the
restaurant industry holds another accolade, they also happen to be the
absolute lowest paying employer in the United States. So 7 of the 11
lowest paying jobs in America and the two absolute lowest paying jobs in
America with the least benefits are restaurant jobs, people who touch our
food. Below farm workers, below daily wage -- anybody you think of as
a low-wage worker, the restaurant industry is the lowest wage employer.
And you'll hear from the industry, oh, this is because we have
razor thin profit margins when in fact on average most restaurant workers
actually work for very large fortune 500 corporations. So growth may be
in small business, I would agree with that, but the vast majority of
restaurant workers are working at Olive Garden, Applebee's, IHOP
earning the minimum wage of $2.13 an hour. So the minimum wage for
tipped workers in the United States has stagnated for the last 22 years at
$2.13 cents an hour because of behind closed-door deals that the
National Restaurant Association has struck with Congress.
And so what we've got essentially is the largest and fastest
growing sector of our economy. In the context that Elaine is talking about,
you know, definitely there is a -- there are problems with job growth, but
you've got two sectors that are dramatically growing. Unfortunately, those
sectors happen to be the absolute lowest paying job employers in the
United States. You've got the largest sectors proliferating the lowest
For new entrants into the economy, this means that young
people -- older people being laid-off from other sectors are finding these
incredibly low even poverty-waged jobs, you know, stories of people
who've been financial analysts now working in restaurants, I'm sure you
have read about that in the New York Times. You know, I have been
talking about that on lots of national news shows. And that what they are
finding is incredibly low waged jobs. And so I think while we're thinking about job growth, we have to think about job quality.
MR. DELANEY: Okay. And what you're describing is that the
quality of the jobs that are being created is very low. Doug, your view of
job creations specifically with the dynamic right now?
MR. HOLTZ-EAKIN: I think we should not be one bit happy
about what's going on right now.
MR. DELANEY: Yeah.
MR. HOLTZ-EAKIN: We have all of these indicators of the
distress. And we, you know, Elaine has covered most of the top lying
ones. The unemployment rate is high, comprehensive measures of
employment that look at inability to get work and have to work part-time
are in double digits still. Labor force participation is low, the number of
jobs we're creating typically in a month is pretty much enough to keep up
with the GDP growth, but not up to really draw down the backlog of, you
know, 15, 20 million people who may in fact be out there looking for
So there is nothing good about that and it has big
consequences. We know that the durations of unemployment are
extremely long in this recovery and all the evidence is that's a permanent
scar in many peoples' careers that we really do lose a tremendous amount
as a nation when people remain unemployed for long periods of time. I'm
particularly worried about the younger workers who were
disproportionately hit by this downturn and whose durations are quite
high. They have suffered an enormous economic blow, some of whom
may not recover. And I don't think we really have a good answer for that.
And then there is a group of older workers as well who
structurally just don't see they have a good place to go. So this is not a
pretty situation. But that's not what I came here to talk about. I came here
to attack the media.
(Laughter)MR. HOLTZ-EAKIN: This is what I'm worried about.
MR. DELANEY: Yeah.
MR. HOLTZ-EAKIN: And you can tell me if I have got it right.
We've now seen, you know, consumer confidence tick up to 5-year highs,
MR. DELANEY: Housing is rebounding, yeah.
MR. HOLTZ-EAKIN: And we are getting all these happy talk
stories about how things are fine.
MR. DELANEY: Yeah.
MR. HOLTZ-EAKIN: They are not. You guys have to stop it.
MR. DELANEY: All right. I'll note that down and we'll work on
it. You can read Quartz tomorrow and see if it. Austan, do you want to
jump in the dynamic right now, anything to add to it?
MR. GOOLSBEE: Yeah. Look, there is not a big secret over in
any one month the job numbers are extremely variable. So we've been
averaging 150,000 a month, and that's plus or minus 100,000. And
so, whenever you see people on TV, whether it's me or Doug or anyone
ignore anything they say unless it's happened for 3 months in a row. Then
it means something, but if it's just for that month it could be anything. The
longer run secret is how many jobs we are creating is 100 percent tied to
how fast the economy is growing. And so, the fact that GDP growth has
been modest 2 percent, 2-1/2 percent when the productivity per worker
is about 2 percent a year growth tells you if you want to grow 2 percent a
year, you don't really have to hire anybody to grow 2 percent a year.
And so we have to get that growth rate higher and the times
when we've seen substantial improvements in the job market, have been
short-lived over the last 3 or 4 years. And they have been correlated with those periods where the growth rate got up, you know, a little above
2-1/2 pushing 3 percent. That has a pessimistic and an optimistic side to
it, I would say.
The pessimistic side is, as crummy as it is here, look around --
look at Europe, look at what's happening in Japan and Asia, oh, my God.
You know, growing at 2-1/2 percent a year makes us essentially the
fastest growing economy in the advanced world. So it has not been a fun
patch for the world economy and that's why job markets remain in distress.
What Doug said is exactly right; the biggest tragedy of the distressed job
market are young workers, the unemployment rate of young workers is
And what progress we have seen is actually 100 percent of
the net job creation has been people over age 50. And the people 25
and younger, it's been a devastating period, and hopefully the future will
not be like the past. The past has shown that lives with you for the rest of
your career or at least for 10, 20 years. The strongest parts of the job
market are those part where -- those parts of the economy that are still
growing. And they tend -- they have tended to be services, the health care
sector, I mean people are still getting older, they still want to either having
their hips replaced, they are still getting into --
MR. HOLTZ-EAKIN: Don't go picking on me.
