By Rusty Rueff
I have followed with great interest the ongoing political debate about how to fix unemployment and create jobs to stir the economy. I should disclose right up front that I am a supporter and fundraiser for President Obama's reelection and I hope that doesn't disqualify me in other's thinking about my ability to bring forward a balanced opinion.
Why We Need the American Jobs Act
Recently, The New York Times wrote about a merchant in Los Angeles who said that he didn't need a tax break, instead, he needed customers -- this captures the heart of how many business owners feel. The problem -- the merchant is not thinking holistically about what drives consumers to feel confident enough to walk through his door and spend their discretionary income. At the root of the situation, it is not just about how much money consumers have, it is about their sense of confidence in whether or not they should spend that money given the state of the job market. This is why, at the core, the American Jobs Act is good.
Consumer Confidence Depends On Employment Confidence
I sit on Glassdoor's corporate board and since 2009, the company has conducted a quarterly Employment Confidence Survey. Two of the key issues addressed in the survey are:
- How confident are Americans in their own job security over the next six months?
- If an employee were to lose their job today, how confident are they that they could find a new job within six months commensurate with their experience and most recent compensation?
It should not be surprising to anyone that each quarter, Glassdoor's Employment Confidence survey results act as a prelude to what the Consumer Confidence Index reveals. If employees are not secure in their employment, then discretionary spending tends to fall short among consumers. And vice versa, if employees feel secure about their jobs and the economy, discretionary spending by consumers rises.
This brings me back to why the American Jobs Act, or any action that Congress decides upon to shore up employment confidence, is more important than just spurring extra spending. The American Jobs Act is also about having corporate America find ways to show growth and productivity quarter after quarter, while not cutting payrolls to make profit numbers. (It's hard to believe that we have become hooked on the record productivity levels coming out of the American worker.)
The American Jobs Act Reality
Do I believe that the American Jobs Act, or any other stimulus that the government offers, is going to fix our unemployment levels and have them return to their pre-2008 levels? No. What happened in the Great Recession is that corporations, by necessity, finally cleaned up and rationalized the labor force against what technology and better management could provide. Technology could have reduced the workforce many times over in the past, but human nature didn't allow us to make the really hard draconian adjustments that could have been made. For example, "Old Joe," who had been around forever and who never accepted technology or new ways of doing things, but who everyone loved and cared for, was always thought of as untouchable. But the Great Recession made Joe vulnerable, and even though he was one of the last to go, he was swept out. No stimulus package is bringing Joe back. And, as we have found out, there are a lot of Joes out there on the streets unable to find a job. Joe and the others are a different problem that needs to be thought about more broadly.
What can be fixed is stabilizing the employment market where it stands now and using the American Jobs Act and/or other programs to boost employment confidence. If we can provide a feeling of stability that American workers are not going to have to be concerned about more job losses and that their pay is secure, then we will see a return of consumer confidence that will allow for the customer to walk into the door of that L.A. merchant.
So, the best we can expect, and it is a good thing, is that a tax break here and there to an employer and an incentive to hire someone that is unemployed, when they need to hire, can potentially cauterize the wound. But until that happens and we become employment confident again, it won't feel very good for anyone.
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