politico · i about the association hr policy association, headquartered in washington, d.c., is...

EMBARGOED Until 05/11/2011

1100 THIRTEENTH STREET | SUITE 850

WASHINGTON DC 20005 202.789.8670 | FAX 202.449.5648 | WWW.HRPOLICY.ORG

Blueprint for Jobs in the 21st Century A Vision for a Competitive Human Resource Policy for the American Workforce

April 2011 11-30

EMBARGOED

EMBARGOED

i

About the Association

HR Policy Association, headquartered in Washington, D.C., is the lead organization representing chief human resource officers of major employers.

The Association consists of more than 300 of the largest corporations doing business in the United States and globally, and these employers are represented in the organization by their most senior human resource executives.

Collectively, their companies employ more than ten million employees in the United States, nearly nine percent of the private sector workforce, and 20 million employees worldwide. They have a combined market capitalization of more than $7.5 trillion.

These senior corporate officers participate in the Association because of their passionate interest in the direction of human resource policy. Their objective is to use the combined power of the membership to act as a positive influence to improve public policy, the HR marketplace, and the human resource profession.

For more information visit www.hrpolicy.org.

EMBARGOED

EMBARGOED

HR Policy Association Board of Directors

iii

J. Randall MacDonald, Chairman Senior Vice President, Human Resources IBM Corporation

Susan F. Davis, Vice Chair Executive Vice President, Human Resources Johnson Controls, Inc. Michael L. Davis, Vice Chair Senior Vice President, Global Human Resources General Mills, Inc. Richard R. Floersch, Vice Chair Executive Vice President, Chief Human Resources Officer McDonald's Corporation

Mirian M. Graddick-Weir, Vice Chair Executive Vice President, Human Resources Merck & Co., Inc. Thomas E. Helfrich, Vice Chair Executive Vice President and Chief Human Resources Officer KeyCorp Eva Sage-Gavin, Vice Chair Executive Vice President, Global Human Resources and Corporate Affairs Gap, Inc

William S. Allen Group Senior Vice President and Head of Human Resources A.P. Moller-Maersk Group Maureen K. Ausura Executive Vice President, HR Lowe's Companies, Inc. William A. Blase, Jr. Senior Executive Vice President, Human Resources AT&T Inc. J. Thomas Bowler, Jr. Senior Vice President, Human Resources and Organization United Technologies Corporation Jeffrey J. Brundage Senior Vice President, Human Resources American Airlines Inc. John D. Butler Executive Vice President, Administration & Chief Human Resources Officer Textron Inc. L. Kevin Cox Executive Vice President, Human Resources American Express Company Timothy M. Crow Executive Vice President, Human Resources The Home Depot, USA Inc. Peter M. Fasolo Global Head of Human Resources Johnson & Johnson Gregory S. Folley Vice President, Remanufacturing and Components Caterpillar Inc. Roger C. Gaston Senior Vice President, Human Resources Avaya Inc.

Dale W. Gibbens Vice President, Human Resources Koch Industries, Inc. Bonnie C. Hathcock Senior Vice President and Chief Human Resources Officer Humana Inc. Allen E. Hill Senior Vice President, Human Resources United Parcel Service, Inc. Anne Hill Senior Vice President, Chief Human Resources Officer Avery Dennison Corporation Angela S. Lalor Senior Vice President, HR 3M Company John F. Lynch Senior Vice President, HR General Electric Company Paul D. McKinnon Head, Human Resources Citigroup Inc. Brian M. McNamee Senior Vice President, Human Resources Amgen, Inc. Jack T. Mollen Executive Vice President, Human Resources EMC Corporation John M. Murabito Executive Vice President, Human Resources and Services CIGNA Corporation Moheet Nagrath Global Human Resources Officer The Procter & Gamble Company Walter M. Oliver Senior Vice President, Human Resources and Administration General Dynamics Corporation

Marc C. Reed Executive Vice President, Human Resources Verizon Communications David A. Rodriguez Executive Vice President, Global Human Resources Marriott International, Inc. Laurie A. Siegel Senior Vice President, Human Resources & Internal Communications Tyco International Jill B. Smart Chief Human Resources Officer Accenture Larry E. Steward Vice President, Human Resources DTE Energy Susan M. Suver Vice President, Human Resources U.S. Steel Corporation Mara E. Swan Executive Vice President, Global Strategy and Talent Manpower Inc. Sharon C. Taylor Senior Vice President, Human Resources Prudential Financial, Inc. Johnna G. Torsone Executive Vice President and Chief Human Resources Officer Pitney Bowes Inc. Elease E. Wright Senior Vice President, Human Resources Aetna, Inc. Dennis Zeleny Senior Vice President, Chief Human Resources Officer Sunoco, Inc.

EMBARGOED

EMBARGOED

Table of Contents

v

ABOUT THE ASSOCIATION ........................................................................................................ i BOARD OF DIRECTORS ROSTER ............................................................................................. iii FOREWORD ............................................................................................................................ xix

INTRODUCTION ..................................................................................................................... xxi

EXECUTIVE SUMMARY ...................................................................................................... xxvii I. THE NEW ECONOMIC, DEMOGRAPHIC, AND SOCIAL REALITIES FACING THE

UNITED STATES: A GLOBAL ECONOMY POWERED BY TECHNOLOGY AND INTELLIGENCE ................................................................................................................... 1

II. DEVELOPING THE NECESSARY TALENT TO STAFF THE AMERICAN

WORKFORCE OF THE NEW GLOBAL ECONOMY ............................................................ 23 III. ATTRACTING THE WORLD’S TOP TALENT TO AMERICA AND RETAINING IT .............. 39 IV. CREATING A REGULATORY ENVIRONMENT THAT ENCOURAGES INNOVATION

AND JOB GROWTH: THE NEED TO REPLACE CONFLICT WITH CONSENSUS TO ACHIEVE COMPETITIVENESS .......................................................................................... 45

V. REINING IN U.S. HEALTH CARE COSTS TO ENCOURAGE EMPLOYMENT

GROWTH: A CHALLENGE TO ITS HEALTH CARE SUPPLY CHAIN ................................ 71

VI. CONCLUSION .................................................................................................................... 85

VII. APPENDIX ......................................................................................................................... 87

VIII. ENDNOTES ...................................................................................................................... 89

EMBARGOED

EMBARGOED

Comprehensive Table of Contents

vii

ABOUT THE ASSOCIATION .................................................................................................. i

BOARD OF DIRECTORS ROSTER ..................................................................................... iii

FOREWORD .......................................................................................................................... xix

INTRODUCTION .................................................................................................................. xxi

EXECUTIVE SUMMARY ................................................................................................. xxvii

EMBARGOED

EMBARGOED

ix

I. THE NEW ECONOMIC, DEMOGRAPHIC, AND SOCIAL REALITIES FACING THE UNITED STATES: A GLOBAL ECONOMY POWERED BY TECHNOLOGY AND INTELLIGENCE ........................................................................ 1

Technology and Innovation Are Transforming the Way Work Is Done, Where It Is Done, and the Skills Needed To Get It Done .....................................2

The Use of Technology to Improve Productivity Is a Permanent Business Strategy Creating Both Positive and Negative Impacts on Employment Levels ....................................................................................................................3

Corporations See a World of Opportunities and Deploy Assets Globally To Take Advantage of Them, Going Wherever Investments Create Good Returns ..................................................................................................................5

Labor Costs in the United States Are Relatively High Compared to Many of America’s Economic Competitors....................................................................8

The Cost and Administrative Burden of Regulatory Compliance for American Employers is Too High, Yet Policy Makers Show Little Interest in Changing That Trend ........................................................................................9

The World is Competing Hard Against the U.S., Yet Job Creation is Not a Priority of the Federal Government ....................................................................11

America Is Taking Longer to Recover After Each New Recession, With Job Creation Completely Collapsing During the Most Recent Recession .........12

The Lack of Focus by Policy Makers in America on Job Creation Prolongs Unemployment and Erodes Key Workplace Skills ............................................14

The New Jobs in America Will Be in Service, Professional, and Related Occupations Requiring More Education and Skilled Training; Goods-Producing Occupations Will Have Little To No Growth ...................................15

The Future American Workforce Will Be Significantly Older and More Diverse ................................................................................................................17

Technology and Globalization Concentrate Jobs at the Top and Bottom of the Economic Rungs of Modern Economies, Shrinking the Middle ..................18

In Recent Years Government Job Growth Replaced Private Sector Growth, But the Trend May Be Shifting ............................................................19

Despite Challenges, America Has Significant Strengths That Policy Makers Should Capitalize On To Produce Employment Opportunities: The World’s Largest and Most Stable Economy With More Innovative Workers ...............................................................................................................20

To Create Jobs, America Needs a National Commitment To Foster Innovation, Ensure the Necessary Talent is Being Developed, and Then Capitalize on the Economic Opportunities They Create .....................................22

EMBARGOED

EMBARGOED

xi

II. DEVELOPING THE NECESSARY TALENT TO STAFF THE AMERICAN WORKFORCE OF THE NEW GLOBAL ECONOMY ............................................... 23

Too Many Graduates Arrive at Work Lacking Basic Competencies .................24

Changing Demographics Are Adversely Affecting K-12 Student Learning ......26

The Development of Science, Technology, Engineering, and Math Skills in America Is Not Adequate To Meet the Needs of Employers .........................27

Not All Good-Paying Career Fields Require a College Degree .........................30

The Vocational Education System in Secondary Education Is Withering Despite the Demand for People To Fill Skilled Trades Positions ......................31

Educators and Employers Are Not Adequately Communicating With One Another To Ensure Graduates Receive the Education They Need For Successful Careers ..............................................................................................32

The Federal Government’s Education and Training Programs Lack Focus and Are Not Adequately Meeting Employer Needs, Particularly for Large, Multi-State Employers ........................................................................................33

Global Employers Are an Untapped Resource That American Educators and Policymakers Could Use To Better Understand Successful Learning Models That Promote Employment ....................................................................34

SPECIFIC RECOMMENDATIONS: ............................................................................................. 35

1. At all levels of education, students should have a far better understanding of the skills and basic competencies needed by employers as well as the career tracks with the potential for long-term gainful employment. ............................................................................ 35

2. There should be an ongoing dialogue between educators and employers to ensure that educators understand the career opportunities available to graduates, the competencies and skills employers are seeking from graduates, and what colleges and universities can do to increase the probabilities that graduates will find quality jobs. ................................................................... 36

3. Employees must pursue lifelong learning to improve their job security. .................................................................................................................. 36

4. Expanding STEM education and enlarging the number of STEM teachers and professors, doing more to motivate students to enter STEM studies, and increasing the number of Americans who graduate from colleges and universities with STEM degrees should be among America’s highest priorities. ........................ 36

5. Career technical education should be expanded and promoted to support those seeking fulfilling careers in the skilled trades. ....................... 37

6. Government economic development, workforce development, and education programs need to be fundamentally redesigned to work in unison toward the same primary objective: economic growth. .................................................................................................. 37

EMBARGOED

EMBARGOED

xiii

III. ATTRACTING THE WORLD’S TOP TALENT TO AMERICA AND RETAINING IT ................................................................................................................. 39

America Is Attracting Top Talent, But Not Retaining It ....................................39

America Is Losing Innovative Talent By Forcing Exceptional Foreign Students To Leave the Country Once They Graduate From American Institutions of Higher Learning ...........................................................................40

Business Is Now Conducted Globally, But the American Visa Process Frustrates Companies Trying To Deploy and Retain Talented Foreign Professionals .......................................................................................................41

American Immigration Policy Is Becoming Even More Restrictive, Building Barriers to Keep Highly Talented Individuals From Entering the Country ...............................................................................................................42


1. The immigration reform debate should address the reality that there is a global war for talent and that countries are competing to attract and retain the human capital essential to a culture of productivity and innovation. ........................................................... 43

2. It is imperative that the United States avoid enacting new legislation or issuing new regulations that impose additional restrictions on visas that would only further dampen economic recovery. ................................................................................................ 43

3. Foreign students who acquire advanced degrees in the STEM disciplines at American higher education institutions should have a path to U.S. citizenship if they wish to use their talents in America rather than returning to their country of origin. ........................... 44

4. The system for determining the number of annual visas should be revamped to better reflect the needs of the market, rather than maintaining arbitrary and inflexible caps. ..................................... 44

5. A more flexible system should be established to maintain options for both short-term and long-term residence, allowing professionals to transition from temporary to permanent status after a period of contributing to the American economy, without regard to quotas or nationality. ............................................ 44

EMBARGOED

xiv

IV. CREATING A REGULATORY ENVIRONMENT THAT ENCOURAGES INNOVATION AND JOB GROWTH: THE NEED TO REPLACE CONFLICT WITH CONSENSUS TO ACHIEVE COMPETITIVENESS ................ 45

Employers Strongly Support Fair Employee Protections; It Is In Their Self-Interest to Treat Employees With Fairness and Respect .............................48

Nevertheless, the Regulatory Policy Process Governing Employee Protections Contains Endemic Flaws That, If Not Addressed, Will Further Stifle Economic Recovery ..................................................................................48

The Time Has Come For a Comprehensive Review of the Fundamental Assumptions and Principles Used To Regulate Employment Policy in the American Workplace ..........................................................................................50

America’s Conflict-Driven Regulatory System Produces Scarred Employment Policy .............................................................................................50

The American Regulatory System Overlooks the Reality That the Vast Majority of Employers Treat Their Employees Fairly .......................................52

Employment Policy Tends to Evolve From a Desire to Protect Employees When an Idea Is First Introduced To Micromanaging the Workplace When the Final Regulations Are Issued ........................................................................53

Laws Written During the Industrial Age Govern the Workplace of the Digital Age, With the Prime Example Being the Fair Labor Standards Act ......54

Job Growth Is Being Hindered by the Costs of the Administrative Structure Required to Ensure Compliance With the Plethora of Government Employment Regulations ...............................................................56

Corporate Human Resource Policy Is Unduly Influenced By the Plaintiff’s Bar Using Ambiguities in Employment Laws and Regulations To Obtain Large Attorney’s Fees .........................................................................................58

Several Employment Policy Proposals Under Consideration Would Create Additional Employer Liabilities at the Expense of American Jobs ....................60

EMBARGOED

xv


1. A 21st Century Employment Law Reform Commission should be established to ensure a consensus-based review of all existing laws, starting with the antiquated Fair Labor Standards Act, to ensure that those laws fit the contemporary workplace. .............................................................................................................. 62

2. The formulation of new employment policies should ensure that abuses are prevented without adversely impacting competitiveness, utilizing a consensus-building process involving key stakeholders. .................................................................................. 63

3. Resolution of all federal employment claims should be handled by a dedicated administrative process, not through litigation in federal court. ..................................................................................... 67

4. The U.S. workplace regulatory scheme should be premised on fostering the preservation and creation of jobs, targeting limited resources available for enforcement on those who mistreat their employees. ...................................................................................... 68

5. Employers should be able to maintain uniform human resource policies in all fifty states through a broad federal preemption of state and local employment laws................................................. 69

EMBARGOED

xvi

V. REINING IN U.S. HEALTH CARE COSTS TO ENCOURAGE EMPLOYMENT GROWTH: A CHALLENGE TO THE HEALTH CARE SUPPLY CHAIN ............................................................................................................... 71

To Be Competitive, U.S. Employers Need a Healthy and Productive Workforce Supported by a Stable Health Care System Providing High Quality Care at Affordable Prices .......................................................................71