MR. GOOLSBEE: I didn't say your name.
MR. GOOLSBEE: And those have been long growing sectors.
And we will probably get into some of the dynamics are changing so that
even in manufacturing, which had been of long term decline for many
decades, you've seen some rebound. But I think that we should separate
in our mind and may be it's the transition that you were going to make
anyway. The problems facing the future, the jobs of the future, the jobs for
our kids, and whether we will remain the richest country on earth are pretty
different from the questions of well, why has the unemployment rate not
come down faster in the last 18 months. And it's important to separate those in our mind because we've got to have growth strategy and
innovation strategy about that longer run stuff.
MR. DELANEY: So before we -- so I want to very quickly turn
to what some of the solutions are and what the jobs will look like for our
kids, but before we get there, let's talk just for a second about the structural
issues that have led us to this point where there is consensus among this
group that we're in a pretty crummy job market where low quality jobs are
being created. Is it -- just listening to you now, it seems like your simple
answer would be the problem's that the economy isn't growing and that's
why we are --
MR. GOOLSBEE: Yes, so --
MR. DELANEY: -- struggling to recover, but are there other
MR. GOOLSBEE: Though a simple answer that's not that
simple to answer.
MR. DELANEY: Yes.
MR. GOOLSBEE: Yes, that is I think the main source of the job
market problem. I think the issues of structural unemployment -- and just as
one factual matter, it is true that lower wage jobs have been growing
faster, but overall incomes -- if the only jobs being created were low
paying jobs and all the jobs being lost were high paying jobs, average
incomes would be falling dramatically. They have not been. We want
incomes to go up, they have been basically stagnant. But the fact that
they have been largely flat tells you it's not all horrible news. It's just not
growing as fast as we need it to grow to be making better news. We're
in this kind of treading water state.
I think the issue of structural unemployment that people who are
in one sector and now that sector is in a problem, how are they going to
shift to another one or geographic mismatch that the, you know, the jobs
are in North Dakota, but the people are in what -- Michigan, and their
house is under water so they can't sell it. Those are important, but I don't think you should kid yourself.
The fact is the overwhelming explanation for why the
unemployment rate got as high as it went and remained as high as it is
now is we had a terrible recession. It's a demand story they have -- the
growth has not been sufficient to warrant hiring of people to match the
sales. The most important factor has not been skills mismatch.
MR. DELANEY: Okay. So anybody want to add before we
move on, on the structural issues behind the -- anyone want to challenge
Austan or add anything to it?
MR. HOLTZ-EAKIN: I would love to challenge Austan, but
unfortunately, he is right about a couple of things. I think --
MR. GOOLSBEE: Stop the tape.
MR. HOLTZ-EAKIN: It's an historic moment. I acknowledge
this. I mean, there is a lot of discussion about these spatial mismatches
and how much the housing markets hurt the recovery because workers
can't move the jobs. There has been a lot of discussion about just the skills
-- and those phenomena are real. I mean you can find examples, they
aren't to be dismissed, but they've been around for long time. We've had
spatial mismatch discussions as long as I've been a professional economist
and I'm now on my second hip, I mean it's been a long time. It's the top
line growth numbers that matter. That you can forgive a lot of sins, if
you're growing rapidly. And that's what we are not doing.
MR. DELANEY: Okay. Do you want to --
MS. JAYARAMAN: I want to add one other structural thing. If
it's true that small business is the number one source of new job growth,
then I don't think that we have supported small business in the way that we
really need to. At least in our industry, the primary voice in our industry is
the National Restaurant Association which represents and speaks for the
interest of large fortune 500 restaurant corporations.Small businesses have felt so left out of this conversation in our
industry that we actually help them form an alternative National Restaurant
Association called RAISE, Restaurants Advancing Industry Standards in
Employment. These small businesses have come together and said,
actually, government is not listening to us or supporting us. The restaurant
association definitely doesn't speak for us. We actually see the ability to
grow, produce more jobs when we have what we call high road
employment better wages, better working conditions. We see less
turnover, we see higher productivity, we see higher profitability. We are
able to grow at a faster rate in fact when we create high road
employment conditions for our workers.
And we've got any number of examples around the country of
great small businesses that are going this, but they continue to say that
there are really structural problems with regard to support for their kind of
growth, for creating a level playing field between them and large
corporations like Olive Garden, Red Lobster, Applebee's. There are real
structural problems that these small businesses face. On the spatial
mismatch question, they also say, yes, it's really hard to find skilled, you
know, workers who know good customer service and even in the
restaurant industry which people may assume is a low skilled job, it takes a
lot of skill actually to work in a restaurant.
And employers are increasingly looking for training programs
and other programs that will help people do better. And that would serve
not just restaurant I mean the owners and the workers, but frankly every
one of us that eats out, we would have better food and better service. So
I think investing in training programs like ours that actually create these
matches between good employers and workers seeking jobs would serve
MR. DELANEY: Secretary Chao.
MS. CHAO: You know, I came to this forum with the intent of
learning and not to be confrontational, but I have to say that I disagree
with everything she has said. Number one, I'm not a defender of the
National Restaurant Association, but I have worked with them during my tenure and they are not comprised only of large corporate entities. They
comprise of thousands, and you can go on their website, thousands of
mom and pop stores.
And imagine, if you were an employer of a small enterprise,
you have five, six employees. You're faced with a specter of the
Affordable Health Care Act, you don't know what to do about that.
You're faced with a specter of increased taxes, you can't get a loan
because Dodd-Frank has frozen much of the liquidity in your community
banks. You're concerned and scared about the future, so what are you
going to do?
