Tuesday, January 5, 2016

A Strategic Plan for Middle Class Job Growth

According to statistics kept by the US Department of Labor, June of 1977 marked the peak month for manufacturing jobs in the United States. Nearly 20 million Americans were employed then, and despite a significant increase in population growth over the last 38 years, only 12 million manufacturing jobs remain. Bucks County mirrors these trends, losing tens of thousands of jobs.
8880731807 d6ce5df21c

Why should we care? For one reason manufacturing jobs tend to be good paying middle class jobs, with good benefits and job security. Another reason is that most jobs, including service jobs, depend on manufacturing, whether directly or indirectly. According to the National Association of Manufacturing (NAM), each job in manufacturing creates an additional 3 private sector jobs. Manufacturers are responsible for over ¾ of private sector R&D, further contributing to economic growth and job creation.

According to the World Bank manufacturing accounts for 13% of US GDP, compared to 20% in Japan and 23% in Germany. If our percentage was equal to Japan the US would have approximately 7 million more jobs, and if equal to Germany we would have 10 million more good paying, middle class jobs. 

So when we read about the decline of the American middle class, stagnant wages, and a lack of confidence that our economic future will be better than our past, is there a direct connection to the decline in US manufacturing? I believe it is a major contributing factor, but there are basic steps we can start taking now to reverse this trend. 

Take Germany for example, a highly regulated manufacturing driven economy with high wages. They’ve expanded their global manufacturing market share in spite of fierce competition from low cost Asian countries. Germany sees strategic long term value in manufacturing, and their education system reflects this with a greater emphasis on engineering and vocational training.

They dominate niche markets, producing sophisticated products of superior quality that other lower cost markets cannot replicate, therefore commanding a higher price. Germany is proof that with the right strategy high wage manufacturing countries can successfully compete with lower wage countries.

Another key to success is a focus on exports, which has contributed to 2/3’s of Germany’s recent economic growth. By comparison the US ranked 47th out of 50 countries in the percentage of GDP attributed to exports. While German exports contributed 51% to GDP, US exports contributed only 13%, ranking us right behind Armenia and Tajikistan. Since every billion dollars of exports creates over 5,000 jobs, a several percentage point increase in exports in our $18 trillion economy results in millions more jobs. Because 95% of the world’s population lives outside of the US, it’s simply good economic policy to focus on these vast and growing world markets.
Exhibiting my US products at trade show booth in Abu Dhabi, UAE (on far left)

I believe sustained US middle class job growth requires a comprehensive national industrial policy that makes the United States a more manufacturing and export based economy. Manufacturing still remains the most important cause of economic growth, and additional growth potential through reaching new global markets is enormous. 

Achieving this will require changes in our perception of manufacturing, how we train our workforce, how we manage our currency, how we negotiate trade deals, and how we create tax and other incentives that encourage manufacturers to keep production here. It requires closer cooperation between government and industry, and vision and leadership from our elected officials in Washington. Despite the recent “Made in the USA” rhetoric, we continue to be outplayed on the world stage, and this has direct, negative, and long term consequences for middle class job creation.

Today I help US companies export their products worldwide. But during that summer of 1977, which was the high water mark for manufacturing employment in America, I was a member of the US Steelworkers union working my way through college at a refrigeration factory in Trenton, NJ. That manufacturer long ago relocated to the South, but I still have family and friends who work there almost 40 years later. I hope our elected officials can provide the leadership necessary to ensure the success of more manufacturers like this one, and the millions of good middle class jobs they can create for decades to come.

Brian Thomas is an international business consultant and Chairman of the Bucks County International Trade Council (BCITC) 


photo credit: <a href="http://www.flickr.com/photos/96644353@N02/8880731807">Stars and stripes</a> via <a href="http://photopin.com">photopin</a> <a href="https://creativecommons.org/licenses/by/2.0/">(license)</a>

Monday, January 4, 2016

Educating the American Workforce for 21 Century Jobs

Much has been written about the dire state of the American education system when we compare our scores in math and science to other nations.  Even more disappointing is the return on our investment in education, where the US falls into the "high spenders, low achievement" category (see chart below).

In a recent assessment, the US ranked a dismal 35th out of 64 nations in math, and an equally disappointing 27th out of 64 countries tested in science (see chart below).  Even more worrisome is the trend, which continues to show American students slipping behind.

Harvard professor Jan Rivkin, who co-chairs a project on U.S. competitiveness states "while our scores in reading are the same as 2009, scores from Belgium, Estonia, Germany, Ireland, Poland and others have improved and now surpass ours.  Other countries that were behind us, like Italy and Portugal, are now catching up.  We are in a race in the global economy.  The problem is not that we're slowing down.  The problem is that the other runners are getting faster."

Before I entered the business world I spent over a decade as a high school teacher,  I then lived and worked in Korea in international trade, and happened to live for a time with a Korean family.  I saw firsthand how Korean students would spend extra time each evening attending special private schools, where they would work on improving their math, science, and language skills.   Is it surprising then that we see South Korean students performing in the top 5 or 6 in the world in math and science assessments.

If our workforce is to effectively compete in an increasingly global economy, we must figure out how to improve our basic math, science and I would argue language skills.  The study below shows that throwing more money at the problem does not yield better results.  From my experience teaching in the US and seeing how Korean students perform, my conclusion is that family involvement in students' performance is one of the most important variables.

But there are two other variables I believe are just as significant.  One is the expectations we place on our students.  We need national testing standards that allow for a comparison of our students performance to students' from other countries.  This way we can better understand where to set the expectations, and focus our efforts on achieving goals that match ever changing global standards.