The Health Care System in the United States Is Not Stable Nor Does It Provide High Quality Care at Affordable Prices ................................................72

The Cost of Health Benefits in the United States Hinders the Competitiveness of Employers Doing Business in America ..............................74

The New Health Care Reform Law Does Not Adequately Address Underlying Cost and Quality Issues. It Has Increased the Cost of Health Care for Employers and Employees ...................................................................74

The Legal, Legislative, and Political Challenges Confronting PPACA Leave Employers and Employees in Limbo Regarding the Future of Health Care, Inhibiting Employers From Implementing Long-Term Hiring and Benefits Strategies ........................................................................................76

Fueling Uncertainty for Large Multi-State Employers Is the Drift Towards Shifting the Responsibility for Health Care Reform from a Uniform Federal Approach to 50 States Going in Different Directions ............................77

The Cost of Undercompensated Care in the United States Is Unfairly Shifted by Health Care Providers To Employers and Employees Who Purchase Care, Driving Up the Cost of Labor ....................................................78

Attempts by Employers As Well As Federal and State Governments to Rein In Health Care Costs Have Largely Failed to Achieve Their Objectives ...........................................................................................................79

Two Elements That Drive Healthy Markets—Transparency and Choice—Are Woefully Lacking in the U.S. Health Care System .....................................80

The Prevailing Reimbursement System in Health Care Encourages Higher Volume and Intensity of Services Instead of Providing the Most Effective Treatments As Efficiently As Possible ...............................................................81

EMBARGOED

xvii


1. The executive, legislative, and judicial branches of the federal government, as well as state governments, need to move as quickly as possible to resolve the uncertainties over the future of the health care system in America. ................................................................. 82

2. The health care supply chain must accept responsibility for reengineering itself to improve quality and reduce the cost of health care in the United States for both employers and employees in order to make American products and services more competitive. .................................................................................................. 82

3. The cost, price, and quality of health care in the United States must be far more transparent. ............................................................................. 84

4. The ability of multi-state employers to design and maintain health care plans that meet their unique needs must be maintained. ............................................................................................................ 84

VI. CONCLUSION ................................................................................................................... 85

VII. APPENDIX ...................................................................................................................... 857

VIII. ENDNOTES ................................................................................................................... 879

EMBARGOED

EMBARGOED

xix

Foreword

When you think about national security, it is natural to think first about the defense of our nation. However, a key element of national security is financial security which is rooted in the assumption that America is at work.

I think we can all agree that we are in changing times. Whether we refer to a flattening world, a revolution of digitization, or the evolution of the emerging BRIC markets, nothing will be the same ever again.

This is one of those moments where you can look at the state of American jobs and know things are in flux, but it can be through the lens of a glass half full or a glass half empty. I have been fortunate to have participated in this important project from its inception and have learned a lot in the process. In my opinion, this is a glass half full moment, but we need to embrace this important workplace change. There is a popular phrase coined in times that we need to pull together—this is not an issue of red or blue, it is a moment for red, white and blue. America is in this together, and we must come together to pull ourselves forward.

Think of the jobs gained and lost because of the Internet. Think of the jobs gained and lost because of the PC, and then laptops, and then Netbooks, and then the iPad. Think of the jobs gained and lost because of the Kindle, or the iPod, or Netflix. Growing up in the 1960s, Made in China meant cheap, and not very good. Today Made in China often means low cost and high quality. This is our new world.

This report makes a compelling argument for change. Also, based on the input of over 300 chief human resources officers, it lays out a number of significant ideas for change. Some are easy, some are harder, more structural, and will take a while. All are doable.

The key point is that there will be jobs, good jobs, in the 21st Century. However, most of our workplace rules, educational standards, and employment norms are rooted in the 20th Century. We need to come together—all of us—industry, education, government, labor to make the leap to the new century. A competitive and trained American workforce is of national interest.

April 2011 Michael L. Davis Chair, 21st Century HR Policy Project, HR Policy Association, and Senior Vice President,

Global Human Resources, General Mills

EMBARGOED

EMBARGOED

xxi

Introduction

Jobs.

It is the most significant domestic policy issue facing the United States today—how to create and sustain quality employment opportunities in the United States in the new, hyper-competitive global economy of the 21st century. Americans want fulfilling jobs that provide security, jobs that hold the promise of a better future, jobs that can triumph over the economic forces that now move globally at the click of a computer key.

We are pleased that the federal government now appears to be willing to address this issue. In a recent speech President Obama said:

We need to out-innovate, out-educate, and out-build our competitors. We need an economy that’s based not on what we consume and borrow from other nations, but what we make and sell around the world. We need to make America the best place to do business.1

We could not agree more. In the new global economy powered by technology and tightly woven together by the Internet, America and American workers are now competing on a world stage. A company’s research and development center can be in one place, and then the results of that research can be instantly transferred and utilized anywhere on earth. Engineering graduates from American universities are now competing for the same jobs with graduates from excellent universities in India, Singapore, and other emerging nations. Jobs characterized by low-skilled repetitive tasks that once paid well in America are being replaced at an increasingly rapid rate by technology that can do the same job at a fraction of the cost. The jobs issues for policy makers in America, therefore, are many and include such questions as:

• How do we encourage companies to locate facilities and the jobs they create in the United States?

• How can American graduates compete for jobs that can be located in dozens of different countries around the globe?

• What jobs are vanishing in America, what are the new career paths being created by the 21st century economy and what can the country do to support those new career paths?

• What economic, education, and regulatory environments will promote jobs in America?

• How can America compete and win on the global economic stage?

EMBARGOED

Blueprint for Jobs Introduction

xxii

With this report, HR Policy Association provides the perspective of the chief human resource officers of more than 300 of the largest companies doing business in the United States today on America’s jobs challenges and the human capital policy changes needed to make the President’s dream, and our dream, a reality.

As the top human resource professionals for their companies, HR Policy Association members are responsible for hiring, training, promotion, and succession for our organizations. Collectively, the Association’s members employ more than 20 million people worldwide, and in the United States they employ more than ten million Americans, nearly nine percent of the private sector workforce. Most HR Policy Association members operate globally, and their experience with hiring, training, assessing, and promoting people in virtually every region of the world gives them an excellent perspective regarding the strengths and weaknesses of the American employment system. Simply put, HR Policy Association members are in the best possible position to understand how to expand long-term employment opportunities in the private sector in the United States.

The information and recommendations made in this report are the product of two years of discussions, surveys, and interviews with HR Policy Association members. These occurred in small focus groups, larger membership meetings, conference calls, and one-on-one sessions with the most senior human resource executives in more than 250 companies. The report is not the independent work product of the Association’s staff nor any consultant or outside organization; rather, the Blueprint channels the thinking of chief HR officers regarding making America more competitive and stimulating job growth in the U.S. For example, the following are the responses of the membership to a survey conducted in March of 2011.

What steps could the U.S. Government take that would result in your company hiring more employees in America over the next 3 years than you currently expect to hire? (Please select no more than five):

51% Create a less adversarial, more sensible regulatory environment

47% Provide certainty regarding government regulatory and enforcement requirements

38% Reform the corporate income tax system and significantly lower the rate

34% Make significant policy changes to lower health care costs

31% Increase the supply of qualified workers by improving the U.S. education system and focusing job training on business needs

23% Reduce the amount/costs of employment litigation

21% Nothing, employment levels are driven by economic conditions and business opportunities

19% Reduce government spending and debt

12% Enact immigration reform

11% Increase government spending on research and development

7% Enact all pending free trade agreements and aggressively pursue more

4% Increase government spending on infrastructure such as high-speed rail, high-speed internet, and repairing crumbling roads and bridges

2% Promote green jobs

7% Other

EMBARGOED


xxiii

This paper has five sections which include a series of detailed recommendations regarding the changes needed in workforce development, education and training, immigration, and benefits policy to restore America’s competitiveness.

Section I, “The New Economic, Demographic, and Social Realities Facing the United States: A Global Economy Powered By Technology and Intelligence,” describes the fundamentally different global economy in which the United States is now operating and will continue to operate for many years to come, and the implications of this new economic order for students, jobseekers, employees, educators, and government policymakers, among others.

Each of the report’s remaining sections provides background regarding the topic of that particular section and then lists a series of specific recommendations.

Section II, “Developing the Necessary Talent To Staff the Workforce of the New Global Technology Economy,” calls for a fundamentally different way of approaching how America develops the skills it needs to produce and sustain quality employment opportunities. In it, we encourage employers, educators, and government policymakers to become far better coordinated in the deployment of their resources to create lasting employment opportunities. Our members believe that in the dynamic economy of the 21st century, there needs to be a fundamental restructuring of the way in which employers interact with the education community as well as government training and education policymakers, such that all three sectors are working together to create the conditions necessary to promote job growth and employment security.

Section III, “Attracting the World’s Top Talent to America and Retaining It,” argues that our immigration laws and regulations are badly out of step with 21st century realities and have a debilitating effect on the American economy and its global competitiveness. This section recommends that instead of turning away skilled foreign workers in critical industries, or discarding the fruits of our universities by sending brilliant foreign graduates home, America should capture this talent. Among our proposed solutions, we call for providing a path to U.S. citizenship for any foreign student who obtains an advanced degree in the U.S. in the STEM disciplines; the development of a market-based system for awarding visas, instead of imposing new restrictions on them that could only damper the economic recovery; and the implementation of more flexible mechanisms for allowing professionals to transfer from temporary to permanent status, irrespective of quotas or their original nationality.

EMBARGOED


xxiv

Section IV, “Creating a Regulatory Environment That Encourages Innovation and Job Growth: The Need to Replace Conflict with Consensus to Achieve Competitiveness,” proposes a fundamentally different way of approaching workplace regulation—one that replaces our current system of conflict-based policy development with a structure based on consensus. It also discusses why regulatory policy designed for the industrial age of manual labor makes so little sense in today’s digital age. It seeks to redefine what is considered success in the development of employment regulation policy, which is far too focused on the extent to which the government in power saddles employers with additional administrative requirements, compliance obligations, mandates, and liability.

Section V, “Reining In U.S. Health Care Costs To Encourage Employment Growth: A Challenge to the Health Care Supply Chain,” discusses the impact of current health care trends on the willingness of employers to expand employment opportunities and locate work in the United States. It issues a call to action to the health care supply chain and government policy makers to address America’s labor costs—among the highest of any nation—which are driven in large part by health care costs.

In this paper, we have chosen to accentuate the positive and to encourage breakthrough thinking to figure out the best path forward. Each day we read about another organization, another commentator, another political figure describing how the course the nation is on is leading to a declining standard of living; we hear that our children will be worse off than their parents and that the American dream will be a distant memory. This presumes that America is not able to recognize the situation it is in, change course accordingly, and pull toward common objectives to restore its competitiveness. There is no question that the United States is being severely challenged by the economic forces sweeping the globe. We see the impact of these forces in chronic high unemployment, slow economic growth, and the reluctance among employers to hire new workers in the United States or expand stateside operations in the midst of this uncertainty. However, America has experienced tremendous challenges since forming itself out of a wilderness three centuries ago to become the dominant economic and military power it is today, and there is no reason it cannot continue to act creatively to meet today’s challenges. This paper seeks to lay out the specific changes the nation’s senior human resource executives believe are necessary to staff the competitive American workforce of the 21st century and to create the good jobs for which everyone is looking.

EMBARGOED


xxv

In preparing this paper we have drawn on a variety of sources, primarily our own experience, captured in membership surveys, focus groups, committee work, and one-on-one discussions with the Association’s 300+ member companies. There is one source, however, which deserves special mention—Rising Above The Gathering Storm, Revisited: Rapidly Approaching Category 5, by the National Academies of Sciences.2 The information, opinions, and recommendations in that paper track very closely the thinking of the Association on the critical domestic policy issues of the day. It addresses a wide range of current economic issues, builds on the human capital strategy subjects it addresses and offers a set of more detailed recommendations in that subject area.

April, 2011 Jeffrey C. McGuiness President & CEO HR Policy Association Washington, DC

EMBARGOED

EMBARGOED

xxvii

Executive Summary

In April of 2011, unemployment in the United States was finally on a downward trend, and the economy appeared to be pulling itself out of the deepest recession since the Great Depression. Some would say that policymakers can breathe easy now, and that the jobs situation in America will heal itself if the nation has the patience to continue along its current the path.

We could not disagree more.

There is a story behind the monthly jobs report that does not get the attention it deserves: With each passing recession, America has an increasingly difficult time recovering. Some may remember the deep recession of 1981 which, prior to the recession America just experienced, was the most difficult economic period in United States since the 1930s. It took two years and four months for the economy to recover all of the jobs lost during the 1981 recession. However, we are now facing a situation in which it will take at least seven years, until 2015, to recover all the jobs lost in the recession of 2008-2009.

The magnitude of what occurred during the recent recession is staggering. There were as many jobs lost in the last recession as there were in the previous four recessions. And as America struggles to regain all those lost jobs, the population will still be growing. In fact, in 2008, the total U.S. population was just over 304 million people. By 2015, the population is forecasted to be over 325 million, and of that number, 163 million are expected to be in the job market as compared with 154 million today. Where will those additional job seekers find work?

We do not believe that America’s current economic situation is a business cycle in which patience and government stimulus can be relied on exclusively to bring down unemployment to acceptable levels. We believe America is experiencing fundamental long-term structural economic changes that require long-term policy changes to restore the nation’s competitiveness.

The 21st century has brought with it new global economic forces that are transforming the way work is done, where it is done, by whom it is done, and the skills needed to get it done. America is no longer an economic fortress, impervious to forces outside its borders as it was following World War II. It now competes with myriad economic powers throughout the world from nations whose citizens desperately want the same standard of living and security that Americans have

EMBARGOED

Blueprint for Jobs Executive Summary

xxviii

enjoyed since the close of that terrible conflict. These emerging economic powerhouses want innovation, investment, and growth to produce jobs for their citizens, and they are doing remarkably well marshalling their employers, educators, and government resources to achieve these objectives.

Caught in the middle of this transformation is the American worker, who is discovering that the skills and infrastructure that enabled success in the 20th century have fundamentally changed in this century. Technology is being deployed at increasingly rapid rates, resulting in high productivity and less expensive products and services, but also lower employment levels. New products and services are born and then become obsolete in a matter of months, and the skills needed to produce, market, service, and sell them are in constant evolution. Americans are not being educated in sufficient numbers to meet the demands of today’s highly technical work processes and products. Labor costs in the U.S. are high and going higher, driven in large part by health care costs that show no signs of abating despite countless efforts to rein them in. Government places a very high priority on regulatory compliance and enforcement but too little on long-term job creation. Most importantly, there is no coordinated commitment by all the various institutions involved in generating economic opportunity—employers, educators, government, and employees—to take the steps necessary to restore America’s competitiveness and provide employment security.

The members of HR Policy Association are the chief human resource officers of more than 300 of the largest employers in the United States. They are responsible for employing more than ten million Americans. Most of their companies operate globally, and they have firsthand knowledge of government polices and economic systems that work as well as those that fail to provide employment security and job growth for their citizens. This report, Blueprint for Jobs in the 21st Century, is their vision of the changes needed in American public policy and the public’s thinking to restore job growth and competitiveness in the United States.

Short of reading the entire paper, the reader will find a more detailed discussion of our views of the current situation, together with our specific recommendations, in the comprehensive table of contents beginning at page vii. The following is a summary of those recommendations whereby America would make a national commitment to grow jobs in the 21st century by fostering innovation, ensuring the necessary talent is being developed to take advantage of that innovation, and capitalizing on the economic opportunities thus created.