Are you going to go out and take your reservoir of savings and
hire someone? No, you're not. You're going to take it with you not do
anything with it, and see what's going to happen. So all this avalanche of
government regulations and specter of uncertainty is creating an
atmosphere that rational employers, small business mom and pop stores
are reluctant to commit their own capital.
I am of course concerned about those who are working at a
lower wage, but Austan mentioned, and I have seen this also, it comes in
across -- health care is one of the most fastest growing sectors because the
baby boomer generation is retiring and we don't have enough nurses,
phlebotomists, you know, health care home maids, doctors. We have a
net deficit of more than a million nurses in the next 10 years. We have a
deficit of doctors.
So all these -- so Austan is right, and the health care is a
growing sector, but the skill sets are different. Going back to again the
example, 40 percent of people who earn minimum wage migrate out of
minimum wage within 1 year. Eighty percent of workers who work in
minimum wage, migrate out of minimum wage within 2 years. I don't
want to get into an argument about minimum wage because it's much,
much too complicated, but when minimum wage has an impact on
employment and what we want is that we are increasingly a knowledgebased economy. We want workers to get into the workforce as quickly as
they can because for a worker that doesn't enter the workforce, they lose
their grasp on the employment ladder.So we want people to come in, learn, grow, go up that skills
ladder as they get from one job to another to another, gain more skills,
make themselves more valuable, they learn, they get, you know, training.
And then that's how they get better jobs. We see in Europe all these
young people at the age of 24 who are riding in the streets because
employment rate is moribund in Europe. They cannot find a job when they
graduate and they fear that if they don't get a job by the time they
graduate, they will never have a job with the rest of their life.
And Doug alluded to this. If you're a young person starting out
in the recession, you'll be forever disadvantaged in your overall life savings
-- I mean life earnings if you started out in the recession. So economic
growth is really important, job creation is really important.
MR. DELANEY: Do you want to jump in, Austan?
MR. GOOLSBEE: There is two -- there are some things that I
agree with that, but on the notion that the primary thing that's holding back
job creation in the country is coming from these regulations of the last 2
years. There is absolutely no evidence that that's true. So if you take the
reason that small business lending dropped; it's not from Dodd-Frank, it
started with the biggest financial crisis of all times and it has not recovered.
Small community banks got squeezed and crushed. Many of the big small
business lenders went out of business.
If you look at, for example, the surveys of the NFIB, and they
ask small businesses what are the biggest hurdle to your growth. One of
the things they ask about is regulation. And it is up, under President
Obama, but it's nowhere -- it's not the highest it's ever been. The highest
it's ever been was actually in 1994 under Bill Clinton when regulations,
they were putting in lots of regulations, but it was the start of a massive
employment boom, the likes of which we have not seen in a long time.
And I think there is one thing you got to -- it's almost a religious
decision you have to make, but there is two views of what leads to longterm economic growth. One view says, we ought to have as little
regulation or rules of the road or what have you as possible, as low a tax rate as possible, as little involvement of government as possible.
The other side says, not that we want big onerous government,
it says, do we need to invest in major public goods like the education and
training system of the United States, like the economic infrastructure of the
country like research and development and science and engineering. And
if you favor that it takes money to do that. And so I think that if in your
mind, you believe that taxes and regulation are the main driver of growth
then ask yourself, "Why is Silicon Valley in California? Why California has
always been a high tech state?" It's always been a high regulation state.
Why isn't it in Vanuatu or Kazakhstan or places where the tax on capital
gains is zero? So you would say, "Wow, you can do anything you want
to the ground water on the Island of Vanuatu and you don't have to pay
any taxes." Why don't great universities move there? Why don't great
companies head for over there?
MR. DELANEY: I think we're all officially domiciled in Ireland.
MR. GOOLSBEE: And I think the answer is because to attract
high skilled people and to innovate requires a backbone of infrastructure
and innovation that involves some aspect of public involvement, what's
called a public investment.
MR. DELANEY: So I don't want to spend too much time on this
question of government, how heavy or light government involvement
should be. And I want to move to the --
MR. HOLTZ-EAKIN: Can I make just two factual observations
MR. DELANEY: Very quickly.
MR. HOLTZ-EAKIN: I mean honestly this is --
MS. JAYARAMAN: And I need the opportunity to -- MR. GOOLSBEE: Did he say two or true?
MR. HOLTZ-EAKIN: Two factual.
MR. GOOLSBEE: Two.
MR. HOLTZ-EAKIN: One, there has been a noticeable drop
off in this recovery of startups. So these are just large small business thing
that people talk about, but new businesses create jobs. And for whatever
reason, we don't really know, it's a missing piece of this recovery. And I
think that's important and we are studying more. The second is the income
growth. That's a really important phenomenon because while all the
attention gets paid on job creation and unemployment rates, you know,
most people have jobs, but the income is not growing, and that's holding
back their ability to spend, their ability to meet their dreams --
MR. DELANEY: (Inaudible) U.S. GDP --
MR. HOLTZ-EAKIN: -- and it's why they don't move. When
things are growing rapidly people have a lot of confidence that they can
go get a job, and knowing the income they have a little cushion, that that
income growth is a big problem here.
MR. DELANEY: Yeah. Just very quickly, Saru.
MS. JAYARAMAN: Yes. So, Elaine, my name is Saru and --
MS. CHAO: And I know that. We've been introduced
MS. JAYARAMAN: And you can refer to me as Saru rather
MS. CHAO: Oh, I'm so sorry. That's fine.
