One of the worst things about the current economic downturn is the sense that we might as well throw out what we think we know, based on our experience with previous downturns. In the past, layoffs often preceded productivity increases and efficiency gains, which then led to hiring. But there's a growing concern that many jobs lost during this recession aren't coming back and that efficiency is seen as an alternative to hiring.
That's a reasonable conclusion, based on a Wall Street Journal story in which several CEOs, including Applied Materials' Mike Splinter, Stryker Corp.'s Stephen MacMillan and Thomson Reuters' Thomas Glocer, indicate their companies have no plans to hire in the short term.
Glocer says the high rate of unemployment is "a serious economic and political issue" because some jobs are gone for good, having been replaced by automation or by sending them to countries with lower labor costs. We've long been told that's a good thing because the replacement or movement of low-skill jobs means American workers will get more strategic, higher-paying jobs. But are there enough of those kinds of jobs to go around, and is our educational system turning out enough people qualified to do them?
(On the latter point, I've had haters on this blog accuse me of perpetuating the "myth" of poor education, noting that folks from around the world come to the U.S. to attend our universities. And that's true. But at the lower levels, many American schools are struggling with low graduation rates. Will it matter if our universities are the best in the world if fewer U.S. residents attend them?)
In addition to concerns over education, I wrote earlier this year about how offshoring lower-level IT jobs may lead to a shortage of folks with the kinds of skills necessary to advance up the IT career ladder and fill the more strategic positions.
Although there's lots of talk about green technology yielding new jobs and some early promise on job generation, there's also concern that growth wouldn't be as strong without government stimulus funds behind it. Certain technologies in the "green" category, like cloud computing, will eliminate some existing jobs and it's not yet clear whether new jobs will offset those losses.
Some folks believe companies are leaving themselves open to future failure by focusing so narrowly on efficiency gains. Last year I cited comments from former Cisco CTO Judy Estrin, author of "Closing the Innovation Gap." In an interview with Wired, she said:
Corporations focused on efficiencies and productivity started to make research more short term and tailored to the company's needs, with the result that most research done at corporations now is applied research.
Estrin said companies are counting on academia and start-ups to shoulder a larger R&D burden while they focus on solving a narrow set of specific problems. What most companies do today is "mostly development and very little research." She thinks companies, not-for-profits and foundations need to devote more dollars to encouraging basic science research, and she also recommends tweaking the R&D tax credit so it would focus solely on research.
Companies that are still hiring are being selective about it, according to the WSJ article. Cisco CEO John Chambers said his company has focused more on growth via acquisitions. Has it ever, picking up wireless telecom provider Starent Networks and video conferencing company Tandberg just in the last month. Acquiring innovative competitors on the cheap during a downturn is one of several strategies recommended by Boston Consulting Group.
Cisco is also making investments designed to help it enter new markets like South Korea. It's hard to fault Cisco for focusing on global growth when future U.S. growth seems so uncertain. I'm sure, like a lot of other companies, it feels like it's dancing as fast as it can. But they'll all have to leave the dance floor at some point, if nobody's willing to pay the band.