• by Thomas Kochan and John Kwoka
  • 3

Part of a special series by Cognoscenti and the School of Public Policy & Urban Affairs at Northeastern University. In this Sept. 17, 2012, photo, job applicants wait for the opening of a job fair in Fort Lauderdale, Fla. (AP Photo)


What will it take to put Americans back to work?

And what industry policies do we need when entire economic sectors get in trouble?

Thomas Kochan of MIT’s Sloan School of Management and John Kwoka of Northeastern University weigh in.

Thomas Kochan is the George Maverick Bunker Professor of Management and co-director of the Institute for Work & Employment Research at MIT’s Sloan School of Management.

To make up for jobs lost in the Great Recession and for labor force growth to occur, the U.S. needs to create 20 million new jobs by 2020. This can happen if the next president initiates a national jobs compact to speed job creation, increase wage growth, and begin modernizing federal policies and work regulations. A successful jobs compact will require a new level of coordination and collaboration among business, labor, education, and government.

The seeds of a successful national jobs strategy already exist in the many successful regional education and training partnerships that link employers, educators and students through apprenticeships, community colleges, university co-ops and other programs. These models vary in details, but they all foster the development of high-level job skills which result in increased wages and incomes.

A successful jobs compact will require a new level of coordination and collaboration among business, labor, education, and government.

Rising production costs in China and improved productivity in American manufacturing firms could make U.S. manufacturers more competitive globally in the coming years, creating up to three million high-skill, high-wage U.S. jobs. Rebuilding apprenticeships, investing in community colleges and training recent college grads in needed science, technology, engineering and mathematics (STEM) skills could produce another 5.5 million jobs.

Labor unions are now willing to invest $10 billion from pension funds to spur needed infrastructure investment. If matched by Wall Street and the federal government, this investment pool could create another 4 million jobs. Normal economic growth would close the remaining jobs deficit.

While there is no single silver bullet to solve the immediate jobs crisis, the actions outlined here address the root causes of these problems and could accelerate the creation of high-quality jobs needed to close our current jobs deficit.

Auto industry executives (from left, Richard Wagoner, GM; Robert Nardelli, Chrysler; and Alan Mulally, Ford) testify on Capitol Hill, Nov. 19, 2008. (AP File Photo)

John Kwoka is the Neal F. Finnegan Professor of Economics at Northeastern University.

The Great Recession provided vivid and painful examples about the importance of good industrial policy for the nation’s economic well-being. Here are, in my view, some of the key lessons learned that the next president should put to use.

The federal government should “bail out” a company or industry only as a last resort, and only if the company’s failure would have a broader impact on the nation’s economy.

The Great Recession provided vivid and painful examples about the importance of good industrial policy for the nation’s economic well-being.

If the federal government does decide to “bail out” a company, it should take full control of and transform the company by changing its operations and incentives. It should hold individuals personally responsible for their actions (e.g. fire CEO, managers, directors, no “golden parachutes,”, institute legal proceedings if actions seemed criminal). And it should then get out as quickly as possible, returning the company to private control.

The 2008-09 auto bailout begun by President Bush and continued by President Obama is an example of how to do it right. Previous management was fired, labor contracts were rewritten, and radical changes in operations were imposed. GM, Ford, and Chrysler are all now profitable, increasing sales, reopening plants and hiring new workers.

By contrast, the Wall Street bailout — with no restructuring of large banks, no replacement of CEOs or Boards, and scant efforts to prosecute companies or individuals — is an example of how not to do it. The banks got relief without responsibility; taxpayers footed the bill and got nothing in return but increased bank profits. Even worse, the banks now have reason to believe the government will bail them out next time they get in trouble.

Related content:

  • WATCH video of these lectures here.
  • READ Kochan’s presentation here.
  • READ Kwoka’s presentation here.

Tags: #advice2012, Election 2012

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  • Nicole LeTourneau

    Too bad Romney’s promise to create 12 million jobs isn’t backed up with specifics like Kochan’s plan. We’re still waiting.

    Also, waiting to hear how he’ll give billions in tax breaks for the wealthy and simultaneously lower the deficit without taking away lots of middle class tax deductions.

  • Rudolf

    And by what mechanism are the Labor Unions willing to invest $10 billion from pension funds? Are these funds not almost fully invested now? So are they going to withdraw them from their exisiting investments? How is that going to affect the economy?

  • Bob S

    Economic growth will NOT solve unemployment and declining wages, 20-hour work week will.

    Over the past 40 years, we have had an incredible increase in productivity. We have computers doing administrative work and robots doing manufacturing work. We also have 5 billion working-age people on the planet competing for the remaining jobs. A simple law of supply and demand explains why real wages (the cost of labor) have gone down or stagnated at best for most people over the past 30 years.

    An attempt to grow the economy fast enough to create enough 40-hour per week, decent-paying jobs for everybody who wants one will have one of the following two effects:

    1. We create enough jobs, but also turn the Earth turn into a toxic wasteland as we try to consume all the junk 5 billion workers will produce.

    2. We will have enough jobs for people in the so-called developed countries with wide-spread unemployment and poverty in the global South. In other words, we will manage to export our unemployment to the developing countries. This will breed social unrest there that will spill over to the developed countries in unpleasant forms such as terrorism.

    The only long-term, sustainable solution is a drastic, worldwide cut in working hours. We went from 60 to 40 hours per week in 1930s. It’s time to do it again. Work less, live more.