MS. JAYARAMAN: That's okay. So, I actually know small businesses and I have actually been a small business owner myself. I have
opened and run two restaurants, one in New York, one in Detroit. And I
actually work with hundreds of small restaurant owners around the
country. So one is Jason from Russell Street Deli in Detroit, Michigan.
Jason opened his business in 2007 -- actually, at the end of 2007 right at
the beginning of the economic crisis. And was committed -- because he
was a former restaurant worker himself -- to providing livable wages to his
Now Jason has provided a minimum wage of $10 plus tip to
all of his employees in the front of the house and at least $15 in the back
of the house. He has experienced a 12 percent growth rate every single
year since 2008 and he is doing really well. His community supports him
and Jason was recently with me in the halls of the U.S. Senate saying, "I
believe in an increase to the minimum wage because I have seen how this
helps my employees. I have seen how them doing better allows them to
spend in the city of Detroit and spend in my restaurant, has allowed them
to actually be more productive because they don't have to worry about
paying the rent."
And in terms of data, actually, on who earns the minimum
wage and who lives in poverty, actually 60 percent of restaurant workers
who live in poverty are adults, they are not children or young people
moving on to something better. Most minimum wage workers are actually
adults. Over 60 percent of minimum wage earners are adults. The
median wage is in the late 30s, and two -- I mean, the restaurant industry,
which is the largest employer of minimum wage records in the United
States also has the highest rates of poverty among working adults.
So these are people who are working full time and often more
than full time, but experiencing literally three times the poverty rate of the
U.S. workforce, the rest of the U.S. workforce. And which is bad for all of
us, using food stamps at double the rate of the rest of these workforce not
because they want to, but because they live in such extreme poverty that
they have to. The people feeding us can't afford to eat themselves. Now,
I don't know about you, but you know, in terms of happiness and having a
job I don't know too many people who can be very, very happy working
more than full time and living in extreme poverty.MR. DELANEY: So I want to move to our second take on this
question. And there will be time in a little bit for questions from the
audience, so you will have an opportunity to join this debate and ask your
own questions. So I want to go to each of you and ask you, what are the
most important things to be done to stimulate job creation, high quality
jobs. What are the key levers that we can use? Secretary Chao, do you
want to start with this question, if you had to --
MS. CHAO: Actually, I wasn't quite prepared when you
asked me the first time. So why don't you ask Austan or --
MR. DELANEY: Okay.
MS. CHAO: Or Doug.
MR. DELANEY: Go ahead, Austan, do you want to --
MR. GOOLSBEE: Okay. Look, I think the focus should be out
of -- the next 6 to 12 months is very contentious politically and there is lot
of argument of, is it having to do with the U.S. or is the fact that it's
happening in all the countries of the world an indicator that it has
something more to do with the world economy. If you think 5 years, 10
years, 20 years, what do we need to do? I think it's obvious, totally
obvious at the individual city, state and national level those people, places
and countries with more skills and more education are doing way better
and they survive the downturn way better.
The unemployment rate of college graduates is in the 3
percents. So there is no question that that has to be the focus and that it's
not just that they do better at any one point in time. They've also proven
remarkably better at adapting when new things come along. So if you
look at places like Minneapolis compared to Detroit, they were both cold
places, both in the Midwest. Minneapolis has done much better as an
economy and in job creation than Detroit has. And the conclusion of
much of the economics profession looked at it was in Minneapolis they
had a lot higher skill level of the workforce.And so as Milling (phonetic) and Pillsbury and a lot of the big
employers phased down medical devices, a bunch of other things phased
up, and in Detroit they had the lowest skill level of workforce. So I think
skill is number one, two, and three, and then maybe number four is the
innovation economy and the science and stuff.
MR. DELANEY: Doug, do you want to add?
MR. HOLTZ-EAKIN: So Austan has hit the first of what I think
were the five --
MR. DELANEY: He said one, two and three actually.
MR. GOOLSBEE: Yeah.
MR. HOLTZ-EAKIN: I don't give him chance to count three
MR. GOOLSBEE: Cut it, his time is done.
MR. HOLTZ-EAKIN: There are five structural reforms the United
States needs to undertake to set itself up for the 21st century. And they are
right in front of us. We know what they are. One is education, from K to
12, all way through higher education to get better skills and labor force,
no doubt about it. Second, immigration reform, simply no doubt about it,
we need to get this right in the United States. I have a sermon on that I'll
Third one, a fundamental regulatory reform. The United States
ostensibly looks at new regulations and asks the question, are the benefits
worth the cost? But it never looks back, it never asks the question, is this
still worth doing? And we have just accumulated lot of Detroiters in our
regulatory infrastructure. We just need to clean that out. Then we need to
do a fundamental entitlement reform from soup to nuts, so our social safety net doesn't collapse under the financial weight.
And we need a tax reform, we need a tax reform that means
something, that raises the revenue necessary to fund the government.
Those are five things that we're going to do because we have to and be
better to do them now intelligently proactively. Those are structural things
where you look out 5, 10 years we have to get done. What could you
do now that would be really help?
Well, you want to do things that are consistent with that and
which could jumpstart the economy. And on that list, I think the most
promising would be tax reform where you could in fact generate better
growth incentives, raise the revenue we need, but unless you do the
entitlement reform, the tax reform is never going to last because the
spending is going to go through the roof and the tax system won't finance
it. So you know there is a lot of work to be done, but we could do better
easily than we're doing right now, we are just having a try.
MR. DELANEY: And when you're saying tax reform you mean
MR. HOLTZ-EAKIN: I mean, having not revenues. We don't
have enough revenue now --
MR. DELANEY: Yeah.