EMBARGOED


xxix

1. Policymakers and the public must recognize the new economic realities, namely that:

a. The economic order of the 20th century has fundamentally changed;

b. Technology will continue to transform all sectors of both the American and global economy; and

c. The United States now competes on a global stage for resources, investment, and jobs against other countries whose citizens want and are working hard to achieve the same quality of life that Americans enjoy.

2. The American education system must do more to provide America’s workers with the education, training, and skill development essential for success in the new 21st century workplace.

3. America’s students and workers need a much deeper understanding of what is necessary to achieve successful careers in the new global economy.

4. The advancement of science, technology, engineering and mathematics (STEM) skills must become one of America’s highest domestic policy priorities.

5. America needs to attract and retain the best talent, both domestically and globally, in order to ensure that the U.S. is an engine of innovation and job growth.

6. Industrial-age employment laws and regulations being strictly enforced in the information/digital age need to be overhauled by using mechanisms to achieve consensus among stakeholders to establish a contemporary regulatory environment.

7. The health care supply chain in the United States must reengineer itself to establish a stable health care system that provides high quality care at affordable prices.

8. For America to thrive in the 21st century global economy, employers, educators, and government must join forces to create the conditions necessary for American workers to compete effectively on the global stage.

To provide leadership within the federal government for this agenda, we would encourage the White House to establish a permanent Office of Job Growth. Its director would report directly to the President, and it would be staffed by those with actual experience in hiring and developing talent in private sector organizations and creating employment opportunities in that sector. There has never been a coordinated effort by the federal government to marshal the billions of dollars spent on all the various education, training, and

EMBARGOED


xxx

economic development activities scattered throughout the far reaches of federal agencies to ensure employment growth. The Office of Job Growth’s mandate would be to make job creation a central priority of the U.S. government and demonstrate the government’s commitment to doing so.

Finally, this paper does not address a number of important policy options for creating jobs that are typically the purview of other corporate officers; namely corporate tax reform, trade policy, energy policy, and payroll tax policy. Each of these policy issues has the potential to significantly impact job creation in the United States, and a variety of groups have already made significant reform recommendations. For example, the Business Roundtable, the President’s Economic Recovery Advisory Board, the U.S. Chamber of Commerce, the Treasury Department, the National Commission on Fiscal Responsibility and Reform, as well as a variety of think tanks, have all published papers and reports on corporate tax reform and its impact on job creation. There is no need for us to repeat these reports here. Instead, this paper makes specific recommendations on issues that draw the attention of chief human resource officers on a daily basis. A sampling of these other reports can be found in the Appendix on page 87.

We invite you to join us in meeting the challenges of the 21st century workforce agenda by helping us achieve the recommendations made in our Blueprint for Jobs in the 21st Century. Throughout its history, America time and again has faced and overcome what seemed insurmountable odds. There is no reason America cannot meet the challenges it faces today if all citizens and institutions make the collective effort necessary to restore America’s competitiveness. We look forward to the discussion.

EMBARGOED

©2011 HR Policy Association 1

I. The New Economic, Demographic, and

Social Realities Facing the United States: A Global Economy Powered By Technology and Intelligence

[Americans] are a bit too pessimistic….I’ve been here for a few days and everybody is talking about how bad it is. America still leads the world in technology. You lead the world in the creativity of your scientists. This is a magnet for people coming from all over the world to be here. And what you have got to concentrate on is not just the deficit. You have got to concentrate on growth: getting growth, getting jobs, using your technology, selling exports to the rest of the world, showing the American ingenuity at work in practice. You have some of the best products that are available, and everyone around the world wants to buy them….You have got to be more optimistic.

Gordon Brown, Former Prime Minister of Great Britain 3

In the summer of 2010, Amazon announced that its latest Kindle could download and store up to 3,500 books.4 In comparison, when the British burned the American Capitol and Library of Congress in 1814, Thomas Jefferson sold Congress his library—the largest personal collection of books in the United States at 6,487 volumes—as a replacement..5 In other words, two Kindles could have held the entire Library of Congress in 1814, leaving room for 500 more books. Put differently, 3,500 books is roughly eight times the number of books that the average American adult will read in his or her lifetime.6

In just a few years, the rise of e-readers has made much of the work traditionally associated with publishing books, newspapers, and magazines obsolete. The Kindle and other e-readers are replacing book stores, printing presses, and printing companies; all the materials such as ink, paper, fabric, and glue that go into book printing; the trucking companies that transport all of the materials used in the printing process and the final product from that process; and all the workers associated with all the activities of traditional book printing, such as publishing, warehousing, and operating retail stores. In

EMBARGOED

Blueprint for Jobs The New Economic, Demographic, and Social Realities Facing the U.S.


January of 2011, Amazon’s sales of digital books officially overtook sales of print books for the first time ever.7

The Kindle story is a metaphor for the 21st century economy and the wrenching changes the United States is experiencing. Today, America faces extraordinarily high levels of unemployment, increasingly long periods of significant joblessness, and ever greater difficulties generating new jobs. There are many reasons for these trends, but a major contributing factor is technology. Over the past two decades, constant leaps in technology have enabled companies to do much more with many fewer people. At the same time, technology has allowed an increasing amount of work to be done anywhere in the globe and moved with the click of a computer key.

Technology and Innovation Are Transforming the Way Work Is Done, Where It Is Done, and the Skills Needed To Get It Done

Although an economy that is rapidly innovating can experience economic distress in the short term for those companies and workers that have difficulty adapting, over the long term advances in technology simultaneously improve living standards and create new employment opportunities.

We often hear news stories of plant closings and job loss, but we hear too little about the emergence of innovative businesses that are meeting new needs. The meteoric rise of UPS over the past century is a good example. Started as a bicycle messenger service delivering telegraphs and lunch around Seattle in 1907,8 today UPS’ global ground and air shipping transports nearly four billion packages annually and employs about 330,600 people in the U.S. and an additional 70,000 globally.9 At the start of the 1980s, UPS had trucking and contracted air services covering 31 states, with sales of roughly $550 million.10 By the end of the decade, after creating its own FAA-approved airline service in little over a year and introducing an innovative new parcel tracking system made possible by developments in computing technology, UPS was able to offer delivery services to the entire U.S. and as well as six European nations.11 That meant transporting 2.2 billion packages in 1988, to the tune of $11 billion in annual sales.12 No airline has ever been created so quickly.

EMBARGOED



Technological innovation has already driven the United States through two major transformations. In 1790, for example, the U.S. economy was agrarian, and 90 percent of the population was largely employed in agriculture.13 That percentage dropped dramatically when the industrial revolution arrived. Today only 1.6 percent of Americans work in agriculture, yet the U.S. remains one of the world’s largest producers of agricultural products. 14 The same transformation has occurred more recently in manufacturing. The percentage of Americans employed in manufacturing has shrunk from 21 percent in 1978 to only 8.9 percent today.15 Yet the United States remains the world’s largest manufacturer in terms of the value of goods produced.16

Amazon opened its online store in July of 1995, and by 2010 it had 33,700 full-time and part-time employees, with annual revenues of $34.2 billion.17 The wireless communications industry that revolutionized the production and distribution side of the publishing business, started in Chicago in 1983, today employs roughly 190,000 people.18

The powerful new force coursing through the global economy right now to support these new industries is technology, and it is fundamentally transforming the way work is done, where it is done, and the skills needed to get it done. In America, it is reshaping careers and career expectations. It is forcing the nation to rethink the basic elements of a successful economy and what society needs to achieve to be both secure and competitive.

The Use of Technology to Improve Productivity Is a Permanent Business Strategy Creating Both Positive and Negative Impacts on Employment Levels

As the industrial age gives way to the digital age, the U.S. is again going through a structural shift. The introduction of massive amounts of technology into the workforce is increasing productivity at rates not seen since the Internet boom of the late 1990s . As a result, companies today can do far more with far fewer employees than they could 20 or 30 years ago.

For example, from 1983 to 1993, the growth of ATM machines reduced the number of bank tellers by 179,000 employees, or 37 percent of their workforce.19 Between 1983 and 2000, office automation cut the number of secretaries and typists that were needed in half.20 From 1990 to 2004, the number of industrial robots in the United States more than doubled,21 and the amount of time required to assemble a car decreased by 18.3 percent from 1998 to 2004.22

Because of the introduction of massive amounts of

technology into the workforce, productivity is

increasing at rates not seen since the Internet boom of

the late 1990s, and business efforts to contain costs and

remain nimble using technology have become a

permanent business strategy.

EMBARGOED



A view of the shop floor of a Hyundai automobile plant in Alabama. Note the number of people and the amount of robotics.

Another major source of productivity growth comes from steps companies take to increase efficiency. With each recession, companies shift their focus from growth to rigorously reviewing their existing assets and operations. Often this results in spinning off or closing down marginal operations, reducing the size of workforces, and upgrading and deploying technology. The result is more efficient operations staffed with fewer people. Hiring typically resumes as the economy improves, but many companies find they need fewer employees for their operations.

Also, when new manufacturing operations are created from scratch, they often are built to maximize the use of technology and minimize labor costs, including the number of employees. Nevertheless, efficiency gains, although painful in the short term, are important in the long run because they usually lead to lower costs and lower prices, providing households with more money to spend elsewhere and businesses with more resources to invest in new activities that are, in turn, a source of growth and jobs for the economy overall.

EMBARGOED



CHART 1

Corporations See a World of Opportunities and Deploy Assets Globally To Take Advantage of Them, Going Wherever Investments Create Good Returns

In addition to the technological transformation of the American economy—and perhaps because of it—another key economic reality overlaying the jobs issue is globalization. There is an important distinction between the recessions of the mid-to-late 20th century and the latest recession. In recessions such as those of 1974 and 1981, the number of other nations constituting major economic powers was far fewer than today. Corporations had little choice but to continue deploying resources in the United States and wait until economic conditions improved.

While the U.S. continues to struggle in the aftermath of its recession, China, India, and other Asian countries have vibrant economies with robust recoveries fully underway, and strong middle classes are emerging in those nations with higher levels of education. A recent International Monetary Fund report estimates that emerging markets will see an annual economic growth rate of 6.5 percent in 2011 and 2012 compared to a much smaller rate of 2.5 percent for more mature economies, such as the United States.23

Companies, both U.S. and foreign, are deploying resources in emerging

markets to increase their sales revenue more rapidly

than they are able to by investing in more

mature economies.

EMBARGOED



Moreover, Brazil, Russia, India, and China have over 41 percent of the world’s population,24 and produce 25 percent of the world’s output,25 and Asia’s middle class is the fastest growing population group in the world.26 One Asian Development Bank report predicts that within the next two decades, another 800 million people in Asia will move from poverty into the middle class.27 As more Asian households gain disposable income, a substantial share will likely be spent on food, apparel, household goods, and personal products, and the producers and retailers of these products likely will reap considerable economic rewards. For example, in 2008, more cars were made in China and purchased by Chinese than were made and purchased in the United States.28 China Mobile is also the world’s largest individual cell phone operator with more than 500 million mobile phone subscribers.29

Companies, both U.S. and foreign, are deploying resources in these emerging markets to increase their sales more rapidly than they are able to by investing in more mature economies.

Emerging economies like China, India, Brazil, Malaysia, Russia, and Eastern Europe are creating new markets for global corporations, and companies are responding by building plants and hiring employees close to these new market opportunities. Just as Toyota, Honda, BMW, and Daimler built auto manufacturing capabilities in the United States, American corporations have expanded their own operations beyond U.S. borders.

CHART 2

EMBARGOED



Where major manufacturers launch new operations, their suppliers quickly follow to take advantage of the opportunities. For example, American auto paint manufacturers are building factories in China to supply Chinese auto manufacturers who are taking advantage of the booming market for cars in China.

If there is less economic growth in the United States, then it will have less investment and slower job growth. This is significant because according to a recent survey, approximately 57 percent of the HR Policy Association membership sees its greatest opportunity for growth in the next five years coming from markets outside the United States. Only seven percent believes its growth will come primarily from U.S. operations. They see the United States as capable of growing at no more than one to two percent a year over the next decade while the emerging economies are capable of five to ten percent growth a year.

As American companies seek to take advantage of business opportunities globally, the percentage of their workforce employed in operations beyond the borders of the U.S. is also increasing, and that percentage is expected to continue to grow during the next five years. Half the Association membership sees the percentage of its workforce outside the United States expanding and the percentage of its employees based in the U.S. declining.30 That growth is coming primarily from South and East Asia and South America, which want growth and are creating environments that attract resources and investments. Among industrialized nations, the least attractive place for doing business is in the countries of Western Europe, in part because of their rigid employment laws and practices as well as high wage structures.

It is important to remember, however, that the deployment of resources by American corporations to take advantage of global opportunities is not a one-way street. Foreign companies are investing heavily in the United States and have been doing so for years, and they are an important source of employment and economic growth. The rapid growth of manufacturers such as Honda, Nissan, BMW, Hyundai, and Kia together with all the suppliers that they attract offers just one example. Since the early 1980s, the United States has received more capital from foreign investors than U.S. residents have invested abroad.31 The total amount of foreign direct investment in the economy has increased eight-fold, nearly doubling as a share of U.S. gross domestic product from 3.4 percent to 6.4 percent.32 From 1988 to 2008, the latest year for which data are available, foreign firms increased the number of Americans they employed from 3.1 million to 5.6 million, an 80 percent increase, and they have a presence in every state in the Union (see chart below).33 Moreover, foreign-owned firms

EMBARGOED



paid wages on average 14 percent higher than all U.S. manufacturing firms,34 spent $35 billion on research and development or 14 percent of the U.S. total, and they accounted for 19 percent of U.S. exports.35

CHART 3

Labor Costs in the United States Are Relatively High Compared to Many of America’s Economic Competitors

According to the Bureau of Labor Statistics, hourly compensation costs for manufacturing in the United States in 2009 were higher than 22 other countries, including China and India, but lower than 12 European countries and Australia.36

The high cost of providing health care benefits is one reason that compensation costs in the U.S. are so much higher than many other countries. Employer costs for health care exceed the costs for life insurance, paid leave, and all legally required benefits such as Social Security and unemployment.37 One RAND study found that faster growth in health care costs has an adverse impact on employment in those industries with the highest percentages of employees with employer-sponsored health benefits (e.g., manufacturing, telecommunications, education, and finance).38

EMBARGOED



CHART 4

There is no question that for some companies, the opportunity to

take advantage of lower labor costs in other countries is important, especially when producing goods and services for consumers in those countries. Companies in the United States are no longer competing with each other; they are competing on a truly global stage. Over time, labor cost differences do narrow as emerging economies become more mature; they have already for Japan and Singapore, and are beginning to narrow even in China. But there will likely be a significant negative difference between U.S. labor costs and those of its foreign competitors for decades.

