The website of McKinsey & Company’s McKinsey Quarterly continues to feature some of the most valuable material concerning major issues, such as job creation. In the article that follows (first published in February, 2010), James Manyika and Byron Auguste identify and then invalidate five myths about how to create jobs that continue to remain remarkably durable. I urge you to click here so that you can check out the wealth of resources at the Quarterly‘s website, sign up for email alerts, and obtain subscription information.
As you read the article, keep in mind what has — and hasn’t — happened since it was written. “Everything changes, nothing changes….”
* * *
Source: McKinsey Global Institute
With unemployment hovering just below 10 percent, job creation is now priority number one in Washington. But America’s jobs challenge is a marathon, not a sprint.
[Here are the first two myths that Manyika and Byron Auguste discuss. To read the complete article, please click here.]
With the unemployment rate in the United States lingering just below 10 percent and the midterm elections just nine months away, job creation has become the top priority in Washington. President Obama has called for transferring $30 billion in repaid bank bailout money to a small-business lending fund, saying, “Jobs will be our number one focus in 2010, and we’re going to start where most new jobs do: with small business.” The fund is among several measures—such as tax incentives, infrastructure projects, and efforts to increase exports—that the White House has proposed to help boost employment. As Americans consider the various approaches, we must have realistic expectations. We need to debunk some myths about what it takes to stimulate job growth.
1. Surely there’s a quick fix.
Oh, were that only the case. The scale of the challenge is enormous. Quick action is important, but remember that the US economy has lost more than 7 million jobs in the past two years. The country would need to create more than 200,000 net new jobs each month for the next seven years to get unemployment back to what was once considered a normal 5 percent. Quick fixes focused on 2010 alone won’t be enough.
Of course, the right mix of government policies can help. But even if Obama’s proposals were enacted right away and they accomplished all that he hopes, they would at best represent a good start. America’s jobs challenge is a multiyear marathon, not a sprint.
2. The key to boosting employment quickly is to help small businesses.
New jobs come from both small and big businesses. From 1987 through 2005, nearly a third of net new jobs were created by businesses that each employed more than 500 workers. By 2005, these big companies accounted for about half of the country’s total employment, although they made up less than 1 percent of all US firms.
But a look at the past two economic booms shows that the pace of job creation depends on more than the size of the businesses. During the economic expansion of the 1990s, large US multinational corporations—which employ an average of about 1,000 workers each in the United States—created jobs more rapidly than other companies. This was because they dominated computer and electronics manufacturing, the sector that drove much of that boom. During the more recent expansion of 2002–07, most of the net new jobs came from local service sectors, such as health care, construction, and real estate—which comprise both large and small businesses.
* * *
James Manyika is the San Francisco–based director of the McKinsey Global Institute. Byron Auguste is a director in McKinsey’s Washington, DC, office. This article originally appeared in the Washington Post, on February 7, 2010. Regrettably, there has been little improvement of the job market since then.