MR. HOLTZ-EAKIN: So let's be clear about that. I think you
could easily get on the corporate side a much lower rate. We're out of
line competitively in a broader base. On the individual side, I prefer lower
rates on a broader base, something like a Bowles-Simpson approach. I
understand the politics of that at the moment. So the question is which of
those pieces could you get done and -- but we should do something.
We're not doing very well.
MR. DELANEY: Saru, what are the most important things that
can be done to stimulate job creation right now? What is your short list?
MS. JAYARAMAN: I mean, I totally agree with immigration reform. We definitely need immigration reform and like I have said I think
we do need to look at the growing aspects of our economy and support
them. So they happen to be these very large service sector, you know,
industry sectors like restaurants and retail. I think we need to think about
the fact that those are the growing sectors, support small business in those
sectors and also support high quality jobs in those sectors so that all of the
growth isn't in the extremely lowest waged jobs.
And that would include raising the minimum wage, yes, which
we have seen in multiple states and localities to actually, you know, there
are seven states in the United States that actually have the same minimum
wage for tipped and nontipped workers. They have the highest minimum
wages in the restaurant industry of any states in the country compared to
all other states. Five out of seven of those states have a faster growth rate
among the restaurant industry than the rest of the country.
So you actually see the cities and states that have higher wages
doing very, very well in our industry, in fact, experiencing tremendous
growth. So, you know, for me having workers -- millions of workers in
these industries who have the ability to spend and stimulate their own
sectors and the broader economy would definitely help our economy.
And of course, supporting these small businesses and even the growth for
example what we have done the growth of worker-owned enterprises,
cooperatives that actually are part of a new economy of workers actually
being able to create for themselves, create their own jobs essentially.
MR. DELANEY: Secretary Chao.
MS. CHAO: I think part of the big problem is again the lack of
economic growth. And yes, there was a recession in 2008, but in
previous cycles when there has been a recession, the steeper the
recession, the quicker the bounce back. So I think the question has to be
asked why is there not a quicker bounce back, this cycle. And if indeed
spending government money as we saw in the stimulus and increasing
taxes and all this regulations does not -- actually helps economic growth,
we should be having a boom economy.
The average unemployment rate between -- from the years 2000 to 2008 was 5.2 percent, we forget that. The unemployment rate
went up to 10 percent, yes, it's dropped to 7.6, but it should be much
lower. Again, if we take into account all the discouraged workers who
have left. So it's really quite basic, I mean those three factors in all the
countries around the world have an impact, and they have a direct impact
on job growth.
MR. DELANEY: Could you talk a little bit about what jobs -- so
we've gone through all of your ideas for how we create jobs. And I want
to talk a little bit about what the jobs of the future look like and in where
they are. I'm very self-interested, I have kids who are 9 and 12 years old.
And I'm very personally interested --
MR. GOOLSBEE: I thought you're going to say because you're
MR. DELANEY: That's my professional interest. My self-interest
is, what are the jobs that will be available to our children and how are
they different from the jobs say, there are a bunch of trends that we've
spoken about little bit. There's things like automation, there is the increased
use of technology. At the same time, you actually have growth in jobs that
are relatively low quality. Do you want to answer this important question?
MR. GOOLSBEE: I would observe two things. The one thing
that cannot really be answered is the one thing that everybody wants to
know, well, what is the job 40 years from now, what job will be the best
paying job, that I want to have that job?
MR. DELANEY: For (inaudible) children.
MR. GOOLSBEE: And every columnist will say, we don't
know. A lot of those jobs, if you go back 40 years in the census, if you
ask now of the top one-third of paying occupation codes what share of
those occupation codes did not even exist in the census 40 years ago, it's
a really high fraction. And so, if you had said in 1910, how many
people are going to have a telephone in 2013, they would say, "No, that's totally impossible. Every man, woman, and child in America would
have to be an operator pulling the cords out and sticking them in like this."
MR. DELANEY: Yeah.
MR. GOOLSBEE: And yet we invent technologies that
eliminated essentially every telephone operator in America, but the
unemployment rate in telecom did not go to 100 percent just because we
came up with new technologies, we moved into these new things. So the
good news is we have 180-year track record of creating new jobs that
20 years later everybody says, "Oh, we never thought of that, but now a
lot of people do it."
MR. DELANEY: Yeah.
MR. GOOLSBEE: And two, the other good news is, the
government doesn't need to be relied on to figure it out. The business
doesn't -- it's in everybody's own incentive to go out and figure out what
jobs are promising careers. And they are out doing it every day. When
they go to school, they are trying to figure out what major to pick, they are
trying to figure out what summer internships to get. So I think, overall, the
trends that you see of higher skill equals higher pay and better
performance in the job market is going to continue. You've seen a 60-plus
year trend of more and more services based employment in the U.S. and
that will probably continue, but beyond that I think it's harder to say.
MS. CHAO: Well, typical of the government, they actually do
have a chart that tells all the jobs of the future, so. And I say this in support
of what Austan is saying. Actually, the Bureau of Labor Statistics, if you're
really interested, go in their website and they have surveys, and studies,
and predictions on what the jobs for the future are. They don't range until
the next 40 years, but there's a list.
And basically, what we're seeing is a gap between higher
skilled jobs that require higher skilled labor. So for example, our country
could have predominance in geospatial technology, in life sciences, in
biotech, but we're lacking the requisite skilled workers to fill those jobs.
And so as Austan mentioned, we're going to see continuously more and more of these new jobs that are being created.