The Cost and Administrative Burden of Regulatory Compliance for American Employers is Too High, Yet Policy Makers Show Little Interest in Changing That Trend

According to the Small Business Administration, the total cost of federal regulations alone on business was $970 billion in 2008, or $8,068 per employee.39 The cost per employee for the typical U.S. firm equals 19 percent of payroll expenditures, or twice the amount of the employer contribution for Social Security and Medicare.40 Moreover, this does not include the regulatory costs imposed by state and local governments, which were estimated to cost $120 billion in California alone.41

EMBARGOED



For firms with fewer than 20 employees, federal regulations cost $10,585 per employee per year.42 The cost drops to $7,454 in medium-sized firms because of greater economies of scale, and $7,755 in large firms with 500 or more employees.43

From 2004-2008, total federal regulator costs increased by $43 billion, and with the passage of the Protection and Affordable Care Act in 2010, they are likely to increase even faster.44 Although complete deregulation of the labor market is neither desirable nor necessary to improve employment growth, President Obama said in a Wall Street Journal op-ed in January 2011, “Sometimes ... rules have gotten out of balance, placing unreasonable burdens on business—burdens that have stifled innovation and have had a chilling effect on growth and jobs,” and a vigorous review is needed.45 The President then issued Executive Order 13563, instituting “a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive.” 46 The question is whether the administration will embrace the President’s initiatives. For example, in the employment context, the reaction of the Secretary of Labor and senior Labor Department officials has been to increase enforcement activity and take a series of steps to frustrate the intent of the executive order.

CHART 5

EMBARGOED



Despite these high compliance costs, the United States still ranks very high on measures of labor market and business freedom compared to other countries. For example, the U.S. ranks third on an index that measures various aspects of the legal and regulatory framework of a country’s labor market, that includes data on regulations concerning minimum wages, laws inhibiting layoffs, severance requirements, and measurable regulatory burdens on hiring and hours.47 The U.S. also ranks 13th on an index that measures the overall regulatory burden on the ability to start, operate, and close a business.48 However, the path the federal government is on regarding regulation and compliance activity is likely to result in the U.S. dropping in each of those rankings over time.

The World is Competing Hard Against the U.S., Yet Job Creation is Not a Priority of the Federal Government

In an interview last year, Paul Otellini, CEO of Intel, summed up the difference between investing in the U.S. and investing in a high-growth developing market saying:

A new semiconductor factory at world scale built from scratch is about $4.5 billion — in the United States. If I build that factory in almost any other country in the world, where they have significant incentive programs, I could save $1 billion.49

Countries such as China, India, Brazil, and Singapore are aggressively seeking foreign investment. They want to be huge global players who attract investment and resources into their countries so that more business will be done there and more job growth will occur. These countries ensure a strong level of cooperation between academic institutions and the business community to ensure that their schools and universities graduate highly motivated workers with the skills needed by employers. They are focused on creating economic opportunities, and they coordinate the resources of government, educators, and business to attract the necessary investment.

Even several European countries have taken some action to remove labor-related impediments and increase jobs since 2005, including reducing disincentives to work at older ages, decreasing labor taxes, and improving the design of disability and sickness benefits and other labor market policies.50

On the other hand, the United States for the past two years has been absorbed in cranking up enforcement of existing regulations, many of them woefully out of date, while layering on new obligations in the midst of a high unemployment and a stagnant economy—obligations that will provide further disincentives for employers to expand their American operations. In many rapidly growing

EMBARGOED



economies, instead of viewing employers as rapacious and under-regulated—as do agencies such as the U.S. Department of Labor—governments treat them as the engines of job creation. In the United States, it is front page news when the government signals it will take steps to work with the business community to grow economic opportunity. In more dynamic economies, it is the norm, not the exception.

America Is Taking Longer to Recover After Each New Recession, With Job Creation Completely Collapsing During the Most Recent Recession

During its history, the United States has experienced numerous recessions resulting in high unemployment, but in recent decades it is taking increasingly longer for jobs to recover following each recession. As the chart below shows, with each recession over the past 40 years the economy has had a progressively more difficult time generating the energy to recover the jobs that were lost.

CHART 6

EMBARGOED



For example, it took 28 months for the economy to recover all of the jobs lost during the deep recession of 1981.51 In 2001, it took more than 48 months to recover from a downturn that was nowhere near as severe.52 Following the recession of 2008 and 2009, Federal Reserve Board Chairman Ben Bernanke recently estimated that “it could take four to five more years for the job market to normalize fully.”53 This would mean that it will likely take a total of seven years before the economy recovers all of the jobs lost at the end of the last decade, i.e. sometime in 2015.

CHART 7

Part of this is due to the large number of jobs lost in the last

recession (8.8 million), but some of it is due to fundamental/structural changes that have occurred in the U.S. and global economy over the past 30 years. As the chart below shows, the new hire rate remains near its recession lows more than 18 months into the current recovery and well below the level it was in 2002 and 2003 after the recession in 2001.

EMBARGOED



CHART 8

The Lack of Focus by Policy Makers in America on Job Creation Prolongs Unemployment and Erodes Key Workplace Skills

Weak job creation has increased the number of Americans who have given up looking for work and those who are working part-time because there are no full-time jobs. Taking into account under-employed Americans, the unemployment rate in the United States was actually a record 16.7 percent in 2010.54 Further, the average duration of unemployment was a record-high 33 weeks in 2010, twice the average high of 16.6 weeks for previous recessions.55 Moreover, in 2010, the labor force participation rate dropped to its lowest level in 26 years as 3.1 million Americans gave up looking for work.56

As Chairman Bernanke recently said, “Long-term unemployment not only imposes exceptional hardships on the jobless and their families, but it also erodes the skills of those workers and may inflict lasting damage on their employment and earnings prospects.”57

EMBARGOED



CHART 9

The New Jobs in America Will Be in Service, Professional, and Related Occupations Requiring More Education and Skilled Training; Goods-Producing Occupations Will Have Little To No Growth

According to the Bureau of Labor Statistics (BLS), “more than half of the new jobs will be in professional and related occupations, and service occupations.”58 And as the boomers retire, the number of job vacancies is projected to be more than twice those created by economic growth alone.59 In a report forecasting employment growth from 2008 to 2018 the BLS writes:

Projected employment growth is concentrated in the service-providing sector, continuing a long-term shift from the goods-producing sector of the economy. From 2008 to 2018, service-providing industries are projected to add 14.6 million jobs, or 96 percent of the increase in total employment. The two industry sectors expected to have the largest employment growth are professional and business services (4.2 million) and health care and social assistance (4.0 million)…[In contrast,] by 2018, the goods-producing sector is expected to account for 12.9 percent of total jobs, down from 17.3 percent in 1998 and 14.2 percent in 2008… Production occupations are also projected to decline.60

EMBARGOED



Post-secondary education will play an increasingly important role in the new economy. Those professions that typically require higher education of some kind are projected to comprise almost half of all new jobs from 2008 to 2018.61 And the most rapid growth will be in professions that require an associate degree.62 Overall, the BLS expects that the fastest growing occupations will be registered nurses (582,000), home health aides (461,000) and customer service representatives (400,000).63 Although a high school diploma and “short- or moderate-term on-the-job training” are all that will be required for 17 of the 30 occupations with the largest employment growth, in terms of percent growth, almost one-half of the fastest growing occupations require a four-year college degree or higher.64

CHART 10

History has shown that there is a direct correlation between the

amount of education and the potential for being employed; namely, that the more educated a person is, the less likely he or she will be without a job, as shown by the chart above.65 Further, in the United States, developing and maintaining expertise in almost any field is one of the keys to success. However, one trend is very clear: the relative cost of dropping out of high school has increased in terms of unemployment risk.66 As technology has changed the occupational and industrial structure of the labor market, the demand for routine cognitive work typically found in many middle-skilled, yet well-paying, manufacturing jobs has significantly decreased.67 Therefore, increasingly higher levels of educational attainment will be required for the quality jobs of the 21st century.

EMBARGOED



The Future American Workforce Will Be Significantly Older and More Diverse

Beyond technology, there is another powerful force at work in our economy— demographic change. Three major demographic trends—slowing labor force growth, aging, and increasing diversity—will continue to have a considerable impact on the profile of the U.S. workforce in the foreseeable future.

Whereas the U.S. economy benefitted from a fast growing labor pool from the 1970s through the 1990s, since 2000 the workforce has grown more slowly—a trend that is projected to continue, and will likely affect U.S. economic growth over the next decade.68

With the aging of the baby-boom generation, older employees are expected to make up a much larger share of the labor force in the future. The Baby-Boom generation was born from 1946 to 1964.69 In 2018, the last of the boomers (those born in 1964) will be 54 years old. The aging of the labor force also will dramatically lower the overall labor force participation rate and the growth of the labor force as 78 million members of the baby-boom generation will likely retire between 2011 and 2029.70

A specific concern for employers is that for many of these jobs, particularly in the skilled trades and engineering fields, there are relatively few people in the pipeline who will be able to step into the shoes of these retirees without considerable training. According to Aviation Week, larger companies in the aerospace and defense industry will have 40 percent of their workforce eligible to retire in 2014, and the expected exodus is causing companies to offer retirement programs that will ease the transition.71

U.S. companies need to be able to retain retirement-eligible employees, who otherwise might leave to start drawing their retirement benefits, in order to maintain valuable institutional knowledge and human capital and impart that knowledge onto the next generation of employees.

Recent immigration trends, an increased number of births, and high labor force participation rates by Hispanics and Asians also will significantly increase the share of the workforce held by minorities over the next ten years.72 By 2018, Hispanics are expected to reach more than 29 million in number, composing 17.6 percent of the labor force.73 Although the share of Asians in the labor force is relatively small, the number of Asians has been growing rapidly in the past two decades and will reach more than nine million workers by 2018.74 The African American labor force is projected to continue to have a steady growth of 1.3 percent over the next decade.75

EMBARGOED



Increasing globalization requires more interaction among people from diverse cultures, beliefs, and backgrounds than ever before. People no longer live and work in an insular marketplace; they are now part of a worldwide economy with competition coming from nearly every continent. For this reason, employers need to maximize and capitalize on workplace diversity in order to become more creative and take advantage of every market opportunity.

Technology and Globalization Concentrate Jobs at the Top and Bottom of the Economic Rungs of Modern Economies, Shrinking the Middle

There is another important societal and economic trend that will need to be addressed as part of any long-term solution? Since 1979, employment growth in America appears to be polarizing, with job opportunities increasingly concentrated in relatively high-skill, high-wage jobs at one end, and in low-skill, low wage jobs at the other. Too often this trend is simplistically blamed on corporate greed, and the remedy is seen as penalizing those in high-skill, high wage jobs. We would suggest a more sophisticated analysis is required.

A recent study for the Center for American Progress by David Autor found that from 1979 to 2009, there was rapid employment growth in both high- and low-education jobs while the number of middle-skill jobs stagnated.76 This uneven growth pattern has substantially reduced the share of employment accounted for by middle-skill occupations—sales, office and administrative workers, production workers, and operators.77 In 1979, these occupations accounted for 57.3 percent of employment; by 2009, it had fallen to 45.7 percent.78 American retailers are seeing the same trend and have begun realigning their product offerings in response.

The polarization of employment is not a uniquely American phenomenon; it is widespread across industrialized economies.79 Moreover, this polarization is consistent with findings of the Pew Research Center—that over the past two decades a growing share of the public has come to the view that American society is divided into two groups, the "haves" and the "have-nots."80

According to the Congressional Budget Office, technological innovation and related organizational changes are the key contributors to this job polarization and responsible for most of the increased demand for workers with more education and skills.81 Workers who do not acquire more education and more skills will likely be left behind.

Since the late 1980s, skill-biased technological change has decreased the demand for workers doing routine cognitive work typical of “middle-skilled” jobs and increased the demand for highly

The U.S. can create new employment opportunities by

fostering an environment in which employers,

government, and educators come together to focus their

resources on developing a workforce with the skills

necessary to produce innovation and then

capitalize on the economic opportunities created by that

innovation. EMBARGOED



skilled workers doing more complex/non-routine analysis, evaluation, and decision making. The demand for manual work that must be done in a specific location or that involves interacting with people has been largely unaffected; therefore, technology has had little impact on the demand for workers such as janitors, waiters, and home health aides.82

CBO also concluded that while changing patterns of international trade may also have increased the relative demand for workers with more education, the effect of globalization on wages is inconclusive. But these trends indicate that in order to create jobs, workers who wish to have good-paying, quality jobs will need to have greater abilities to handle more complex tasks. In the future, repetitive, high-paying manual jobs in auto manufacturing, for example, will be few and far between.

However, this does not mean that middle-class job opportunities in the United States are destined to disappear. As noted above, from 2008 to 2018, service-providing industries are projected to add 14.6 million jobs, or 96 percent of the increase in total employment, and over 65 percent of these jobs provide middle-class incomes.83 For example, the number of registered nurses, whose average income is currently $62,450, is expected to grow by 582,000 jobs by 2018. The same is true of elementary school teachers, who earn on average $49,330 and whose numbers should increase by 244,000 jobs over the same period.84 In addition, the numbers of carpenters ($38,940), truck drivers ($37,270), plumbers ($45,650), and paralegals ($46,120) are projected to increase by a combined 548,000 jobs.85 Although no one can be certain what the future will bring, as long as America continues to innovate it will certainly create new industries and a broad spectrum of new job opportunities that will include new middle-class jobs.

In Recent Years Government Job Growth Replaced Private Sector Growth, But the Trend May Be Shifting

Over the past ten years there has been another change in the character of job creation. From January 2001 to February 2011, government employment increased by 6.6 percent, or 1.4 million jobs, while the private sector lost 3.3 million jobs, or 3.3 percent.86 A trend like this is simply unsustainable over time. In fact, the problem with growth in taxpayer-funded employment while private sector jobs are lost has become painfully evident in view of the government budget shortfalls that have emerged. These shortfalls will have to be closed by either raising taxes and/or cutting spending, both of which could threaten the strength and sustainability of the recovery.

EMBARGOED



CHART 11

Despite Challenges, America Has Significant Strengths That Policy Makers Should Capitalize On To Produce Employment Opportunities: The World’s Largest and Most Stable Economy With More Innovative Workers

The trend of companies taking advantage of global opportunities does not mean they have given up on America. Far from it. Despite the rapid growth of Asian countries, the U.S. remains the largest economy in the world and, for many companies, the most profitable. With just 4.5 percent of the world’s population, the United States continues to produce nearly 20 percent of global output.87 Despite its economic problems, the U.S. has a highly stable government compared to many other nations, and its citizens operate under the rule of law, which makes it an attractive place to do business. Further, the nation is protected by the strongest military in the world, making it a highly secure place in which to do business, deploy resources, and make investments. And when a business begins to fail in the United States, there are not as many barriers to addressing the situation as there are in other industrialized countries.

EMBARGOED



CHART 12

Moreover, among companies operating globally, many have a

special appreciation for the unique characteristics of the U.S. workforce and the nation’s employment system. They find Americans more innovative. They see educational systems in countries outside the U.S. placing too much reliance on rote learning. They see other countries not encouraging students to think creatively or engage in integrative thinking. Further, American society is not as hierarchical as other societies, which means Americans are more willing to challenge conventional thinking and approach problems in non-traditional ways. Americans are much more open to new ideas and coming up with innovative solutions. Americans often excel at middle management in comparison with their counterparts in other countries, where their cultures make it more difficult to accept the concept of middle management. Further, while governments at all levels make the U.S. workplace regulatory structure more rigid each decade, it is not yet as rigid or inflexible as other industrialized nations.

Among companies operating globally, many have a special

appreciation for the unique characteristics of the U.S.

workforce… they find Americans more innovative…

much more open to new ideas and coming up with

innovative solutions.

