In an unusual mid-month commentary, PIMCO chairman Bill Gross says fiscal balance alone will not likely produce 20 million jobs over the next decade. He said the government must re-think how it approaches job creation, and said that a college education was a waste of money.
“It is becoming obvious that the 2012 election will be fought on a battlefield of job creation,” Gross writes in the July issue of his monthly newsletter. “ A 9.1% official unemployment rate, and a number nearly double that when discouraged and part-time workers are included in the rolls, portend an angry and disillusioned electorate, which will include millions of jobless college graduates ill-trained to compete in the global marketplace.
He notes that over the past 10 years under both Democratic and Republican administrations, only 1.8 million jobs were created while the available labor force has grown by over 15 million.
“It is clear, however, that neither party has an awareness of the why or the wherefores of how to put America back to work again. Few economic advisors from either party ever mention structural long-term disconnects in employment–recognition that cyclical influences will no longer dominate the U.S. labor market.”
He goes on to write that the past several decades have witnessed an erosion of our manufacturing base in exchange for a reliance on wealth creation via financial assets.Manufacturing and goods exports have ceded enormous ground to China and other developing labor markets, as America’s reliance on services and high tech innovation has exposed gaping holes in an historically successful model.
Almost any industry dominated or significantly connected to finance and financial leverage has hit the canvas and stayed down in the aftermath of Lehman in 2008. Housing construction, real estate brokerage, banking and consumer retail employment will likely never come back to levels dominated by our prior decade’s excessive leverage and its abuse leading to overconsumption. Because of that focus, a “shovel-ready,” vigorous manufacturing sector is not there to pick up the slack.
Gross also questions the reason for a college education, wondering if it’s worth the cost in post-graduation wages.
“A mind is a precious thing to waste, so why are millions of America’s students wasting theirs by going to college? All of us who have been there know an undergraduate education is primarily a four-year vacation interrupted by periodic bouts of cramming or Google plagiarizing, but at
least it used to serve a purpose. It weeded out underachievers and proved at a minimum that you could pass an SAT test.”
He points to Peter Thiel, head of hedge fund Clarium Capital, who has established a foundation to give 20 $100,000 grants to teenagers who would drop out of school and become not just tech entrepreneurs but world-changing visionaries. College, in Thiel’s mind, is stultifying and outdated, Gross writes, with very little value created despite the bump in earnings power that universities use as “their raison d’être in our modern world of money.”
He points to CNN’s Fareed Zakaria for one solution, explaining that Zakaria has advocated for a program as ambitious as the GI Bill, but one that focuses on retraining existing unemployed workers and redirecting our future students. Instead of liberal arts, Zakaria suggests focusing on technical education, technical institutes and polytechnics as well as apprenticeship programs.
“Those who advocate that job creation rests on corporate tax reform (lower taxes) or a return to deregulation of the private economy always fail to address dominant structural headwinds which cannot be dismissed,” Gross concludes. “Labor is much more attractively priced over there than here, and U.S. employment based on asset price appreciation as opposed to manufacturing can no longer be sustained. The golden days are over, and it’s time our school and jobs daze comes to an end to be replaced by programs that do more than mimic failed establishment policies favoring Wall [Street] as opposed to Main Street. “