And I think if there's any commonality, it would be that they're
increasingly more complicated, more sophisticated and they require higher
skills more education. And studies have shown and you go on to BLS,
Bureau of Labor Statistics website, the average weekly earning of
someone who is a high school dropout is like, you know, $456 a week.
You contrast that weekly earnings, employment prospects, unemployment
rates, overall earnings, there is no question that the higher educated
individual will have better earnings, lower unemployment, better job
And there is also one last thing I will mention. We do talk
about this income gap, there is an income gap. This income gap comes
from highly skilled workers and those were low, relatively low skilled.
Employers are willing to bid up the wages of those workers who have
higher skills and that's why their wages are increasing. So what we're
seeing in terms of the income gap is really a manifestation of the education
and training gap.
MR. DELANEY: So we're going to go to audience questions in
just 1 minute. Doug, you wanted to jump in.
MR. HOLTZ-EAKIN: Yeah. I agree with Austan. We should
have a very healthy --
MR. GOOLSBEE: Stop the tape again.
MR. HOLTZ-EAKIN: -- very, very healthy modesty about our
ability to forecast exactly what's going to happen, we can't, but we know
two long-term trends that inform this a little bit.
MR. DELANEY: Yes.
MR. HOLTZ-EAKIN: One is if you go from Paul Revere to now
and you look at the shares of the economy that are in agriculture, manufacturing and services, the share of manufacturing has not changed
dramatically. It's edged down a little bit, but it's sort of been there the
whole time and all we've done is we've moved people from farms to
MR. DELANEY: Yeah.
MR. HOLTZ-EAKIN: I wouldn't bet on a farming job and --
MR. DELANEY: You would not bet.
MR. HOLTZ-EAKIN: I would not and given the manufacturing
productivity goes up, the manufacturing jobs are actually not a big bet of
the future either. So services really is the key, and that's what we've done
as a nation, it's going to continue. Second is, we will continue to get
older. And if you want to look at the shifts and the demands, it's going to
be the shifts that are driven by the demography that's inevitable. And we
have, you know, we've been cursed by listening to boomers music my
entire life, it's going to continue. The products they like and demand are
going to drive the jobs of the future.
MR. DELANEY: And health care has obviously been a big
MR. HOLTZ-EAKIN: It's a big specific part of it.
MR. DELANEY: So I think we'll go to the audience for
questions. Please raise your hand. If you could repeat your name if you
have any organizational affiliation --
MS. JAYARAMAN: Even I didn't get a chance to say on what I
thought about the jobs of the future.
MR. DELANEY: Okay. Hold that thought. Quickly, we just
have a few minutes for questions.
MS. JAYARAMAN: I mean, I think one thing that hasn't been
brought up is that I do think we have to be concerned about our daughters in particular because the largest and fastest growing sectors
right now are these low-wage jobs, because 70 percent of the workers on
that ridiculously low minimum wage of $2.13 are women because most
young women, many young women actually go through this industry, work
in this industry for some part of their career and high school, graduate
school, college, many of these workers are actually educated.
Forty percent of these workers have college education and are
working in the restaurant industry, so these are not completely uneducated
people. But they also experience much higher levels of sexual harassment
than other sectors. So the growing sector of the economy, you know, 40
percent of all charges to the Equal Employment Opportunities Commission
of sexual harassment come from the restaurant industry even though 7
percent of American women work in this industry.
For any young woman, being exposed to the world of work,
this is how she is exposed to the world of work. She is exposed to an
industry in which she can be paid $2.13 an hour, where she can be
touched and talked to inappropriately. Where any number of things can
happen to her, in fact, I was speaking -- I'm on a book tour and I was
speaking in San Francisco yesterday, and a young woman came up to me
and said, what you said make so much sense. I worked in the industry, in
the restaurant industry throughout high school, college and graduate
school and law school. I went on to IBM where I was sexually harassed,
but in my mind, I thought, "Gosh, this is nothing compared to what I
experienced in the restaurant industry. So it must be okay." So I think it's
important for us to think about these job quality issues as well.
MR. DELANEY: Okay. Thank you. Audience questions.
MS. RESNICK: Is it all right?
MS. CHAO: Yes.
MS. RESNICK: You can hear me?
MR. DELANEY: Yeah, we can hear you. Yeah, go ahead.MS. RESNICK: Okay, good. I'm Lynda Resnick. Stewart and
I are the largest farmers of tree crops in the world. We have 20 million
trees in the San Joaquin Valley. And if you say farming isn't the future, you
don't know what you're talking about.
MS. RESNICK: So I just want to tell you as quickly as I can
what we are doing. I researched and found out that we have to put
middle management employees through 12 weeks of study before they
can hit the factory floor. And these are people making $30,000,
$40,000 a year. And by the time you've invested 12 weeks in these
people, you don't know if you like them and if they are going to work out.
So we started something called "career tech."
And what we're doing is, we're working with local community
colleges, local high schools creating a curriculum of career ag. Ag is not
picking fruit anymore, not in our business. Every one of our 20 million
trees has its own computer, so we don't put too many nitrates in the soil.
We don't use up too much water and so forth. And so we identify these
kids in seventh and eighth grade, they are telling us if they want to be part
of this, this is just starting in the ninth grade. By the time they finish high
school, they will have 2 years of community college under their belt.
They will have been shadowed, you know, they'll shadow
executives in our companies, they'll have summer jobs there, and when
they graduate they can either go to work for us in the middle management
job or they can go on to a 4-year school, but -- and I'm hoping that the
health care sector is inspired by this and it is happening in small pieces
around the country.
