Does the White House Know How to Make a Job?

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In his State of the Union address, the president will pledge to create the best -- and best-paying -- jobs in the world. How exactly does he plan to do that?

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The official theme of the president's State of the Union address Tuesday night is competitiveness. With billions of Chinese, Asian, Brazilian, Indonesian and others "coming online" and "plugging into" the global economy, the challenge to out-compete the world will only get harder. But what is the reward for winning this competition? Jobs, of course.

But as the White House trains its focus on job creation -- an admittedly amorphous challenge, since the government cannot physically create a non-government job -- it's worth thinking through the ingredients of a good job, why they've suddenly disappeared, and how we can get them back.

There's no perfect definition for a Good Job, but I'll nominate three basic characteristics: Paying, Plentiful, and Productive. Paying means the jobs come with such a salary that families don't have to go into debt to enjoy the fruits of a decent middle-class life. Plentiful mean these kind of jobs are scalable, like the manufacturing industry of the mid-20th century, and relatively stable, so that workers can depend on them to exist through booms and busts. Productive means that these jobs create real value added. For example, one of the concerns of economists about the growth of our health care sector is that we're adding hundreds of thousands of jobs to an industry that isn't producing commensurate returns in quality and outcomes.

Globalization and technology threaten to commoditize millions of U.S. workers. How to we make ourselves unique again?

GETTING THE JOBS BACK

Where did the good jobs go? That's the 15 million-person question. Globalization and technology took assembly-line, call-center, and bookkeeping jobs and "replaced them with a computer or a lower-paid foreign worker," says MIT economist David Autor. The "financialization of the economy," in Ezra Klein's words, encourages CEOs to show their shareholders high profits, which means the folks in corner offices are more cautious about filling their cubicles with decent-paying positions. You could also point to the decline of labor, the rise of the rest of the world, the short-comings of our education system, and more.

The most important question is, What can we do about all of this?

There are two broad approaches to this question. The first approach is the stand-back-and-wait approach. Conservatives tend to think that if we cut taxes, fine-tune our regulations, and let the market work itself out, the right industries will rise and the good jobs will come. They might be right. But the president is not stand-back-and-wait kind of guy. He's a nudger. He believes in the power and primacy of the private sector, but he also believes that smart government can be a compass providing direction and guidance for the economy.

That's why the State of the Union will focus on four areas in the realm of job creation where government can lead: education, health care, taxing and spending.

-- Education: The financial gains of a college education are increasing while college graduation rates have slowed. The bonus from a college education for men and women (called the "college premium") has doubled in 30 years, but graduation rates for the 20-25 age crowd increased slowly. We need the U.S. workforce to catch up with the demand for brainiacs, and the president thinks he has a plan to help.

-- Health care: Health premiums are growing so fast that they're eating into our salaries. Health care spending is growing so fast that it's eating into out budget. And the health care industry is growing so quickly that it's absorbing workers much, much faster than it's extending our lifespans. We need to control health care's expansion while finding other sectors to place workers.

-- Taxes: Our complex and burdensome corporate tax code could be our largest roadblock to becoming more competitive, said Frank Vargo, vice president of the National Association of Manufacturers. We have one of the highest corporate tax rates in the developed world, which encourages multinational companies to set up subsidiaries abroad to escape U.S. taxes. Lower taxes on corporate income would encourage more businesses to keep factories, offices and jobs in the U.S.

-- Spending: The president will push for more spending on infrastructure and education. But with a Republican House opposed to any increase in overall spending, he will also have to find places to cut. As a result, the White House will have to choose where to divest and where to re-invest: In research and development credits? In green energy subsidies? In export financing, or manufacturing support? These are questions without an answer key, and this is where the White House has to decide what kind of compass it wants to be, and where it wants to direct the U.S. economy.


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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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