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Time for de-structuring

June 16, 2011
The fixation on unemployment promotes the misperception that jobs are goals, things to be achieved, rather than tools for accomplishing something.
Robert E. Brooks

There is a GM dealer in my area running ads about three times an hour, urging us to buy a Chevy because it “really matters” to the economy. “Jobs, jobs, jobs,” according to the voiceover, over and over again. It’s annoying because it’s repetitive — and simplistic; it says nothing about the quality of the cars — but it makes clear how widespread is the sense that our economic plight is caused by unemployment.

A Gallup survey finds American’s economic confidence falling to new annual lows following a depressing May employment report (though week stock prices and rising consumer prices are cited, too.) These facts are hard to overlook: the U.S. Commerce Dept. puts the unemployment rate at 9.1%, where it has hovered for many months, but the economy produced just 83,000 new jobs last month (reportedly about half were in fast-food restaurants); manufacturing sector jobs declined by 5,000 nationwide. Nearly every detail of the report fell short of economists’ expectations, underscoring the widespread sense that we’ve arrived at “structural unemployment,” a static situation in which employers are unwilling or incapable of hiring more. Structural unemployment leaves economists, public officials, and everyone who is not an employer scrambling for ways to induce or coerce them to take on more workers.

It’s a strange turnaround from the understanding that prevailed for most of the past two decades, when employers were hailed for continuing gains in “productivity,” for producing more and earning more while lowering their costs of doing business – including employment costs. Now, those lower operating costs are a basic measurement of a company’s ability in the global economy. Indeed, for manufacturers in particular, low operating cost (along with product quality) is the minimum standard for global competitiveness.

With the world’s economy drifting into its third sluggish year, adding to their operating costs is the last thing most companies are inclined to do. They’ll invest in new equipment, as capital spending figures reveal, as long as more or better production systems will lower total cost of operations. They’ll update information technology, because that will make their internal and customer services more efficient. They may acquire new business or merge with competitors, as that will increase their market coverage.

Typically businesses will reserve cash, conserving their resources against the apparent continuation of economic drift, and this is confounding to the non-employers who see “structural unemployment” as the result of obstinacy or greed. They’ve tried stimulus funding, proposed tariff protections, threatened penalties to employers with offshore operations, and initiated various training and retraining programs, and unemployment still lingers around 9.0%.

Non-employers trying to resolve structural unemployment are addressing the effect, not the cause. Employers must remain competitive in an era of rising costs for energy and raw materials costs, amidst credit uncertainty, expanding regulatory demands, and unsteady demand for finished goods. If an employer is not a multinational corporation, it must contend with declining equity, too. This is the structure that is inhibiting job growth. Bearing the public’s scorn for not increasing hiring is the least of their concerns.

The fixation on unemployment promotes the employee’s sense that jobs are goals, things to be achieved. Rather, they should reconsider (from an employer’s perspective) that jobs are tools to accomplish something, in the same way that new equipment or new software does.

Bridging the two notions is another idea lost in our more prosperous near past: the understanding that productivity is a boon to innovation. Companies seeking to grow need new ideas, and new ideas spawn from new ventures. New ventures provide unexpected products or services for needs that the market didn’t realize it had. These ventures thrive, grow, and hire when the market is wide open to them. Don’t over tax or over regulate them. Encourage growth. Solve “structural unemployment” by changing the structure.