MR. GOOLSBEE: You know, the community college system is
actually the unsung hero of skill development in the United States and
people don't often think of it, but it's actually absolutely where the rubber
hits the road. In many different industries it's critically important and it has
this money available to community college as you might imagine, you
know, (inaudible) like everything else, is a very tough environment. It is critically important when we do that that we tie the private sector in with
the public sector in doing it.
So in Chicago, I met this guy, he runs a school. And this
school is in the Pilsen neighborhood which is heavily Hispanic
neighborhood in Chicago, where the high school dropout rate is very
high. So in this guy's school, he gets payments from the city to go get
people who have dropped out and he has kind of a career educational
thing that's a sub sector of community college let's say.
And I asked him, "How many people who graduate get a
job?" He said, "100 percent." But I said, "Wow, well, wait a minute
that's extremely unusual." The data on the career and technical academies
is, you know, is mixed in the kind of the academic way which is to say it
shows the opposite of what you want. So you say well, it's mixed, we
don't know what it shows. And it hasn't been very --
MR. DELANEY: Well, what you mean by that is completion
rates for community college are pretty low?
MR. GOOLSBEE: And it is, of technical academies at the high
school level --
MR. DELANEY: Yeah.
MR. GOOLSBEE: -- people go through it and then they can't
get a job. And so I ask them, I said the weakest link has always been
how do you figure out what to train them to do. And he said, what I do is
I go to every business that's in a 10-mile radius of right here and I ask them
what do you need somebody to do? And in their case, it was -- there are
a lot of warehouses and they need people to use the barcode. They need
to -- as well as somehow to operate the barcode.
And he said, in Chicago, they are having a hard time finding
teachers for the Chicago career academies to teach some kind of machine
tool operation, numerically controlled machine tools or something. So
they couldn't even find the teachers. So he went and looked and he said,
how many people have a job with that -- the answer was zero. There is not a single person in Chicago who has that job.
And so of course he couldn't find a teacher, but that was
approved and you can just hear the bureaucracy that went through of like,
no, no that's approved, so it's got to be public-private partnership or else it
won't work. I mean good for you for doing that.
MR. DELANEY: Let's take another question. Do you have a
microphone on this side maybe right here? Keep going.
MR. CUSACK: Can you hear me?
MR. GOOLSBEE: If you yell really loud, it will sound like it's a
MR. CUSACK: Can he hear me?
MR. DELANEY: Yes, we can hear you.
MS. CHAO: Yes.
MR. CUSACK: Stan Cusack (phonetic), Milwaukee. If you
look at the split between high school graduates, college graduates,
community college graduates and so forth, how well they're doing
compared to the intercity dropouts of public school systems, it's enormous.
MR. GOOLSBEE: Yes.
MR. CUSACK: And I'm not putting the blame on the teachers,
the teacher unions, the politicians, the single-family parents, the minorities,
whatever, I'm saying this is a problem that needs to be addressed and it
isn't going to be addressed by passing some quick piece of legislation and
doing it with juniors and seniors in high school who already can't read
their diplomas that they maybe are going to get. This is something that is
going to take a long time concerned effort at getting all of the pieces fixed.
MR. GOOLSBEE: True.MR. CUSACK: And it needs fixing because --
MR. GOOLSBEE: Though in fairness their diplomas are in
Latin, I think I would have a hard time reading it too.
MR. CUSACK: You look at Washington, D.C. for example,
their numbers are deplorable. My own city Milwaukee, their numbers
aren't much better. It's got to be fixed, but it's going to take a long time
and a lot of concerted effort public and private.
MR. DELANEY: Okay. Let's go to this side for the next
question. Do we -- actually, the microphone is heading to the middle
MS. SNEIL: Hi, I'll stand up. My name is Constance Sneil
(phonetic), I'm a retired private school teacher from New York City and I
am a pre -- member of the pre-baby boom generation which may color
some of my views --
MR. DELANEY: That's better --
MS. SNEIL: My question is, is technology a net job creator or
destroyer. And when I read about things like driverless cars coming down
the pike, and even restaurants where you don't need waiters or waitresses
because you have computers and you just order automatically. And
sometimes, it seems to me like all these advances or supposed advances
are geared to eliminating people from doing anything that had meaning
for them in the past. And I'd just like some people to comment upon that.
MR. HOLTZ-EAKIN: This is a big fear, it comes up all the time,
but if you look at again long periods of history, take again, from the
revolution to now when the United States went from an international
nobody to the largest global economic power, our technology has
transformed this country and they are dramatically different, and over that
period we managed on average, not every year, to employ Americans.So it's not the technology net creates or net destroys, it doesn't --
will get them the jobs, it's going to change the character of those jobs.
And in the good news version of that, the character will be people with
skills take advantage of high technologies, they earn a lot of money. We
see big examples of that and the bad new story of that people fail to keep
their skills up to the necessary level with modern technologies and that's
where we're starting to see trouble. So I don't think it's a technology issue,
I think the story does come back to job skills.
MS. JAYARAMAN: Yeah, I think I totally agree with you and
see that as well in large sectors not just restaurants, food retail, you know,
all of the people who used to check us out, now we work with, you
know, a robot basically. And certainly technology is not something to
hate or be stopped or to fear. I agree that, you know, certainly we need
technology, technology has created great advances for all of us. I do
think there is a loss of human contact in our society, in our country.