EMBARGOED



To Create Jobs, America Needs a National Commitment To Foster Innovation, Ensure the Necessary Talent is Being Developed, and Then Capitalize on the Economic Opportunities They Create

In his State of the Union address, President Obama said, “We need to out-innovate, out-educate, and out-build the rest of the world. We have to make America the best place on Earth to do business.”88 We agree. Therefore, with capital and technology completely mobile, and with highly attractive economic opportunities beyond the borders of the United States aggressively attracting investment resources, what are the key elements necessary for doing what the President says needs to be done?

Innovation is the key to the economic success of any society, and the world today is replete with examples of countries that made a conscious, national commitment to foster innovation. As described in the Gathering Storm, innovation “commonly consists of being first to acquire new knowledge through leading-edge research; being first to apply that knowledge to create sought-after products and services, often through world-class engineering; and being first to introduce those products and services into the marketplace through extraordinary entrepreneurship.”89 The Gathering Storm goes on to describe the principal ingredients of innovation and competitiveness as “Knowledge Capital, Human Capital and the existence of a creative ‘Ecosystem.’”90

Because routine jobs requiring low skills are moving to areas where costs are lower and the citizenry is well educated, the U.S. can create new employment opportunities by fostering an environment in which employers, government, and educators collectively focus their resources on developing a workforce with the skills necessary to produce innovation and then capitalize on the economic opportunities created. If such a mutually supportive environment exists, it will attract resources and investment, which will create jobs.

The following sections of this paper lay out a set of recommendations that we believe are necessary to strengthen the Human Capital element of the equation in order to create more innovation that will produce lasting American employment opportunities.

In his State of the Union address, President Obama

said, “We need to out-innovate, out-educate, and

out-build the rest of the world. We have to make

America the best place on Earth to do business.”

We agree.

EMBARGOED


II. Developing the Necessary Talent To Staff

the American Workforce of the New Global Economy

Companies evaluate several factors when deciding where to locate or start new business operations. They include such issues as how close the operation needs to be to its customers; the cost of the workforce; the proximity to resources; and the skills of available or potential employees. But there are intangibles as well, one of the most important being how willing those at the location are to become educated, learn new skills, and take on new challenges. If the employees have an entitlement philosophy or an entrenched view of their skill sets that falls short of their actual capabilities, the employer will be inclined to look elsewhere. But if there is a spirit about the location that places a high priority on learning, adaptability, and focus on the mission, that spirit will attract work, investment, and resources.

One of the most important responsibilities of chief human resource officers is to look for that spirit to ensure the company is staffed with the talent it needs to drive innovation and remain competitive wherever it does business. To compete in today’s global marketplace, it is imperative that companies maintain a knowledge-based workforce committed to continual learning and skills development. American policymakers should take note of the significant fact that other countries with dynamic economies set growth as their highest national priority. In doing so, the energy and resources of employers, educators, and government, as well as the workers themselves, often tend to be focused on that objective. All parties work in close collaboration to ensure the necessary talent is being developed to meet changing employer needs. That type of collaboration does not exist in the United States to the extent necessary for America to remain competitive—a matter of great concern.

This is not to say that American employers are not committed to developing the American workforce. In fact, it would be nearly impossible to catalogue all the programs, resources, and initiatives that large employers alone are devoting to reverse this trend. In 2010 alone, it has been documented that the private sector devoted approximately $53 billion toward job training, 53 percent of total job training spending in the United States.91 Nevertheless, Association members are finding that too many graduates are entering the American workforce without having developed the skills necessary to

EMBARGOED

Blueprint for Jobs Developing the Necessary Talent to Staff the American Workforce


succeed in the workplace. And those in the workforce often do not place enough emphasis on ensuring that their skills evolve along with the demand for new products and services.

For America to remain competitive with countries achieving rapid employment growth such as China, India, and Brazil, the United States needs a fundamental restructuring in the way all those involved in educating and training American students and employees interact with one another and go about developing the talent the nation needs. America is far from where it should be in creating the conditions necessary to promote and develop a workforce prepared to compete in today’s world. This section discusses this issue from the perspective of those responsible for staffing more than ten million jobs and offers a series of recommendations to help create the talent America needs to be competitive in the 21st century.

Too Many Graduates Arrive at Work Lacking Basic Competencies

The graduates who are applying for jobs today frequently do not have the basic skills required to work effectively in entry-level positions. Oddly enough, as Secretary of Education Arne Duncan points out, despite their low scores in certain critical areas, American students often feel extraordinarily confident about their academic abilities. 92 Employers, however, find graduates are generally ill-equipped to function adequately in today’s high technology work environment and that they require considerable additional training by employers in basic competencies.

One recent survey found that over 42 percent of employer respondents rate new workforce entrants with a high school diploma as deficient in their overall preparation for entry-level jobs.93 Seventy-two percent of employers rate new entrants with a high school diploma as deficient in writing; 54 percent of employers rate them as deficient in math; and 81 percent say they are deficient in written communication skills.94 The fact that graduates do not have the basic literacy and numeracy skills to function properly in the contemporary workplace should be viewed by policy makers and the public as a national crisis.

Significantly, this lack of basic competencies is not confined to high school graduates. Chief human resource officers are seeing a lack of basic workforce competencies among many of those entering the workforce at all levels, including those with master’s degrees. Companies would prefer to use corporate training resources to build specialized skill sets; however, many are currently being forced to sponsor remedial programs that either fix something that was broken in the new employee’s education process or provide something that

The fact that graduates do not have the basic literacy

and numeracy skills to function properly in the

contemporary workplace should be viewed by policy makers and the public as a

national crisis. EMBARGOED



was not but should have been available in his or her schooling. For example, many employers are forced to send their new hires to orientation classes just to learn communications basics so they can express themselves clearly in e-mails and other forms of written and oral communication.

CHART 13

Which Skills Do High School and College Graduates Lack?

Skill

Percent of Employers Who Say

Skill Is Deficient

High School Graduates

Four-Year College

Graduates

Basic Skills

Writing in English 72.0% 26.2%

Foreign language 61.7% 40.7%

Mathematics 53.5% 12.0%

History/Geography 45.7% 17.0%

Government/Economics 45.6% 17.4%

Science 44.5% 12.6%

Reading Comprehension 38.4% 5.1%

English Language 21.0% 4.4%

Applied Skills

Written Communications 80.9% 27.8%

Leadership 72.5% 23.8%

Professionalism/Work Ethic

70.3% 18.6%

Critical Thinking/ Problem Solving

69.6% 9.0%

Self Direction/ Life Long Learning

58.2% 14.3%

Creativity/Innovation 54.2% 16.5%

Oral Communication 52.7% 9.8%

Ethics/ Social Responsibility

44.1% 11.1%

Teamwork/Collaboration 34.6% 8.1%

Diversity 27.9% 7.4%

Information Technology 21.5% 3.4%

Source: Conference Board

EMBARGOED



A key element of the basic competencies set is the ability to think critically, analytically, and with imagination. Too often, however, employers find these attributes lacking. A recent opinion piece in the Washington Post by former Congresswoman Heather Wilson, entitled “Our Stunted Scholars,” sums up this issue eloquently. Wilson, who serves regularly on selection committees for the Rhodes Scholarship, said, “Our great universities seem to have redefined what it means to be an exceptional student. They are producing top students who have given very little thought to matters beyond their impressive grasp of an intense area of study.” She concludes, “Many of our young people spend four years getting very expensive college degrees. But our universities fail them and the nation if they continue to graduate students with expertise in biochemistry, mathematics, or history without teaching them to think about what problems are important and why.”95

Importantly, the concern that the author is describing does not just apply to Rhodes scholars. We live in a wired world where huge amounts of information can be quickly assembled, but new entrants often have difficulty seeing beyond the assembly of information to understand how it relates to other forces and issues at play.

Changing Demographics Are Adversely Affecting K-12 Student Learning

Though the United States may have the world’s greatest universities and research institutions, the kindergarten through 12th grade educational system in many parts of the country is woefully inadequate, and those graduating and moving into the workforce arrive on employers’ doorsteps in need of considerable remedial education. Employers understand that one of the reasons for this trend is that since the 1960s the socioeconomic background of children entering school has changed dramatically, and that this has significantly increased the challenges teachers face in the classroom. In 1970, about 15 percent of children lived in single-parent families or with another adult. By 2010, that number had doubled to 30 percent.96 Social scientists have found that children growing up in single-parent families are:

• four times as likely to need help for emotional and behavioral problems;

• more likely to participate in violent crime; and

• twice as likely to drop out of school.97

EMBARGOED



Further, in survey after survey, teachers say that lack of discipline is their number one complaint, and that the parents of students who disrupt classes often fail to support the school. Significantly, in one survey, almost 68 percent of all teachers said removing students with severe behavioral problems from the classroom would be most helpful in improving teacher effectiveness.98 Other longstanding challenges have also increased, including a lack of student proficiency in English and the mixture of student learning abilities in the classroom. Nearly twice as many teachers today as in 1992 say that a lack of proficiency in English hinders learning for at least one-fourth of their students (22 percent vs. 11 percent), and more teachers (43 percent) agree that their classes have become so mixed in terms of students’ learning abilities that they cannot teach effectively.99

The Development of Science, Technology, Engineering, and Math Skills in America Is Not Adequate To Meet the Needs of Employers

The development of individuals with science, technology, engineering, and math skills—the STEM skills—has been badly neglected in the United States, creating national security issues and hobbling the economy. A constant theme heard from nearly all HR Policy Association members is that companies are having difficulty finding and attracting persons with adequate STEM skills for jobs in the United States. They feel the development of STEM skills is badly neglected in America by both the educational system and society as a whole. They believe that government, the education community, and society generally should do far more to promote and develop these critically important skill sets. They see the lack of investment in these programs as hobbling the ability of the American economy to grow for a long time to come.

Furthermore, as the current crop of STEM workers from the baby boomer generation approaches retirement age, employers are concerned that, given the STEM deficiency of U.S. citizens entering the workforce, the next generation will be unable to step in and fill the massive vacancies in STEM-related positions that are coming. Defense contractors, for example, anticipate tens of thousands of highly skilled engineers retiring during the next five years, and nearly all the new entrants will need to be U.S. citizens who can pass government security requirements. There is, however, nowhere near the number of students needed in the pipeline to fill these jobs.

The United States needs both a comprehensive vision and

the national will to overcome the shortage of STEM

students and employees with critical STEM skills.

EMBARGOED



CHART 14

The reality is that in American universities, the percentage of

American students enrolled in the STEM fields of study is far too low. In 2003 just 13.5 percent of American college students were enrolled in science, technology, engineering, or mathematical fields, compared to 24.3 percent who were enrolled in education, the social sciences, and humanities.100 In 2006, just 15.7 percent of bachelor degrees were awarded for the sciences, engineering, and computer and information sciences, compared to 27.6 percent for education, consumer services, and communications.101 Moreover, the number of STEM-related bachelor degrees, as a percent of all four-year degrees, has been declining since 2003.102

EMBARGOED



CHART 15

Most employers believe tracking students is necessary to develop

those with adequate STEM skills. There is a widespread feeling that if students interested in STEM subjects are not identified and supported for STEM studies in middle school (grades six through eight), it will be difficult to stimulate their interest in the subject matter by high school, and even more difficult, if not impossible, to get them admitted to an engineering or technical university. Employers also believe that in their efforts to support students gifted in STEM areas, society must be careful to encourage women and minorities to enter these fields, as they are often overlooked as prospective STEM workers at a young age.103 In contrast with the American experience, our members see countries like China, India, Korea, and Singapore aggressively identifying those students predisposed to STEM studies and facilitating their participation in those studies. As a result, these countries are producing hundreds of thousands of engineers annually in their universities.

There is no question that some cities and counties in the United States are doing an excellent job of developing specialized schools for STEM students and then attracting promising students to these schools. For many employers, however, these programs fall under the purview of local school boards who design their programs and agendas apart from the input of employers.

EMBARGOED



Not All Good-Paying Career Fields Require a College Degree

Not only is the United States not supporting STEM education to the degree necessary for America to remain competitive, it is also neglecting the development of the skilled trades. In the United States, one of the prevailing policy axioms is that everyone should have an undergraduate degree, and therefore, anyone who does not enter and graduate from college is, by and large, a failure. Such thinking, unfortunately, has done a tremendous disservice to those who cannot or have chosen not to pursue a college degree. In fact, the majority of students never receive a degree from an institution of higher education. The U.S. Department of Education reports that of every 100 students who enter the 9th grade, only 75 graduate high school. Of the 75 who graduate high school, only 51 enter college. Of the 51 who enter college, five graduate with a two-year degree within three years and another 17 graduate with a four-year degree within six years. Statistically, of every 100 students who enter 9th grade, only 22 end up with a degree within six years.104 More must be done to help the other 78 students who want to enter the workforce and land fulfilling, productive careers, and there is a readily available solution.

CHART 16

EMBARGOED



Even in the current period of high unemployment, certain jobs are going begging, and many of them are skilled trades and other “blue-collar” positions. For example, welders are in constant demand no matter what the economic climate. Utilities always need line workers, and while it can be a tough job, it often comes with an excellent compensation package. Yet lineworkers are in chronically short supply. Other very productive and rewarding careers in fields such as health care occupations, auto technicians, and information technology require some education and training that results in certification, but do not require a degree from a four-year institution. The key point here is that we live in a world interwoven by and highly dependent on technology, and those with the appropriate skills needed to manufacture, install, service, and maintain all that technology will be well paid for doing so. And for those jobs, a traditional bachelor’s degree is not necessarily the path to acquiring the necessary skills.

One of the best ways to address this situation is to expand and promote career technical education within the high schools. Career technical education not only helps students explore career options, it can teach them skills that can be leveraged through apprenticeships or certificates into productive and meaningful careers that are vital to our economy.

The Vocational Education System in Secondary Education Is Withering Despite the Demand for People To Fill Skilled Trades Positions

From 1950 to 1980, vocational education, as a share of secondary education, declined in almost every educational system.105 By 1990, just six percent of the U.S. population ages 18 to 34 years old were taking vocational courses.106 From 1978 to 2000, California lost more than 80 percent of its vocational programs, and the number of high school vocational education courses dropped from about 40,000 in the late 1980s to approximately 24,000 in 2005.107

With the pending retirement of the baby-boom generation, millions of well-paid skilled trade and production employees who received vocational education training in the 1950s and 1960s will have to be replaced. Manufacturers, for example, are going to need to find an estimated 143,000 welders, 415,000 assemblers, and 434,000 metal and plastic workers to replace retiring employees.108 Yet there does not seem to be a realization that in the United States there is considerable job growth potential for these blue-collar jobs, that many of these jobs pay well, and that companies in good economic times and bad are having difficulty filling trade positions.

EMBARGOED



According to the Bureau of Labor Statistics, from 2008 to 2018 almost two million new construction employees will have to be found to replace all of the workers expected to retire.109 This includes 160,000 carpenters, 112,000 plumbers, and 168,000 electricians— relatively high-paying jobs for which there are fewer and fewer prospective employees with the adequate skill sets.110 All the new technology that runs the modern workplace needs to be built and maintained, and while these well-paying jobs do not require a college degree, they do require specialized vocational and technical training.

The future of career tech in America is highly uncertain. It has great support by some and is stiffly opposed by others. There is a bipartisan career tech coalition in Congress that is now 90 members strong. At the same time, the President’s 2012 Department of Education budget request cuts spending on career technical education by $265 million even though unemployment remains high and America is not producing the employees needed to fill the demand for the blue-collar jobs of both today and tomorrow.

