Friday, September 09, 2011

Let’s Not Confuse Job Creation With Need to Get Work Done on Cusp of 9/11

US slips to 5th on world competitiveness scale. Obama jobs plan holds opportunities for marketers

As we tap out this post, U.S. stocks are down about 3 percent today wiping out a brief rally earlier in the week. Experts point to fresh euro-zone sovereign-debt worries, the surprise resignation of an ECB board member and concerns about Obama's jobs plan unveiled on national TV last night. Let’s not confuse “concerns” with “uncertainty” about the plan, which sounded pretty good to us, if you don’t worry about how to pay for it.

At the core of his plan are two cuts in the payroll tax — one for employers and one for employees —The employee cut would reduce the tax to 3.1 percent of income instead of the 4.2 percent negotiated last year. If passed, it will put money in people’s pockets quickly and increase consumer demand. As marketers, you need to be ready to pounce on this.

For employers, the plan would halve the payroll tax for most small and medium-size businesses and would provide an incentive for hiring by temporarily removing the tax for new employees (and on raises for existing ones). Companies would also get a $4,000 tax credit for hiring anyone out of work for more than six months. Unemployment insurance would be extended for five million people. We were also encouraged by proposals to continue unemployment benefits for those legitimately starting new businesses. The dream of a safe steady corporate (or government) job, with benefits and a pension is fast fading into the rearview mirror and not likely to come back.

We’re hoping this crisis gets us back to our entrepreneurial roots and makes it easier for small businesses and independent contractors to be part of the mainstream—not outliers who continue to be treated as second class citizens by lending institutions and healthcare providers. More and more work in our service driven economy is going to be project-based, not permanent and we all need to learn how to hustle.

Again, you need to be ready to pounce on this pent up demand because the surge may not be sustainable, but it will be a surge nonetheless.

U.S. slips to 5th on world competitiveness scale

The United States is slipping and emerging markets are improving, but European economies still dominate the list of the most competitive economies in the world, according to a World Economic Forum report released Wednesday.

For the third consecutive year, Switzerland ranked first in the forum’s annual competitiveness survey, which assesses countries based on 12 categories including innovation, infrastructure and the macroeconomic environment. The US, which topped the list in 2008, continued its decline, also for the third year in a row. The weaker performance was attributed to economic vulnerabilities as well as “some aspects of the United States’ institutional environment,” notably low public trust in politicians and concerns about government inefficiency.

OUR TAKE: Unacceptable--regardless of whether or not you believe in the methodology of the survey.

The results show that while competitiveness in advanced economies has stagnated over recent years, it has improved in many emerging markets, the Geneva-based forum said.
“Much of the developing world is still seeing relatively strong growth, despite some risk of overheating, while most advanced economies continue to experience sluggish recovery, persistent unemployment and financial vulnerability, with no clear horizon for improvement,”
Klaus Schwab, founder and chairman of the forum, said in a statement. China, ranked 26th and up one place from a year earlier, was the highest placed of the large developing economies. Among the other major emerging economies, South Africa was 50th, Brazil 53rd, India 56th and Russia 66th.

The rankings take into account 12 categories: institutions; infrastructure; economic environment; health and primary education; higher education and training; goods market efficiency; labor market efficiency; financial market development; technological readiness; market size; business sophistication; and innovation. The deck should really be stacked in our favor.

What the business gurus suggest

A recent Wall Street Journal CEO Council
roundtable of business leaders had some interesting suggestions for getting America back to work. For your convenience, we stripped the corporate PR spin to serve up some nuggets to ruminate on over this weekend of self-reflection.

No surprise, the CEOs want lower corporate taxes in the U.S., which has among the highest tax corporate tax rates in the world, and a moratorium or a rollback of business regulation.
"The government needs to be a better partner with the business world," said Magellan Health Services CEO Rene Lerer, echoing a sentiment expressed by many.
Yet the CEOs also exhibited a practical streak that is often absent from the Washington debate, and a willingness to embrace compromise. Terry Marks, president and chief executive of The Pantry Inc., which operates convenience stores that sell gasoline, even suggested an increase in the gas tax "to invest in transportation infrastructure."

"We have to confront reality," wrote Roger Wood, chief executive of Dana Holdings Inc., the auto-parts company. "Political infighting and seemingly disparate objectives...are keeping the U.S. from finding real solutions to real problems."

The members of the CEO Council, which includes global companies some of which are domiciled abroad, generally agreed that indebted U.S. consumers can no longer drive economic growth in the U.S., and impetus will need to come from developing countries. As a result, they urged the U.S. to embrace global free trade, and make changes that will encourage the growth of export industries here. Many of their recommendations focused on developing human capital as the key to global competitiveness.

"Create more charter schools and teaching jobs for young graduates," wrote Thomson Reuters CEO Tom Glocer. "Train more engineers and German-quality skilled labor." Several also called for reform of the immigration system, to allow more skilled professionals to live and work in the U.S.

Encouraging innovation in the U.S. was also a common theme

Klaus Kleinfeld, chairman and CEO of Alcoa Inc. called on the U.S. to "reignite innovation" by creating regional alliances that join local governments, universities and investors to spark new business creation, and to invest in "research and development clusters" in areas like clean energy and life sciences. He and others also recommended an overhaul of the patent system, to reduce backlogs and address inefficiencies and the growing problem of "patent trolls."

Several of the CEOs also counseled patience. Deleveraging, they pointed out, takes time. "Slowdowns are to be expected after the rapid pace of growth in the world's economies over the past couple of decades, and businesses should take advantage of the time to re-focus on the basics and prepare for the resumption of growth," wrote Jack Ma, CEO of the Alibaba Group, the Chinese Internet company. "It's like Tai Chi [the Chinese martial art]—sometimes you need to go slow in order to go fast again."

Klaus Kleinfeld, CEO, Alcoa Inc said ."Confidence is like the air the economy needs to grow and thrive. We need a positive, forward-leaning message from the president—and business leaders—aimed at the real challenge: improving American competitiveness and fostering growth and innovation."

Brent Saunders, CEO, Bausch & Lomb Inc. quipped: "Institute a lower corporate tax rate to encourage domestic investment including incentives to invest capital and conduct research in the United States. The U.S. corporate tax rate is on average ten percentage points higher than other world economies, which is a key factor in driving corporate investment overseas."

Jack Ma, CEO, Alibaba Group: "Put your trust in young people and in small businesses. Young people will bring the new ideas an innovations that will create a brighter future. Small businesses are the backbones of the world's economies in terms of employment, tax base and overall contribution to society, and in some cases they are tomorrow's big companies."

Rene Lerer, M.D., CEO, Magellan Health Services: "The government needs to be a better partner with the business world. There needs to be a concerted effort to create jobs throughout the country through a governmental-private partnership. The corporate community needs predictability and support. If we can move forward with the philosophy of "no surprises" with clear and predictable guidelines and support that would go a long way."

George C. Halvorson, chairman and CEO, Kaiser Permanente: "Health care costs are damaging the total economy and destroying government budgets. We spend twice as much money buying care as any other country on the planet... We need to significantly improve the processes of care delivery to the point where we get better care for less money than we spend now. "

Bold talk and great ieas. Can they back it up when the quarterly pressure’s on to deliver the numbers they need to appease their analysts and stakeholders?


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