Living in a world without jobs (and we don’t mean Steve)

Sign of our times

As the Eurozone crisis lurches from one supposedly critical meeting to the next, it is becoming increasingly clear why the rest of the world is looking on with some anxiety. Without “the prospect of growth” (in the words of Luxembourg’s prime minister, Claude Juncker) there is really little prospect of tackling a problem that dwarfs the Eurozone crisis – the shortage of jobs around the world.

True, globalisation and associated developments have lifted millions in the developing world out of poverty. But, according to the US-based polling group Gallup, there is still a huge shortfall in the number of real jobs.In his new book “The Coming Jobs War” (Gallup Press), Jim Clifton, the organisation’s chairman, writes that 5 billion of the Earth’s 7 billion people are adults aged 15 and older. Of these, 3 billion tell Gallup that they work or want to do so. Most need full-time, formal jobs (those that involve receiving a paycheck for steady work averaging more than 30 hours a week).

“The problem is that there are currently only 1.2 billion full-time, formal jobs in the world. This is a potentially devastating global shortfall of about 1.8 billion good jobs. It means that global unemployment for those seeking a formal good job with a paycheck and 30+ hours of steady work approaches a staggering 50 per cent, with another 10 per cent wanting part-time work.” Jim Clifton, Gallup.

Jim Clifton-Gallup CEO

Put in those terms, it is perhaps easier to see why there is some much unrest – not just in countries like those that experienced the Arab Spring but also in comparatively affluent democracies. Indeed, it is perhaps surprising that there has not been greater support for the likes of the Occupy Wall Street and Occupy the City protests. As Clifton points out, nearly a quarter of the world’s population is potentially subject to societal stress and instability.

It is for this reason that he adds that the demands of leadership have changed. Politics, military force, religion and personal values will not work for leaders in the way they have in the past. “As of 2008, the war for good jobs has trumped all other leadership activities because it’s been the cause and the effect of everything else that countries have experienced.” Put simply, based on Gallup’s worldwide polling, nothing would do more to change the state of humankind more than the immediate appearance of 1.8 billion jobs.

COULD AMERICA BE WINNING THE WAR ON JOBS?

Politicians of all stripes make great play about the importance of jobs, particularly when they are trying to get elected. But few appear to understand the link between jobs and the national psyche like those in the United States. So, while the country clearly has serious national debt issues, the political class in seeking to deal with them does not seem to have lost sight of the importance of creating jobs. One reason perhaps why official figures show a 1.6 million rise in non-farm employment in 2011 (the private sector increase of 1.9 million more than offsetting the 280,000 fall in government jobs).

In this US presidential election year there will be plenty of rhetoric about varying views of America’s place in the world and rival views on how to improve it. But, combined with gross domestic product figures showing an annual rise of 2.8 per cent for the last quarter of the year, it appears that things in America might not be as bad as has been claimed. Past experience suggests that there is nothing like a crisis – particularly a suggestion that the country is past its best – to galvanise the American people. Back in the 1980s, Japan was being proclaimed as the world’s industrial champion – in much the same way as China now is.

Robert Kagan, Brookings Institute

But American business fought hard to improve – notably by adopting many of its rivals’ management methods – and, as a result, is still the economy to beat. As Robert Kagan, senior fellow at the Brookings Institution think-tank, points out, the United States accounts for roughly half of the world’s economic output – just as it did in 1969, (when nobody questioned its supremacy). In the “Sunday Times” of 29 January 2012, Kagan adds: “People are rightly mesmerised by the rise of China, India and other Asian nations whose share of the global economy has been rising steadily, but this has so far come almost entirely at the expense of Europe and Japan.”

This is not to say that China, and indeed India, might not yet surpass America as the world’s leading economy. Their recent progress in converting what they do from basic manufacturing and support roles to more valuable service-type work – in other words, more like “formal” jobs – makes this more likely. But it is also true that America should not be underestimated, particularly when it comes to ingenuity. It is not really an accident that many of the world’s largest companies – whether representatives of the old or new economies – are American. Apple and Facebook, to name but just two, are, of course, American. There is a perception that the country knows what works in business. Clifton points out that 20 of the leading 30 MBA schools in a recent poll were in the United States and urges policymakers to remember that the country is “really good” at teaching business skills. Even so, Clifton warns those in government to avoid becoming too focused just on creating jobs. “Companies aren’t trying to create a job. They are trying to create customers,” he explained on a recent visit to London.

DOES ENTERPRISE NEED INNOVATION?

“Entrepreneurship is more important than innovation. The supply and demand is backward here: Almost all countries, states and cities have bet everything on innovation. Innovation is critical, but it plays a supporting role to almighty entrepreneurship. The investments should follow rare entrepreneurs versus the worldwide oversupply of innovation. Put another way, it’s far better to invest in entrepreneurial people than in great ideas”

Clifton takes issue with governments and their advisers about the championing of innovation. His 10-point prescription for dealing with this starts by acknowledging that cities are more important than countries when it comes to job creation. This is because it is only through local policies encouraging enterprise that jobs can be created, hence the importance of small and medium-sized businesses to every economy. “Most jobs occur when entrepreneurs start companies,” he writes. “The next biggest source is the approximately 5 per cent of existing small companies that shoot up to big success. Cities have to create environments where this is highly encouraged, supported, mentored and celebrated.”

Ultimately, though, it is exports that will ensure that the United States wins the global war on jobs, what he calls “its third world war”. Clifton believes that the United States needs to more than triple exports in the next five years and carry on increasing them so that they rise by 20 times in the next 30 years.

This is not an especially original thought, of course. Britain is seeking to start an export-led recovery, while it is Germany’s dedication to exports that at least in part accounts for the disharmony within the Eurozone. And China, of course, has been exporting with a vengeance these past few years.

Perhaps the real battle of the coming years will be for trade. After all, as Clifton says, it is customers that create jobs.

Index B tracks the commercial behaviour of thousands of enterprises each year and uses the information this creates to help clients generate insights and intelligence about them and inspire better ways to influence, engage and connect with them. To find out more please visit www.myindexb.com.

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