The other variable is career goals, which need to be clearly articulated for each and every student, and through our educational and vocational training systems ensure that every student has the opportunity to learn the relevant knowledge and skills required for a successful career in their chosen field.

For example, in the Unites States there are as many as 500,000 manufacturing jobs that go unfilled because employers can't find qualified workers.  In the IT and technology space the numbers are even higher.  Overall it's estimated that 3 million jobs go unfilled in America because of lack of skills. In one recent study, 43% of business owners said unfilled jobs were impeding their businesses from growing.

This gap increases the risk of companies moving out of the US to find more skilled workers, in addition to reducing the productivity and revenue for the firms that remain, which negatively impacts our GDP.  So we need to work harder to match our current students with current and future available job opportunities. Anything that falls short will lead to chronic underemployment and unemployment, and all of the social ills that result as a consequence.

The recent passage by Congress of the Workforce Innovation and Opportunity Act, which updates the job training system in the United States to make it more aligned with today's needs is one positive step.  But I believe we need to go one step further and develop a national industrial and educational policy, led by Congress.  This policy should clearly set national goals that can provide guidance for our secondary schools, colleges and universities, vocational and apprenticeship training programs, and families trying to align their student's career goals with both future employment trends, and the proper education and training path necessary achieve their goals.



Sunday, January 3, 2016

Middle Class Workers in America and the Crippling Cost of Obamacare

In a 2015 USA Today article, a physician in Kentucky points out the disastrous bottom line for many middle class working Americans, which is that they now cannot afford healthcare. 

Dr. Parveen Arla confirms what many expected would happen to middle class working Americans. Poor, long-uninsured patients are getting free Medicaid through Obamacare and finally seeing doctors for care, but middle-class workers are forced to stay away due to soaring costs.

"It's flip-flopped" says Arla.  Patients with job-based insurance plans, he says, will say: "My deductible is so high, I'm coming to the doctor as little as possible."  Some are skipping checkups altogether, which puts them at much higher risk of a serious health problem that was not caught at an early stage.  

This of course will cost much more in the long run than if the health problem was identified early on through regular check ups and preventative screenings. The USA article reports that "many doctors contend it's only a matter of time before the middle class begins crowding ER's.  They say putting off care can be dangerous, exponentially more costly and, if it continues and spreads, can threaten the health of the nation."

Not only have deductibles skyrocketed for many middle class working families, but premiums have as well.   On July 3, 2015, the NY Times reported "Health insurance companies around the country are seeking rate increases of 20 percent to 40 percent or more, saying their new customers under the Affordable Care Act turned out to be sicker than expected.  A recent Commonwealth Fund survey found that 4 in 10 middle class working-age adults skipped some kind of care because of costs.

Add to skyrocketing premiums and deductibles the price of drugs or procedures not covered by plans, and for many ordinary middle class working Americans it's just too much. The story describes one middle class worker whose doctors told her she risks a stoke because she can't afford the high deductible for blood pressure pills.  Another woman in Florida describes how her out-of-pocket costs of $7,500 was too high based on her $70,000 family income to deal with a debilitating neck problem.

For our family of four, our premiums 5 years ago were close to zero, with small deductibles and co-pays.  Our monthly premiums now are $1,300 per month/nearly $16,000 per year cash out of pocket just to have an insurance plan that's inferior to previous plans (we've had 5 different plans in the past 5 years to save costs).  Our family deductible is over $4,000, and when you throw in co-pays we will need to spend nearly $20,000 per year out of pocket before we receive the benefits of our "affordable" healthcare plan.  And costs are only expected to rise in the future.

If you are a middle class worker and have not yet been affected by rising healthcare costs, and you think this can't happen to you, think again.  Healthcare costs will continue to rise for middle class workers, forcing an increasing number to pay exorbitant fees for care they can't afford to use.

photo credit: <a href="http://www.flickr.com/photos/80497449@N04/8677835326">Caduceus Grunge Symbol - Sepia</a> via <a href="http://photopin.com">photopin</a> <a href="https://creativecommons.org/licenses/by/2.0/">(license)</a>  

Saturday, January 2, 2016

U.S. General Jack Keane's Strategy to Defeat ISIS

In a recent television interview, retired four-star Gen. Jack Keane said that Afghanistan could be stabilized but it would require political will.   Keane also states the defeat of ISIS will require leadership thus far lacking from the White House.

General Keane's strategy to defeat ISIS would include increasing the number of U.S. advisors, trainers, and air controllers in Syria from about 3,000 to around 10,000.  “We have to have a sense of urgency about ourselves.  The more time we take, guess what? The more killing takes place, the more barbarism takes place, the more opportunity ISIS has to hurt Americans.”

Keane further explains his strategy in an article published in the Cipher Brief (https://www.thecipherbrief.com) that “the only way to defeat an enemy who is holding terrain is to conduct a decisive ground campaign supported by effective air power, similar to what the U.S. and its allies did to regain territory from the Germans and Japanese during WWII, and from the North Koreans who occupied South Korea during the Korean War."

Keane goes on to say that "instead of providing minimal support to Iraqi forces, which has been the White House plan to date, the U.S. must once and for all provide all required advisors, trainers, and air controllers needed to dramatically increase the combat effectiveness of the Iraqi Army, Sunni tribal force, and Kurdish Peshmerga. The output of trained units should be at least three times greater, and the U.S. troop requirement would be about ten thousand."

General Keane goes on to suggest the building of an Arab/NATO coalition to support both an air and ground campaign to defeat ISIS instead of the current White House plan of dragging out the war. "The ISIS terrorists continue to kill and recruit worldwide, and they inspire their followers to kill Americans.  We need a sense of urgency and resolve to win, with a coherent decisive strategy to defeat ISIS."