And unfortunately, the people who have lost out the most from
technology replacing jobs are low-wage workers who don't have
supports right now out there to deal with massive levels of layoffs because
of technology. So I think it would be okay for a net, you know, net
balance for technology to not create loss since the industrial revolution if
there were supports for people who are losing their jobs because of
technology to train them to move on to something better, if -- and this is a
role for government intervention where government could provide funding
for training, for supports, for, you know, some kind of safety net for people
who are losing their jobs.
MR. DELANEY: Do you want to --
MS. CHAO: Is there another question?
MR. DELANEY: Okay. We'll take another question. On this
side here, maybe right down here in the front. Thank you for sitting in the
MR. GOOLSBEE: Yeah, I was just going to give a reward to
MR. CHRISTIE: Good afternoon, now. Ron Christie (phonetic)
from Washington, D.C. Earlier today the Massachusetts legislature passed
a bill that would require the governor to seek a waiver of the Affordable
Care Act. The rationale for this waiver is that they believe that under the
premium rating system that it would cause premiums for small businesses in
the Commonwealth of Massachusetts to increase by up to 60 percent.
So my question to you, Austan, is earlier you said that it was
little speculative perhaps to think that the Affordable Care Act wouldn't
have an impact from a regulatory standpoint on jobs. How do you
reconcile of the fact that the democratically controlled legislature of
Massachusetts wants to require the Democratic governor to seek a waiver
because they think it will hurt small business?
MR. GOOLSBEE: Okay. I would say two things. First, I will
go look at this, I wasn't aware of it. Massachusetts already has universal
coverage of a model that the ACA was largely patterned on. So there
might be something a little weird about the interaction of Massachusetts
with the system, but the overall, what I said which I think is rather obviously
correct is, the explanation for why the job market has been troubled from
the end of 2007 up to today is not attributable to the ACA which is not
even yet been put in place.
If you think, the normal way economists go look at what's the
impact of some regulation is to go compare a treatment group versus the
nontreated group. So we have a good idea that the Clean Air Act of
1977 had a negative impact on employment in manufacturing because
they go look at factories in counties where it's binding and they compare
them to factories in counties where it's not binding in the same industry and
you see a big difference.
In this case, the ACA does -- creates a few cliffs. One is, if you
have more or less than 50 employees, if you have fewer than 50
employees there is no employer mandate. So that does not apply. And
so you would expect to see some differential impact on if you're above or below the 50 threshold. Likewise, if you're an industry like aerospace
where almost everybody is already covered, the mandate is irrelevant. If
you're in an industry like restaurants where very few people are covered,
the mandate is highly relevant.
And therefore, you would say, well, let's go compare industries
where the coverage was higher before, do we see job growth has been
higher in places where the coverage was higher before. The data shows
nothing of the sort, no matter how you cut these things you do not see a
noticeable impact in the data of what should be there from the ACA. So
that's why I say it's more than speculative. Thus far, the evidence is not that
that is driving employment.
Now, if we get into the enactment and then you start to see a
big threshold right at 50, you start to see a bunch of people shift
employees to get them under the 30-hour cut off. Those will be the kinds
of -- or you start seeing industries where they had more coverage or less,
those would be the kinds of things that you would -- that you would say
would be having an impact, but thus far, it's just not factually correct that
you've seen anything like that.
MR. DELANEY: We have time for one more question and I'm
going to again reward the gentleman in the front here for being brave and
getting here early presumably. So thank you. We have just time for a
quick question quickly.
MR. MENDELSON: Quick question. Bob Mendelson
(phonetic) from Chicago. I'm active at a university. And one of the
questions we've been discussing is you're having some students kind of be
going to school -- going to university, maybe getting loans, you know, the
student loans are very high. They graduate with degrees that they can't go
out and get a job. The question is, does the university have a responsibility
to direct you to getting a job with your degree?
MR. DELANEY: With a degree that you've paid, in some
cases, over $100,000. Secretary Chao, do you want to take this one?
MS. CHAO: No. I couldn't hear the question.MR. DELANEY: Okay.
MR. GOOLSBEE: The question is if people are going to
universities taking a lot of student debt, but in a lot of their majors they can't
get jobs that will pay for their debts, do the universities have some
obligation to steer them in ways or inform them in ways --
MR. DELANEY: To provide them --
MS. CHAO: Well, that's actually quite interesting because the
Affordable Health Care Act actually nationalize student loans so that --
and then with -- and increase the interest rate; that's a fact. So now, we
actually have nationalized the whole health -- the whole student loan
program in an effort to fund the Health Care Act. So we've jacked up this
interest rates on student loans, so students are paying more. And at the
university level there are two items in every state budget. One is health
care, Medicare, Medicaid, one is education.
So as health care increases in the state, the state has had to cut
down on university support. So the students and university community are
hurting in two ways. They are getting cutbacks in their university funding
and then their student loan interest rates are going up. And that's a terrible
dilemma to be in.
MR. DELANEY: So we're going to have to end it. I thank you
for this lively thoughtful discussion.
MR. GOOLSBEE: Let me just state one thing which is -- look,
I'm an economist so you know I love numbers in this, but --
MR. DELANEY: You guys are uncontrollable.
MR. GOOLSBEE: -- turning the arts or something that can't be
quantified into like the university is going to tell you no, you can't be a
philosophy major, you know, that doesn't pay. Your own father can tell
you that, you know -- (Laughter)
MR. GOOLSBEE: -- hopefully, we're not coming to that.
MR. DELANEY: Well, thank you for --
MS. JAYARAMAN: I have one important thing. I mean --
MR. DELANEY: We got to stop here.
MS. JAYARAMAN: Okay.
MR. DELANEY: We're really sorry, we're over time. Thank you
* * * * *
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