RESOLVING AMERICA’S HUMAN CAPITAL PARADOX: A PROPOSAL FOR A JOBS COMPACT

Abstract

It’s generally understood that the United States can’t be competitive—and won’t be able to support high, and rising, living standards—without a well-trained, well-paid, and continuously improving workforce that can compete with the best that other countries have to offer.Yet, at all levels of the economy, we behave as if we don’t believe this: firms value short-term profits over investment in the workforce; federal policymakers tolerate high, persistent unemployment and underemployment; wages for most of the workforce have stagnated for three decades, despite gains in productivity; unions have become a convenient scapegoat despite their sharp decline in influence; and job satisfaction nationally has declined steadily over the past decade. Why this human capital paradox? At one level, the reasons are complex—and, as a result, there can be no single, silver-bullet solution. At another level, though, we’re looking at a simple market failure, and a not-so-simple institutional one. Let’s start with the market failure.