Educators and Employers Are Not Adequately Communicating With One Another To Ensure Graduates Receive the Education They Need For Successful Careers

HR Policy Association members recognize the incredible benefits a society reaps when its citizens are well educated. Education is critical to a properly functioning democracy and to the general fulfillment, enjoyment, advancement, and intellectual enrichment of a nation’s residents. Without a well-educated citizenry, the United States cannot flourish as it has for more than 200 years. We have full confidence that most educators are passionately committed to their students and developing solutions for the education system.

From the perspective of many employers, however, educators often seem unwilling to hear what employers are saying about what graduates need for successful careers upon graduation. They believe providing such skill is not part of the academic mission. We understand that some professors are wary of the suggestion that there needs to be serious discussions among employers and educators regarding the skills graduates need to be successful in the modern workplace. We understand that our leading universities do not want to be seen as what some would describe as “vocational schools for large employers.” But the fact remains that most students at both the undergraduate and master’s level have a very difficult time moving into quality employment positions after graduation without significant additional education and training in basic competencies that should have been learned in school.

EMBARGOED



The Federal Government’s Education and Training Programs Lack Focus and Are Not Adequately Meeting Employer Needs, Particularly for Large, Multi-State Employers

In 1998 Congress passed the Workforce Investment Act (WIA), to replace the patchwork federal job training system that had developed over the previous 60 years, replacing it with a locally designed and driven system to improve the quality of the workforce; enhance the productivity and competitiveness of the nation; and reduce welfare dependency. In spite of the improvements the law has brought about, far more remains to be done. In fact, large employers remain frustrated with these government education and training programs.

In a 2010 survey of the Association membership, 54 percent of our member companies reported not taking advantage of government training programs, 43 percent use them only modestly, while only three percent make strong use of them. Only nine percent of Association members are satisfied with the government programs that they use. More than 60 percent believe that federal, state, and local policymakers need to spend far more time ensuring that their training resources fit contemporary workforce needs. Two-thirds believe that there is too much red tape and bureaucracy in these programs, and 65 percent believe employers should be given a far greater voice in the design and administration of them.

To promote employment growth in the private sector, the Association believes that there needs to be a far more integrated approach by the federal government. The Commerce Department has economic development programs. The Labor Department has employment and training programs. The Education Department provides funding for education and vocational training programs. However, employers do not see these programs as being effectively coordinated to assist individual employers in expanding employment opportunities in the United States or to promote national strategies to create competitive economic opportunities. In February 2011, the Government Accountability Office (GAO) issued a report that shows in fiscal year 2009, nine federal agencies spent approximately $18 billion to administer 47 separate employment and job training programs. In the report, GAO could not conclude whether the programs had any meaningful benefit despite the large federal investments.

Joint planning across federal agencies is badly needed if new and emerging industries are to have the workforces they need to expand and advance quickly. What occurred in clean technology, unfortunately, is a typical example. While the U.S. Department of Energy was investing billions of American Recovery and Reinvestment Act (ARRA) funds in cutting-edge developments in

EMBARGOED



clean energy that are critical to our nation’s energy independence, millions in job training programs were being invested in low-skill weatherization programs that rarely resulted in jobs. In fact, a $4 million New Jersey weatherization job training program was closed after only seven of 184 participants found jobs in the fields.111 Other ARRA-related weatherization programs funded by the U.S. Department of Labor met substantial delays while waiting for another part of the U.S. Department of Labor to develop a prevailing wage rate for weatherization work. Without better coordination between and within federal agencies, job training funds will be squandered on low-skill training when they should be invested in new and emerging fields that offer great employment opportunities.

Further, in the United States large employers operate in a multi-state business environment, yet federal training dollars and programs are disbursed on a state-by-state basis, then passed out by formula to local areas. By federal law, job training funds pass from the U.S. Department of Labor to the states and territories according to a formula. The states and territories keep 15 percent of the funds for administration of the program and discretionary grants. The remaining 85 percent of the funds pass directly on to the local workforce investment areas, which then design and run local programs in accordance with federal regulations and state guidance. This means that a large employer seeking to establish a national training program that may result in hiring and/or training dozens or hundreds of workers in multiple states must form separate, independent, and often different relationships with each of the state and local governments with which it chooses to work. This is a burden that most private sector multi-state employers believe is simply not worth the effort.

Global Employers Are an Untapped Resource That American Educators and Policymakers Could Use To Better Understand Successful Learning Models That Promote Employment

Global employers have firsthand knowledge of the educational systems in a variety of countries and the effectiveness of these systems in producing graduates with the requisite skills for their companies. They see countries such as Singapore and China doing an excellent job motivating citizens to move in partnership with their educational systems to support emerging economic opportunities. These countries operate sophisticated technical schools and universities that identify those students who can succeed in positions requiring STEM skills. These learning institutions are closely aligned with the business community so that graduates are easily placed in growing industries.

EMBARGOED



In his 2011 State of the Union speech, President Obama said that in order to “win the future” America must “out-innovate, out-educate, and out-build the rest of the world.”112 The following are specific recommendations made by the Association to enable the United States to achieve this vision.

Specific Recommendations:

1. At all levels of education, students should have a far better understanding of the skills and basic competencies needed by employers as well as the career tracks with the potential for long-term gainful employment.

Graduates often come into the workplace with either a lack of understanding or false impressions of the competencies and skills needed to become successful in a career. At the same time, students and jobseekers receive information from a variety of sources—teachers, guidance counselors, parents, friends, and relatives—but they rarely hear directly from the people in the best position to advise them—employers who hire. Much more needs to be done to ensure that students have the desire to learn what these skills and competencies are, that they are in a position to obtain those skills and competencies from learning institutions, and that employers are giving students the information they need. To fulfill our responsibility in providing this information, HR Policy Association is in the process of creating a website that will serve as the communications platform where students and graduates can hear directly from Chief Human Resource Officers and other senior business executives responsible for hiring and career development about their workforce needs and expectations.

Today, too many college graduates are discovering that simply spending tens or hundreds of thousands of dollars getting an undergraduate or graduate degree is no guarantee that there will be a job available upon graduation. More needs to be done to ensure that students interested in having a job in the private sector following graduation know what careers are in demand, what skills are required for those careers, where those skills can be obtained, and how best to acquire them.

EMBARGOED



2. There should be an ongoing dialogue between educators and employers to ensure that educators understand the career opportunities available to graduates, the competencies and skills employers are seeking from graduates, and what colleges and universities can do to increase the probabilities that graduates will find quality jobs.

In the coming months, HR Policy Association will be organizing an ongoing series of discussions between small groups of chief human resource officers from Association member companies and educators interested in sharing perspectives on changes that could be made to ensure graduates have better opportunities to enter the workforce upon graduation. We welcome those educators to participate in this effort.

3. Employees must pursue lifelong learning to improve their job security.

As the change produced by the global economy continues to accelerate, lifelong learning has become an essential characteristic of the workplace. Career paths are constantly shifting as new technologies, new industries, and new work processes replace older ones at an increasingly rapid pace. In fact, because of the pace of today’s economies, companies often change more quickly than many of their employees can adapt to that change. People are hired and trained to do particular jobs, and at times it can be difficult to adjust when that job is no longer needed. Yet change is both inevitable and accelerating, and education cannot end with a high school or college degree. Employees must make lifelong learning a priority, and employers, educators, and innovators need to come together to make more learning opportunities available outside traditional classrooms.

4. Expanding STEM education and enlarging the number of STEM teachers and professors, doing more to motivate students to enter STEM studies, and increasing the number of Americans who graduate from colleges and universities with STEM degrees should be among America’s highest priorities.

STEM studies, STEM careers, and recognizing that the nation’s future depends on Americans embracing and supporting STEM skills should be among the highest priorities for the United States. We live in a global world that functions on technology, and the importance of technology will only increase in the coming decades. The United States, therefore, needs both a comprehensive vision and the national will to overcome the shortage of STEM students and employees with critical STEM skills.

EMBARGOED



The United States needs to encourage and expand STEM scholarships and other forms of financial aid for STEM studies, as well as retention programs for undergraduate STEM students, so that American institutions of higher education successfully graduate far more students from the STEM disciplines. Further, America needs to encourage and incentivize the preparation of STEM-certified primary and secondary school teachers to ensure that U.S. colleges and universities produce enough qualified secondary teachers of science and math. At the same time, if America hopes to make a difference in producing students with employable STEM skills, the authority for these institutions should be placed in the hands of those who are more closely aligned and in tune with the career paths for STEM students.

To a degree, the problem also reflects a fundamental irony that in a country so dependent on technological development and innovation, American popular culture rarely encourages students to study STEM fields. From Hollywood to Facebook, STEM figures persistently rank near the bottom of the social totem pole. Therefore, it is imperative to motivate the media, parents, and teachers to provide a more positive view of STEM careers, emphasizing the end goal and the huge demand and potential for success in these fields. No matter one’s opinion of Bill Gates or of the social skills of innovators like Mark Zuckerberg, their success is highly attractive to students in the rest of the world; why not in America?

5. Career technical education should be expanded and promoted to support those seeking fulfilling careers in the skilled trades.

During the past three decades, the American educational system has largely removed vocational education and career technical education programs from the secondary school system. In view of current and coming demands for skilled trade workers, policy makers need to return this form of education to our nation’s schools as quickly as possible.

6. Government economic development, workforce development, and education programs need to be fundamentally redesigned to work in unison toward the same primary objective: economic growth.

As our nation struggles to recover from the broadest and deepest recession in modern history while reducing our nation’s deficit and debt, our political leaders must take this opportunity to question the purpose, existence, and effectiveness of the economic development, workforce development, and education programs funded by the federal government. They need to fundamentally redesign them around the same primary objective of economic growth. The pressures that caused the most recent recession are easing, but the underlying

EMBARGOED



structural weaknesses they exposed threaten to restrain our future economic growth for years, if not decades, to come if not addressed. Among those primary weaknesses are the fact that our education system is not preparing students for success in the rapidly changing workplaces of America; our job training system is not linked closely enough with the needs of employers so that those who receive training have highly desired skills; and the economic development programs designed to expand economic opportunity too often work in isolation and apart from the needs of employers.

Federal investments to prepare the workforce and drive economic competitiveness are considerable. However, these investments are dispersed through different Federal agencies with different priorities under different leadership. Very little inter-agency communication occurs. Federal agencies must begin to coordinate their efforts with each other around the single purpose of job creation. We hope that in the major governmental reorganization outlined by President Obama in his 2011 State of the Union speech, this approach will be given serious consideration.

EMBARGOED


III. Attracting the World’s Top Talent to

America and Retaining It

The United States remains a magnet for many talented individuals from overseas. Many already have skills that are in short supply; others come to the United States to acquire them through a higher education system that continues to be highly coveted by the rest of the world. When America turns away foreign professionals or sends promising graduates home, it does itself a grievous disservice. Out of economic necessity, global companies will pursue talent regardless of where it is physically located. The key question for the United States is whether it wants that talent employed in America or in the nation of one of its global competitors.

We are concerned that the U.S. debate over immigration reform often fails to place immigration policy in the broader context of education and competitiveness policy, particularly when it comes to meeting America’s needs for greater talent in the fields of science, technology, engineering, and mathematics (STEM). Unfortunately, in recent decades, policymakers have proved largely unable to adjust immigration rules to admit the manpower —both Ph.D. scientists and farm workers— that U.S. companies require to grow.

America Is Attracting Top Talent, But Not Retaining It

We have made clear in this report our strong belief that, from the beginning of its history, the United States’ economic dynamism has depended on its technological prowess and gift for innovation. What makes the challenge more daunting in the new century is that nations around the globe other than the United States are now aggressively competing for the best and brightest. Clearly, America can regain its edge only if it remains open to talent wherever it might be, attracting and retaining both science students and mature scientists. And yet, despite this clear imperative, America seems to be moving in the exact opposite direction. Restrictive quotas limit the number of skilled immigrants admitted each year. Misconceived policies and burdensome, bureaucratic rules constrain where and how they can work. Instead, the U.S. should actively work toward retaining the foreign scientists we have educated just as they are reaching their most productive years.

EMBARGOED

Blueprint for Jobs Attracting the World’s Top Talent to America and Retaining It


By paying insufficient attention to the economic forces that drive immigration, the system currently restricts the entry of foreign workers and the duration of their stay, while failing to allow for changes in the marketplace—i.e., shifts in U.S. labor supply and demand, or the increasingly integrated nature of global labor markets. Because of the way immigration ceilings are set—in most cases, only Congress can tweak the quota—American immigration policy is largely unable to adjust to market realities, and most of its annual ceilings have remained unchanged for 20 years through all the churning fluctuations of the world economy.

America Is Losing Innovative Talent By Forcing Exceptional Foreign Students To Leave the Country Once They Graduate From American Institutions of Higher Learning

The immigration system often views newcomers as inert widgets, not dynamic human beings—failing to recognize that people may come to the U.S. for one reason but stay for another, defying the categories—“permanent” and “temporary”—that structure the part of the immigration system that is employment-based. When it comes to the critical STEM disciplines, this creates two severe problems—one involving foreign students, the other involving workers who travel to the U.S. through an employment-based visa.

American colleges are more popular than ever with international students. The number of foreign students attending colleges in the United States climbed for the third straight year, according to the Institute of International Education. Roughly 671,600 international students attended colleges and universities in America during the 2008-2009 school year, with first-year enrollment rising almost 16 percent. Moreover, more than half of the science and engineering graduate students in U.S. universities are from outside the country. Roughly 24 percent of all college-educated workers in science and engineering occupations are foreign born, and that number rises to 40 percent for doctorate holders in these same fields. In comparison, the current H-1B visa cap for temporary foreign workers in specialty occupations is 65,000, and each year the limit is reached within a few months of the start of the new fiscal year.113

Even if global competition were not a factor, it would still make sense for the United States to do everything possible to entice foreign students to stay on after graduation, because key American industries are in desperate need of more trained and talented workers. But instead of welcoming them with a path to citizenship or even permanent residence, America makes it hard for foreign students to get visas and then limits where they can work. As of now, the only avenue open to most graduating foreign students is a temporary H-1B visa, which leads to another major concern.

More than half of the science and engineering graduate

students in U.S. universities are from outside the U.S. Roughly 24 percent of all

college-educated workers in science and engineering

occupations are foreign born, and that number rises to 40

percent for doctorate holders in these same fields.

EMBARGOED



Business Is Now Conducted Globally, But the American Visa Process Frustrates Companies Trying To Deploy and Retain Talented Foreign Professionals

Similar to the situation facing foreign students, American immigration policy also results in the loss of talented professionals who have already begun their careers. Many come to the U.S. with a temporary H-1B visa. Issued for three years and renewable once in many if not most cases, the H-1B is an indispensable tool for employers of highly-skilled workers—more easily and quickly obtained than a permanent visa, or green card. But an H-1B is not always the best answer—in some companies and some personal circumstances, a permanent visa would be more appropriate. However, because employment-based green cards are in such short supply, the H-1B is often used with the hopes of it becoming a stepping stone toward a permanent visa. Unfortunately, highly skilled workers find themselves caught in a holding pattern, facing hurdles in seeking to work for another employer other than the one who sponsored them, unable in many if not most cases to change jobs or even move up the ladder as long as the visa lasts. This rigidity hurts employers and employees alike, undermining the productivity of these knowledge workers and the positive effect that they could have on our economy, while also reducing the United States’ appeal to highly desirable skilled workers who are being enticed to locate elsewhere.

