How about Targeted Industries?
The solution we most hear about in the media is the government providing support for targeted industries. Just like the pure stimulus, targeted support involves the tax code, guaranteed loans, and other incentives. This approach is based on two possibilities.
- First, there is the possibility that demand already exists that is not being met because one or more of the factors of production are missing. A current advertisement sponsored by the American Petroleum Institute (API) says, "By erasing burdensome regulations, the oil industry could create one million jobs by 2018 and more than 1.4 million by 2030." In related statements, mostly by politicians, we are led to believe that this increased oil production will lower the cost of gasoline in the U.S. Assuming existing refineries can process some of the oil, it will still take several years to build new refineries (assuming there are places that will let you), and there are no guarantees that the domestically produced oil will remain in this country. It's a global market, and oil production goes where the highest price is. That's capitalism. The industry is not asking for the government to lend them money, just permit them to drill new wells and ship the oil. That leaves them free to sell it to the highest bidder. Take a look at the current oil boom in North Dakota and multiply it exponentially. Some people are making money there, as will the developers in the new production envisioned by the API's "one million jobs by 2018" ad. Problems have already risen from the sudden shift in the location of workers, and the potential for environmental damage will remain behind after the petroleum companies have gone elsewhere. Regardless, that's too far in the future to be considered a viable solution to a current problem.
- A second possibility is that an undefined demand is represented, for example, by environmentally sensitive or "green" jobs in areas such as solar energy. We have the technology and the skill but not the manufacturing capacity. Building that capacity will take time and a lot of money, and once it's built, labor costs will be high. We can reduce our dependence on fossil fuels and have cleaner air by increasing the use of green technology, but this does not in itself create jobs. The best way to increase the use of solar panels, for example, is to reduce their cost, and the best way to do that would be to manufacture the components offshore. Clearly, this would not help the unemployed in the U.S. If the panels were manufactured here, we could not afford them. If subsidized by the government, private business will be crowded out, and the result will be inflationary.
While we're on this topic, let's look at the globalization of the labor market. After all, we are not only interested in creating jobs so currently unemployed and underemployed people can provide a good standard of living for their families. These jobs translate into increased GDP, and this growth funds a lot of other things, particularly those projects funded with government resources for the benefit of Congressional constituents. It isn't just a matter of moving to North Dakota. The largest amount of job growth will occur overseas. Much of that job growth will be tied to the use of computers. Below are findings from a recent study by the analyst firm International Data Corporation.
"Spending on public and private IT cloud services will generate nearly 14 million jobs worldwide from 2011 to 2015. The research, commissioned by Microsoft, also found that IT innovation created by cloud computing could produce $1.1 trillion a year in new business revenues. The highest percentage of new jobs will occur in emerging markets, according to the study, especially China and India, which together are expected to produce nearly 6.8 million cloud-enabled jobs between 2011 and 2015. Nearly 1.2 million new cloud-related jobs will be created in the U.S. and Canada." [microsoft.com]
This suggests not only that job growth, fueled in part by lower wages and costs of living, will occur outside our borders but that the growth we are likely to experience will occur in IT-related careers. This directs us to our next question.
next: Targeting Specific Jobs
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* David Hayes, EA, CFP, is an adjunct instructor in the Department of Economics and Finance at Middle Tennessee State University and serves on the Tennessee Workforce Development Board. |
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According to an IDC study, "The highest percentage of new jobs will occur in emerging markets," and "nearly 1.2 million new cloud-related jobs will be created in the U.S. and Canada." |
