WASHINGTON (CN) – The United States appears to be in a jobless recovery, experts told lawmakers Friday, blaming an unskilled American workforce, a corporate tax structure that sends jobs abroad and doubt about of the future of health care. “Our unemployment problem has become increasingly chronic,” Morgan Stanley’s chief U.S. economist Richard Berner said.
“We need to improve the skills of American workers,” Berner told the Joint Economic Committee. “We have a skills mismatch that is profound.”
While the three witnesses agreed that the market is seeing signs of future hiring, they predicted that it would only experience modest job gains and even smaller gains in the unemployment rate – currently at 9.7 percent – during the recovery.
Berner said the economy would need 10.6 million jobs – more than the 8.4 million lost since the start of the recession – to restore the pre-recession employment rate.
Manpower Chief Executive Officer Jeffrey Joerres said that 73 percent of U.S. companies reported having no plans to increase the current size of their workforce during the first quarter. That is the highest proportion the employment agency recorded since its beginning 42 years ago. Joerres said that 58 percent is usual.
He added that companies are unlikely to hire for a while because they have responded to the recession by cutting hours, meaning they can increase capacity before re-hiring. Employers have also become sophisticated in measuring when they need to hire, meaning they will hire with a growing market and not in anticipation of growth.
“Offering incentives will not drive job creation,” Joerres said, undermining the $15 billion jobs bill passed by the Senate on Wednesday, which includes $13 billion in payroll tax reductions for companies that hire unemployed Americans and keep them on through the end of the year.
Long periods of unemployment erode skills and the chances that someone will be hired back into the market. And here, a record 41 percent of the unemployed have been without a job for six months or more, Berner said. The average length of joblessness has been 20 weeks, which is more than twice as long as during the recession in the early 1980s.
“This recovery will be a jobless recovery,” Joerres said during the hearing, and added in an interview afterward that businesses “are basically not moving.” He did say, however, that the hours of Manpower’s customers have increased in the last 10 of 11 months.
The panelists largely promoted job-sharing programs, job training, and corporate tax breaks as ways to spur job growth. And they called for the government to forge a credible plan to tackle its long-term debts, giving some degree of certainty to investors and businesses. But there was a disagreement over whether health care reform should be pushed through now or later.
A job-sharing program – like that in Germany – is where businesses reduce worker hours as an alternative to firing. Kevin Hassett, an economist from the conservative American Enterprise Institute, said that job-sharing could have an immediate effect on the economy, but suggested that the government also directly hire given the magnitude of the recession.
Berner from Morgan Stanley said that health care reform would help spur hiring. Health costs – which persist even when worker hours are reduced – disadvantage American businesses during a recession compared to foreign competitors that are often not burdened by such costs. He also said workers are staying in their jobs simply to keep their health care, and that undoing that would make the job market more efficient
But Joerres from Manpower said that uncertainty resulting from lingering reform has been “a stumbling block” for hiring. While he said that health reform is important, he recommended that such reform should be put off when hiring is not as vital.
All proposed lowering corporate taxes. “Reducing the corporate rate is urgent,” Hassett said, promoting it as a long-term solution. And Joerres noted that Manpower’s two foreign competitors pay eight and fifteen percent less in taxes, which means that his company must make an extra $120 million each year to stay competitive.
Berner and Joerres also blamed inadequate labor skills. Joerres criticized the current system where job applicants first get training, then apply, proposing instead that companies step in earlier to direct training for a specific job.
Berner said in his written testimony, “Worker skills have greatly lagged technological change and tectonic shifts in the structure of our economy.” He added that immigration restrictions have hindered companies from hiring qualified foreign workers.