At the heart of the problem is a fundamental, structural mismatch between the size of existing temporary programs, including but not limited to H-1B, and the number of permanent visas, or green cards, available for employment-based immigrants with college degrees. The number of temporary visas issued to skilled workers—H-1B, TN, O, and L-1 combined—are nearly 300,000 annually. Yet America still grants only 140,000 employment-based green cards a year.

The persistent shortfall has created huge backlogs; in some cases the wait for a permanent visa is as long as a decade. The H-1B visa holders America should be wooing cling desperately to their temporary status while they wait for permanent residence. In the meantime, it is difficult for them to change jobs, and it is hard for their employers to promote or assign them more productively. Their spouses cannot work, and they often remain hesitant to put down roots, buy homes or invest in the United States. It is a classic lose-lose—unwelcoming and economically inefficient, bad for U.S. employers and foreign talent alike. The only people who benefit are America’s global competitors.

As President Obama stated in his 2011 State of the Union

Address, “it makes no sense” that, as soon as foreign

students obtain advanced degrees at U.S. higher

education institutions, “we send them back home to

compete against us.”

EMBARGOED



American Immigration Policy Is Becoming Even More Restrictive, Building Barriers to Keep Highly Talented Individuals From Entering the Country

For more than 20 years, Congress has proved unable or unwilling to expand the number of available employment-based green cards, and this constricted pipeline simply can no longer accommodate the increased flow running through the easier to use and ever more popular temporary programs. And yet, despite the backlogs, the bottlenecks, and the waste of highly sought global talent, there is no relief in sight.

If anything, policymakers in recent years have been more inclined to impose further encumbrances on existing worker visa programs. The problems start on the ground where would-be employers and employees are finding immigration officials and policies increasingly less friendly. Agencies adjudicating visas have become not just increasingly strict, but also capricious. Applications of a kind routinely granted in the past are now being routinely denied. Even workers already issued visas are finding it difficult to renew them under the new, arbitrary standards. Similar and even more threatening changes are occurring at the regulatory level: the Departments of Labor and Homeland Security are rewriting the rules for existing temporary worker visa programs and, invariably in the past two years, making them harder to use.

Meanwhile, the viability of these programs is being threatened by a number of proposals that may be considered by Congress. In the past, these proposals have included arbitrary caps on the number of foreign workers an employer can sponsor, restrictions on how and where they can work, and an array of costs that will price temporary visas out of reach for many employers. Even proposals for comprehensive reform, generally seen as bringing relief for business, contain a buried threat: the current broken system would be replaced with an appointed commission, politically unaccountable and more than likely hostile to the free market, which would set visa quotas and recommend how programs work.

Ultimately, what is needed is an immigration policy that harnesses rather than hides from or tries to block the dynamism of the new global economy—a policy designed to serve U.S. economic interests and one that allows market mechanisms, not politics as usual, to determine what those interests are.

Ultimately, what is needed is an immigration policy that

harnesses rather than hides from or tries to block the

dynamism of the new global economy— one that allows

market mechanisms, not politics as usual, to

determine what those interests are.

EMBARGOED




1. The immigration reform debate should address the reality that there is a global war for talent and that countries are competing to attract and retain the human capital essential to a culture of productivity and innovation.

Typically, the highly charged immigration debate is dominated by social and moral issues. Yet the critical question that must be addressed is whether the immigration system is helping American employers regain the edge against global competition. The U.S. can only do this by attracting and retaining the kind of human capital that spurs technological change, enhances productivity, launches businesses big and small, and sustains the American culture of innovation.

As was noted in a 2010 report by the World Economic Forum entitled Stimulating Economies Through Fostering Mobility:

Countries need to prepare to face the challenges of demographic shifts and a fast-changing labor market environment by defining adequate education and migration policies…to prepare for the era of extreme labor scarcity, significant talent mobility and a truly global workforce.114

As other countries wake up to this fact, so should the United States.

2. It is imperative that the United States avoid enacting new legislation or issuing new regulations that impose additional restrictions on visas that would only further dampen economic recovery.

In view of some of the pending proposals, as bad as current policy is, it would be better if Congress did nothing. Among the legislative measures we believe should be resisted are those that would impose additional impediments on the issuance of employment visas, including not only H-1B visas but also those issued under the L-1 program, which allows companies operating in the U.S. and abroad to temporarily transfer employees from a foreign location to a U.S. worksite. We are particularly concerned about any proposals that may seek to cap the L-1 program, or impose location and unrealistic compensation restrictions on L-1 employees.

EMBARGOED



3. Foreign students who acquire advanced degrees in the STEM disciplines at American higher education institutions should have a path to U.S. citizenship if they wish to use their talents in America rather than returning to their country of origin.

As President Obama stated in his 2011 State of the Union Address, “it makes no sense” that, as soon as foreign students obtain advanced degrees at U.S. higher education institutions, “we send them back home to compete against us.” This situation should be remedied by authorizing permanent residency for foreign students receiving advanced STEM degrees in the U.S. and exempting them from numerical limitations on H-1B visas.115

4. The system for determining the number of annual visas should be revamped to better reflect the needs of the market, rather than maintaining arbitrary and inflexible caps.

Employers, not the government, have the best sense of which workers they need for their businesses. No government agency is capable of determining the attributes needed to fill the many, varied, and constantly changing jobs in the U.S. economy. As the diminished immigrant influx of recent years demonstrates, the global labor market corrects itself when times are tough and works efficiently to regulate the flow of workers seeking to enter the country. Arbitrary, inflexible caps only impede this self-adjusting flow, to the detriment of the economy. The current system should be replaced by one that is more demand-driven, reflecting the actual skill needs that employers are facing, while maintaining protections for U.S. workers with those skills being displaced.

5. A more flexible system should be established to maintain options for both short-term and long-term residence, allowing professionals to transition from temporary to permanent status after a period of contributing to the American economy, without regard to quotas or nationality.

Two decades of debate about visas for highly skilled workers have driven home a critical lesson: the more flexible the system is, the better it will work. Not all newcomers want to stay permanently. Many come initially on a temporary basis to meet short- to medium-term labor needs. Some then decide to go home—generally to the benefit of their home countries—while others end up staying permanently in the U.S. and earning legal permanent residence. A rational immigration system would permit both options, providing flexibility for immigrants and employers alike.

EMBARGOED


IV. Creating a Regulatory Environment That Encourages Innovation and Job Growth: The Need to Replace Conflict With Consensus to Achieve Competitiveness

Cheryl is a business analyst with a major insurance company in the United States. This is a highly specialized position that includes helping the company manage its work flow and deal with new business ideas, trends, and concepts. In her work, Cheryl uses the most current and most advanced office technology. Cheryl is six years out of school and has a master’s degree in Business Administration, and she earns an annual salary of $75,000. Eventually, she hopes to earn more as a senior financial analyst, which is the next logical step in her career. To move up, she knows she has to work very hard, which includes occasional weekend work. But, far more frequently, it includes staying in touch with her supervisor and her co-workers on a regular basis. In addition to answering e-mails and checking voice mails on her Smartphone before and after working hours, she often has to work from home since she has two school-age children.

Most of the time she works in the office on a regular schedule, but she frequently has to arrive late or leave early. This practice does not concern her supervisor because she knows that Cheryl more than makes up for it by keeping in touch when she is away from the office and that at times she arrives early or leaves late. The point is, no one is tracking Cheryl’s hours because she is getting the work done.

Cheryl has made great strides in her very promising career, but most of the time she is being given direction by a senior analyst, who exercises the necessary discretion and judgment when a critical decision must be made.

Although Cheryl makes the equivalent of $28.84 per hour, or roughly four times the minimum wage, her company is very likely violating the 1938 Fair Labor Standards Act (FLSA). Even though the work she performs requires a considerable amount of expertise and experience in navigating complicated financial rules and principles, the fact that she does not exercise discretion in doing so likely disqualifies her from falling within any of the so-called “white collar” exemptions under the FLSA. Because of this and other arcane rules largely written in the 1950s, countless engineers, pharmacists, accountants, highly-compensated sales persons, paralegals, and others

EMBARGOED

Blueprint for Jobs Creating a Regulatory Environment That Encourages Job Growth


have been deemed by the Department of Labor and the federal courts to be “nonexempt.” In other words, they are covered by the FLSA, which mandates tracking of hours and dozens of other requirements, including calculations of potential overtime.

Because of this, Cheryl’s employer is sitting on a litigation time bomb. Even though Cheryl feels she is being paid fairly (as much as any employee does) and likes the flexibility of not having to punch a time clock, she is still likely covered by the FLSA, regardless of whether she wants to be.

Why? Under the Fair Labor Standards Act, the company is required to track and keep records of all “hours worked” by a nonexempt employee and pay time-and-a-half at the employee’s “regular rate” for every hour worked over 40 in a particular workweek.

For Cheryl, this means the company is likely to be committing the following violations:

• Failure to pay “time and a half” for every hour worked over forty in any given workweek. Moreover, in calculating the “regular rate” on which this is based, the company has to factor in any performance bonuses Cheryl has received;

• Failure to monitor and keep records of the time Cheryl is engaged in work, either at the office or away from the office, with the exception of any “de minimis” work. This is a somewhat elusive standard but is viewed by many legal experts to be any work taking less than six minutes; and,

• Though the law is unsettled on this, the company may also be in violation by failing to track and pay Cheryl for her commuting time on days when she performed more than a de minimis amount of work before or after her commute. Under this view, the workday begins and ends with the first and last act of work, respectively.

Cheryl’s company is very large, and there are 250 other employees with her same job title and duties. If, like many American companies, Cheryl’s company is sued in a class action brought on behalf of all of these other employees, the company could owe overtime back pay that could easily be in seven-digit amounts.

What can Cheryl’s company do to protect itself? Companies that have found themselves in this situation have had to take a number of steps that have proven very unpopular among their employees.

EMBARGOED



First, it must convert Cheryl and all other employees in her position to hourly status, an action that is often viewed by employees as an unfair diminishment of their place within the organization in view of their level of education, experience, and responsibilities. In other words, those whose status is being changed to hourly feel a loss of dignity and respect by their employer and co-workers.

Second, the company must begin tracking Cheryl’s time, which means Cheryl is responsible for filling out and turning in time sheets on a weekly basis. Early arrivals, late arrivals, early departures, and late departures must all be included in the time sheets.

Third, the company must decide whether it needs to impose new restrictions on Cheryl’s work outside the office. Compliance with the law requires that all time worked that is not de minimis be tracked and paid for and, as indicated previously, perhaps commuting time as well. Out of concern that the only way they can ensure compliance is by requiring all employees to perform all work in the physical workplace, many companies have banned the use of smartphones and laptops outside the workplace for any work by their nonexempt employees. In companies where such tools are provided to their employees at the company’s expense, they are denied to nonexempt employees.

As litigation and DOL enforcement of the FLSA continues to proliferate, more and more employers are taking these steps and it is not being well-received by their Generation X and Millennial employees. They want smartphones connected to the office grid, and they want to access their worksite remotely. But for most employers, particularly at a time when the Department of Labor has stepped up enforcement of the FLSA, they are not willing to risk a lawsuit by being flexible.

This example demonstrates why, in seeking to rebuild and restructure its economy to match the challenges of the 21st century global economy, the United States must restructure its system of employment regulation.

As Senator Mark Warner (D-VA) noted, “If Washington expects to partner with the private sector to lead the effort toward economic recovery, we must address the regulatory uncertainty felt by many of our small and large businesses.”116 In making this point, the Senator cited a Small Business Administration study that estimates the annual cost of federal regulations on businesses in 2008 to be $970 billion, and goes on to note that, according to the Office of Management and Budget, the federal government has issued more than 132,000 final rules since 1981, and more than 1,200 of those rules have an estimated economic impact of greater than $100 million each. Employment regulation plays no small part in this broad problem.

EMBARGOED



Employers Strongly Support Fair Employee Protections; It Is In Their Self-Interest to Treat Employees With Fairness and Respect

At the outset, we wish to emphasize that in thinking through a modernization of America’s regulatory structure for employment policy, we are not suggesting a race to the bottom that abandons fundamental employment protections. Indeed, the vast majority of laws regulating the workplace address legitimate concerns, and they rest upon a set of core principles that nearly all people believe should be part of the employer-employee relationship. For example, there is a broad consensus that:

• Employees should be treated with respect by employers;

• Employees should not be taken advantage of by employers;

• Employees should not be discriminated against in hiring, compensation, advancement, and termination using inappropriate factors or criteria;

• Employees should not have to fear or suffer from bodily harm in their workplace that is reasonably preventable; and,

• Employees should be able to form a union and engage in collective bargaining if they choose to do so in an atmosphere free of coercion by either the employer or union organizers.

Effective human capital strategies are a primary concern of today’s employers, and the foundation of those strategies is commitment to fairness. Having low turnover and a highly committed and engaged workforce is essential for maintaining competitiveness and profitability. All that will not happen unless a company’s employees believe they are being treated fairly and with dignity and respect.

Nevertheless, the Regulatory Policy Process Governing Employee Protections Contains Endemic Flaws That, If Not Addressed, Will Further Stifle Economic Recovery

At present, the system used by the U.S. Congress and administration to develop regulatory policy has a number of endemic flaws that, if left unaddressed, could further stifle economic recovery and long-term growth:

Far too often, the focus of policymakers in writing laws

is to address actions taken by scofflaw employers with

unacceptable human resource practices, even

though they are typically a very small minority of

all employers.

EMBARGOED



• In developing employment policy, the United States uses a conflict-based system in which various interest groups typically engage in political warfare with one another instead of conducting reasoned discussions regarding the development of sound public policy promoting the mutual objectives of competitiveness, employment security, and employee protections.

• Rather than embracing the traditional American approach of presuming a party is innocent until proven guilty, contemporary employment law assumes that employers will abuse their employees and seek to circumvent both legal and ethical obligations; therefore, it operates on the basis that a strict set of laws, regulatory requirements, and severe penalties are necessary to cover every conceivable abuse.

• Concomitantly, a higher priority is placed on anticipating and providing protection against every conceivable wrongful act that an employer could potentially engage in than is placed on ensuring a regulatory scheme that promotes employment by minimizing regulatory excesses.

• As even the U.S. Department of Labor has learned through recent litigation with its own employees over the use of smartphones, most employment laws being strictly enforced today, in the digital/information age, were written in the industrial era, and they address a workplace far different from what is commonplace now.117

• Rigid, mechanistic requirements ensuring overly broad worker protections limit the ability of employers to provide flexibility to meet the changing demands of today’s employees.

• The ability of the vast majority of conscientious employers to maintain compliance with the myriad employment regulations is severely taxed as precious resources are drained by legal expenses and unending administrative tasks.

• Instead of seeking a prompt settlement of employment law disputes, the U.S. system instead foments costly and lengthy litigation that has contributed to the fact that U.S. firms spend twice as much on lawsuits as they do on research.118

Although it would seem that a thorough review of our existing framework of employment regulations is long overdue, policymakers in recent years have instead proposed a plethora of new regulations, expanding existing ones while adding wholly new obligations and restrictions.

EMBARGOED



The Time Has Come For a Comprehensive Review of the Fundamental Assumptions and Principles Used To Regulate Employment Policy in the American Workplace

We believe the time has come to undertake a comprehensive review of the fundamental assumptions and principles the United States has followed regarding the role of government in the workplace. We are encouraged by President Obama’s signing of Executive Order 13563, seeking to “remove outdated regulations that stifle job creation and make our economy less competitive,”119 as well as a number of regulatory reform proposals currently pending in Congress. We view these as an acknowledgement of the need to closely examine what is already in place with an eye toward improving its relevance and workability in the contemporary workplace. At the same time, it would be a departure from strict enforcement of laws that are no longer relevant to the way people live and work.

