Mobility. Start-ups

Mobility

A less mobile workforce means fewer people find employment

Residents who have

changed their address

in the past year

19%

unemployed tend to be depressed, suffer greater health problems and even have shorter life expectancy. The youth unemployment rate is now 24%, compared with the overall rate of 9. 1%. If and when these young people return to work, they'll earn 20% less over the next 15 to 20 years than peers who were employed. That increases the wealth divide that is one of the root causes of growing political populism in our country. While Republicans have pushed back against spending on broad government-sponsored work programs and retraining, it would behoove the Administration to keep pushing for a short-term summer-work program to target the most at-risk groups.

But these are stopgaps. The real solutions, of course, are neither quick nor easy— making them especially challenging for Congress. It's a cliche that better education is the path to a more competitive society, but it's not just about churning out more engineers than the Chinese. The U. S. will also need a lot more welders and administrative assistants with sharper communication skills. There's an argument for a good system of technical colleges, which would in turn require a frank conversation about

Start-ups

Fewer new companies are being started

-23%

Drop in

Sources: McKinsey Global Institute analysis; BEA; Department of Commerce; Kauffman Foundation

" \

the fact that not everyone can or should shell out money for a four-year liberal-arts degree that may leave them overleveraged and underemployed.

The other major issue is bridging the divide between the fortunes of companies and the fortunes of workers. Democrats and Republicans argue about whether and how to get American corporations to repatriate money so it can be taxed, and again they are missing the point. For starters, it's hard to imagine that crafty corporate lawyers won't find ways around any new rules. (That in itself is an argument for tax simplification that would reduce the loopholes that allow the 400 richest Americans to pay 18% income tax. ) The bottom line is that we have to find ways to make the U. S. a more attractive destination for investment.

One way to do that is by considering a third-rail term: industrial policy. It's a concept that needs to be rebranded, because Democrats and Republicans alike shudder at being associated with something so " anti-American. " In fact, good industrial policy can be a useful economic nudge. It's not about creating a command-and-control economy like China's but about the private and public sectors coming together at every level, as in Germany, to decide how best to keep jobs at home.

The lesson of Germany is a good one. Back in 2000, the Germans were facing an economic rebalancing not unlike what the U. S. is experiencing. East and West Germany had unified, creating a huge wealth gap and high unemployment at a time when German jobs were moving to central Europe. The country didn't try to explain away the problem in quarterly blips but rather stared it directly in the face. CEOs sat down with labor leaders as partners; union reps sit on management boards in Germany. The government offered firms temporary subsidies to forestall outsourcing. Corporate leaders worked with educators to churn out a labor force with the right skills. It worked. Today Germany has not only higher levels of growth but also lower levels of unemployment than it did prerecession.

In our politically polarized society, such
cooperation may seem impossible. But Ger
many after the fall of the Berlin Wall was
perhaps far more polarized. It is worth re
membering that economic change tends to
happen only during crises. We've survived
the banking crisis. How we deal with the
longer-range crisis—the crisis of growth
and unemployment—will define our eco
nomic future for not just the next few quar
ters but the next few decades. ■

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