The Coming Jobs War
I recently read a book written by the CEO of Gallup, Jim Clifton, titled The Coming Jobs War. I read the book on the way to Las Vegas for one of my kid’s soccer tournaments, and haven’t been able to stop thinking about it since. I've read and listened to droves of studies on the future of the US Economy, but this book hit home more than any. I hold a passion for solutions derived through unconventional thinking and this is the first economic study that provides just that . . .
First of all, Gallup’s studies are vast. When they do a poll, they don’t test a few hundred, or a few thousand, but hundreds of thousands, and in this poll, across 150 countries. And, I can testify to the fact that most of the time what they learn from these studies does not fit the conventional wisdom of today’s society.
A Few Takeaway Points of the Book:
According to Gallup, 52% of Americans believe China is the world’s strongest economic power. In reality, of the world’s overall Gross Domestic Product (GDP) of 60 trillion, the US generates roughly 25%, nearly 3 times that of China. However, China’s GDP is growing at a mind-numbing 8% to 10% while we are growing at a much flatter rate of around 2%. This means at the current rates China will far exceed the US in the next 30 years becoming the world’s largest economic power. Of the overall predicted world GDP of 200 trillion in 2040, China will have the lion’s share of around 70 trillion while the US is predicted to grow to about 30 trillion. And, good jobs go to the country who leads the world’s economy.
We Need More Good Jobs
According to Gallup, the world’s values have changed over the last generation. Thirty years ago people desired financial stability, peace, shelter, and freedom. Now, what the world’s people want is a good job and a good job for their children. Why this matters is that GDP is controlled by people’s comfort level with spending. Seventy percent of our country’s GDP is consumer spending. When people have a good job they feel it’s safe to spend and GDP rises. When they don’t have a good job they don’t spend and GDP falls. Thus the key to faster GDP growth is more consumer spending which requires more good jobs.
Government Job Creation
Can the government create these good jobs? In the news you may have heard about shovel-ready, stimulus package funded, construction jobs. In my opinion, this is like placing a Band-Aid on a cancerous tumor. The Feds currently take in about 2.6 trillion in taxes each year and are spending about 3.7 trillion. Gallup predicts this may likely require a cut of roughly one-third of spending to become sustainable. That’s right, a one-third cut to Social Security, Medicare, Medicaid, the Military, and a cut of one-third to the number of government employees . . . No, higher taxes or borrowing more of China’s money won’t fix this problem. According to Gallup, this will only make the explosion bigger when then train finally derails.
The Solution is Local
As alarming as the results of Gallup’s study, their fix will likely surprise you more. While you may understand government spending cannot sustain job growth, you may have held the belief, like myself, that US innovation is the solution. Though this is part of the solution, it is not the driving factor. We have droves of good ideas as a result of billions spent in R & D that will never see the light of day because they lack one special key component to make them profitable—a great entrepreneur.
Great entrepreneurs are the key to our climbing out of this hole, entrepreneurs investing at the local level. The Coming Jobs War predicts it will take heavy investment by key entrepreneurs at the local level to spark the GDP growth needed to stay ahead of China. When our best entrepreneurs invest in their new ideas in their home towns in hundreds of cities across the US, the tide will turn back in our favor. Rather than study complex economic models, we need to study great entrepreneurs.
Government spending is unsustainable and has led to a change in our social philosophy from a capitalistic to an entitlement mind-frame. While our grandparents understood you had to earn your keep—period, many now believe they are entitled to better simply because they are a US citizen. One example is our health care system. Health care costs are twice what they should be at 2.5 trillion per year, which equals approximately one sixth of our total economy. One simple solution: we need to get in better shape! One-third of our population maintains a healthy weight, one-third is overweight, and one-third is obese. Gallup shows if an additional one-third of Americans were in good shape, our health care costs would be greatly reduced into manageable levels.
I, for one, am not terribly excited about my kids and their kids living in a nation that is in second-place, which no longer leads developing countries into democratic systems. When China leads the world’s GDP, the other countries of the world will look to China, not the US, as a model for success. And, just as the leadership of the US has pushed China towards civility, democracy, and environmental protections, the opposite will be the case if China leads . . .
As an entrepreneur in the construction industry, I realize more and more the success of my company goes beyond just making a living for my family, but has an impact, maybe ever so small, on the country our kids and their kids will inherit someday.