However, a much bolder approach needs to be taken. The entire way the United States goes about the process of developing and reviewing employment policy needs to be fundamentally changed. Finally, it should be emphasized that, at a time when the federal government is struggling with reviving the economy in a way that does not add to the federal deficit, regulatory reforms can achieve those goals with practically no cost to the federal budget.

America’s Conflict-Driven Regulatory System Produces Scarred Employment Policy

For the past several decades, the success of a particular Congress or administration is often assessed by the extent to which it has increased certain employee protections and employer liabilities through legislation, regulation, enforcement actions, or all three. The impact of those changed policies on competitiveness, the ability of employers to expand employment opportunities, and compliance burdens are given hardly any consideration. Rather, it often becomes a power game. One set of interest groups and politicians seeks to triumph over other sets rather than there being a reasoned dialogue among key stakeholders to address the real abuses without further impeding the competitiveness of those employers who are not the problem. It is both easy and highly rewarding politically to paint certain groups as villains and then enact legislation or issue regulations to curb their villainous behavior. What is far more difficult and far less rewarding is trading polemics for polite conversation that takes in a variety of views and then seeks to develop solutions that promote the common good.

EMBARGOED



Instead, Congress usually moves employment legislation at the behest of one or more interest groups in a highly adversarial manner, with the proposal reflecting the approach most desired by those groups, regardless of whether it makes sense for key stakeholders. Upon enactment of the new legislation, a federal agency is typically authorized or required to issue regulations implementing the new law, resolving ambiguities, and providing the regulated parties greater detail as to what is required. In issuing these regulations, the agency must then typically follow the Administrative Procedures Act (APA), which generally requires public participation in the rulemaking through various notice and comment procedures.120 Employment legislation is generally no different in this regard. However, as long as the regulatory agency follows the specified steps in the APA, there is no mechanism for guaranteeing that all affected parties play a meaningful role. This is exacerbated by the fact that the agency employees—both political appointees and career—do not necessarily have “real world” experience to inform the rules they write.

While most American employers are likely to view European workplace laws as focusing excessively on job protection at the expense of job mobility and growth, there is one component of the European Union’s system that deserves a closer look. Articles 138 and 139 of the European Community Treaty give both business and labor—the so-called “Social Partners”—a right to preempt all European Commission proposals by agreeing upon their own jointly-drafted rules. The Commission is required to allow the parties nine months to reach a “framework agreement,” and may generally only proceed if the parties fail to reach agreement within that time frame.121

Though the details of the social partners’ preemption system are embedded in the highly unique European Union system of governance, the concept itself is transportable. Indeed, a recent example of this approach took place in the United States during consideration of the Americans with Disabilities Act Amendments Act of 2008 (ADAAA).122 After a bill with broad bipartisan support was strongly opposed by employers, the business community and disability rights groups, with strong encouragement by Congressional leaders including Rep. Steny Hoyer (D-MD), decided to seek an alternative they could both support. At the time, the legislation was being driven by certain court decisions interpreting the Americans with Disabilities Act (ADA), which most agreed would or should not be allowed to stand because they narrowed the definition of “disability.” However, employers were concerned that Congress would go much further in seeking to overturn those decisions, effectively deeming almost every minor impairment a covered “disability.” Thus, the task of the groups was to find a way to reverse the court decisions with a scalpel, not a meat cleaver.

EMBARGOED



The result of the negotiations was a more evenly balanced approach, ultimately passed by Congress as the ADAAA, which reversed the decisions but avoided disruption of the workplace by ensuring that the “reasonable accommodations” employers would have to provide under the ADA would be limited to the more severe conditions that the ADA was originally intended to address.123 Significantly, the legislation passed the House by a vote of 402 to 17, and unanimously by the Senate.

Unfortunately, this collaborative process ended with the enactment of the new law. The Equal Employment Opportunity Commission (EEOC) was charged with implementing the ADAAA by issuing new regulations, and its initial proposal completely undermined the compromise that Congress had enacted. The result was the launching of another battle, with all sides pressing their views with the EEOC instead of coming back to the table to make sure their agreement was fulfilled by the regulations.

Fortunately, after the proposed rules were in limbo for over a year, new members of the Commission were able to revisit the proposed regulations and forge a bipartisan agreement that moved much closer to what Congress had intended. Significantly, these delays and power struggles could have been avoided in the first place with a negotiated rulemaking process that involved the outside stakeholders who best understood what they had agreed upon.

The American Regulatory System Overlooks the Reality That the Vast Majority of Employers Treat Their Employees Fairly

One of the most serious flaws in the existing system of contemporary U.S. employment law is the tendency to “regulate from the bad.” The most significant driver of the American economy for the past two centuries has been the ability of the private sector to create economic opportunities and jobs. Yet we see a disturbing trend in the recent regulatory climate that instead seems to view employers as a malevolent force that must constantly be placed under severe restraints. There appears to be a general belief among many policymakers that, absent strong governmental enforcement schemes, employers will take advantage of employees at every turn.

There is no question that there have been many instances over the years of certain companies taking actions that harmed employees. However, the political system in the United States is such that public policy addresses the misdeeds of a few bad actors by foisting harsh regulatory schemes on all employers, regardless of their past behavior.

We see a disturbing trend in the recent regulatory climate

that seems to view employers as an inherently irresponsible

group that, absent strong governmental enforcement

schemes, will take advantage of employees at every turn.

EMBARGOED



Rules are crafted, down to the most trifling of regulatory nuances, under the assumption that every potential loophole must be closed and every conceivable employer abuse must be anticipated. In stark contrast to our system of criminal laws, which bends over backward to presume innocence on the part of every accused wrong-doer, employment regulations generally start with the assumption that most employers will abuse employees unless they are regulated into compliance. The end result is a tangled web of rules that, ultimately, will have a greater impact on conscientious, responsible employers who are likely to spend precious time, energy, and resources ensuring compliance with rules not aimed at them in the first place. If they stumble into a violation, it is more likely to be a so-called “gotcha” rule or a genuine disagreement over what the confusing law requires.

A prime example of this perversity is a Fair Labor Standards Act (FLSA) rule that requires an employer to include certain bonuses paid to employees in their base pay for purposes of calculating their “time and a half” overtime premium.124 The rule is driven by a fear that employers will try to lower the employees’ overtime rate by paying them bogus “bonuses” rather than including those amounts in their hourly rates. This little-known rule has tripped up many well-intended employers who were motivated exclusively by the desire to reward their employees with a bonus. As a result, employers tend to reserve bonuses for exempt employees.

Employment Policy Tends to Evolve From a Desire to Protect Employees When an Idea Is First Introduced To Micromanaging the Workplace When the Final Regulations Are Issued

It is instructive to see how employment laws evolve from their original motivation to the specific rules that are ultimately promulgated. A case in point is the Family and Medical Leave Act (FMLA), which provides employment protection for employees who need to take leave from the workplace following the birth or adoption of a child or to recover from “a serious health condition.”125 The law was enacted after Congress heard testimony from employees who had faced severe economic hardships following termination by their employer after childbirth or during a severe medical condition. With regard to the latter, examples were provided of employees with heart attacks, heart bypass or valve operations, cancer, strokes, spinal injuries, appendicitis, and pneumonia.126

These were the kinds of “serious health conditions” contemplated by the statute. Yet, when the law was ultimately implemented, the regulations had effectively written the word “serious” out of serious health condition such that it now includes common colds.127 As a result, the FMLA has become one of the most problematic laws for

EMBARGOED



employers to comply with—not in those situations such as childbirth and truly serious conditions that generated the law in the first place, but in the more nuanced situations created by the broad definition of “serious health conditions.”128 Further, rather than reserving FMLA leave for those severe situations the law sought to address, some employees have learned how to game the system so they can simply take more time off. They view “FMLA leave” as an addendum to the annual leave and personal leave already granted by their employer.129 Moreover, the fact that the law allows such leave to be taken in increments as small as one hour creates serious disruptions for employers in maintaining their operations, not to mention the administrative burdens of tracking the time increments as part of the recordkeeping required under the law.

Laws Written During the Industrial Age Govern the Workplace of the Digital Age, With the Prime Example Being the Fair Labor Standards Act

The problems that employers have with regulatory policy are further compounded by the absence within our employment regulation system of any mechanism to ensure that the laws and regulations are regularly reviewed and upgraded to ensure relevance to the existing workplace. The recently-signed Executive Order 13563, which instituted “a government-wide review of the rules already on the books, to remove outdated regulations that stifle job creation and make our economy less competitive,” was a good first step. However, it remains to be seen how successful this effort will be, especially because the underlying problem is frequently the statute itself.

Of all employment laws and regulations that are out of sync with today’s workplace, the most troublesome for both employers and employees is the FLSA, enacted in 1938 during the Great Depression. On its face, the FLSA is a sincere attempt to protect employees against exploitation and “sweatshop” working conditions. The dual purpose of the law is to provide a minimum wage (currently $7.25 per hour) and ensure that workers who are not otherwise exempt (i.e., “nonexempt”) are paid time-and-a-half overtime for hours worked in excess of forty in a given workweek. The most common exemption is for “white collar” employees who must be paid a salary. Unfortunately, these simple concepts have been translated into countless vague, inconsistent rules and exceptions that are increasingly out of step with the times, as in the example used at the outset of this chapter.

The problems that employers have with regulatory policy are further compounded by

the absence within our employment regulation

system of any mechanism to ensure that the laws and regulations are regularly

reviewed and upgraded to ensure relevance to the

existing workplace.

EMBARGOED



Employers regularly deal with the following kinds of situations forced by the statute’s inflexibilities:

• Work schedules are carefully designed to avoid overtime. Thus, even if employees would prefer to work eight days in a row, with six days off in a row, the employer cannot afford such a schedule because it would involve at least two full days of overtime.

• Because employers fear that FLSA violations will occur due to employees engaging in work that is not being tracked, they impose restrictions on the use of e-mail, Internet or social media outside of working hours. Thus, nonexempt employees are discouraged or prohibited from checking emails off-hours due to the risk of not reporting their time worked. In occupations such as off-site repair, where the use of Blackberries, iPhones or other personal digital assistants (PDAs) is essential, some employers require the employee to keep these at one of the employer’s locations after hours, picking it up and dropping it off there, regardless of the location of site visits.

• The law creates disincentives toward engaging nonexempt employees in trouble-shooting and decision making because of overtime issues. Thus, nonexempt employees may be routinely excluded from off-site meetings or trips that could be beneficial to both them and the company because of the administrative difficulty of determining what time is compensable and the actual cost, once determined. In team situations where nonexempt employees are actively involved in deciding how the work is to be performed, the employer often has to discourage them—to the point of imposing discipline—from engaging in “after hours” discussions with their co-workers or engaging in any other work, such as writing a proposal for addressing a particular problem. This caste system based on job classifications is increasingly out of sync with corporate cultures that depend on teamwork. Further, the inability to participate in off-hours or off-site events stunts the career growth of nonexempt employees who lose the benefit of these activities.

• At a time when upgrading the skills of American workers is a priority, employers are discouraged from offering optional training to their employees because of FLSA regulations. Those rules require that employees be paid for the time spent during the training unless it is “not directly related” to their jobs, even though they are not being required to take it. For example, an employer may provide training for a new software program that only some of its computer programmers will use. Clearly, the employer should pay for the training time for those employees. However, other programmers also may wish to learn the program to broaden their

EMBARGOED



expertise. Yet the employer may decide not to offer it to them because its lawyers say it may be viewed as “directly related” to their jobs.

All of these problems are exacerbated by the continuing uncertainty over which employees are covered by the overtime requirements and which are exempt, according to rules largely written to cover the workforce of the 1950s. The inability of even the U.S. Department of Labor itself to make these determinations has been exposed by a recent action brought against the Department involving the exempt status of more than 1,900 employees, resulting in a number of these employees being awarded back pay. In addition to a large number of administrative employees, those eligible included highly paid computer professionals, paralegals, litigation support specialists and pension law specialists, as well as highly paid wage and hour division compliance specialists.130

The disconnect between the FLSA and the modern workplace will continue to grow if the law is left unchanged. It will increase tensions among employers, employees, and regulators, with the only true beneficiary being the plaintiff’s bar. Congressional attempts at incremental reforms stalled in the 1990s, leaving a bitter taste in many policymakers’ mouths and making them reluctant to make another attempt. Yet the pressure will steadily increase, and it will become a problem that is increasingly more difficult to ignore.

Job Growth Is Being Hindered by the Costs of the Administrative Structure Required to Ensure Compliance With the Plethora of Government Employment Regulations

The comprehensive structure of U.S. workplace laws, regulations, and taxes plays a role in virtually every decision an employer makes with respect to hiring, promotions, terminations, scheduling, sharing of data, use and design of facilities, changes in operations, and location of work. All of these laws and policies have a cost, and with each additional mandate or tax, another cost is layered onto employment decisions.

An example of an area where significant costs are imposed on employers even when they are acting in full compliance with the law is Executive Order 11246, which imposes affirmative action requirements on federal contractors regarding women and minorities.131 Our member companies pride themselves on their diversity and inclusion programs, and we firmly believe that, in general, American companies are a beacon for the world in providing opportunities to women and minorities. Yet, even those with the proudest record in this area must spend significant resources ensuring compliance with the executive order as enforced by the Office of

The disconnect between the FLSA and the modern

workplace will continue to grow if the law is left

unchanged, increasing tensions between employers,

employees and regulators, with the only true beneficiary

being the plaintiff’s bar.

EMBARGOED



Federal Contract Compliance Programs (OFCCP). Just to prove they are in compliance, every year federal contractors spend over 12.5 million hours on paperwork alone, compiling data and conducting detailed statistical analyses of county-level Census data on the availability and utilization of women and minorities for all of their recruitment areas.132

These costs are growing. OFCCP has taken a stepped-up enforcement approach that involves more contractors being subjected to on-site, full compliance audits, regardless of whether there are indicators of potential discrimination or other violations. The new regime replaces the previous approach that terminated investigations where initial indicators showed no signs of systemic discrimination.

Ultimately, the ability of employers to add new jobs to the economy depends to a large extent on the costs associated with each particular job. A key point here for policymakers is that it is not just the dollar amounts involved in wages and benefits that influence decisions regarding staffing levels. Such decisions also include numerous other factors regarding whether it is economically feasible to even continue an existing position, let alone add new ones. When it comes to workplace regulation, these factors include:

• The administrative costs associated with compliance with a law or regulation, including the tracking and recordkeeping associated with the data needed to demonstrate compliance;

• The time spent by human resource officers, supervisors, managers, and company leadership in planning and ensuring compliance with each workplace rule;

• The legal costs associated with establishing protocols to ensure compliance while maintaining continuous internal auditing to make certain that these protocols are being followed;

• The potential legal costs for addressing complaints and, ultimately, litigation, as well as defending against enforcement actions brought by the government or private parties where allegations of noncompliance are involved (including the costs of settlement where the expense of defending such actions may exceed the potential liability); and

• The inability to achieve savings or competitive advantages as a result of restrictions that preclude the development of more efficient and productive workplace policies and procedures, even when they may be to the mutual benefit of both the employer and the employees.

EMBARGOED



The failure to contemplate those costs—particularly at a time when the United States is pursuing an agenda which, in President Obama’s words, “will make America a better place to do business and create jobs”133—is a serious deficiency in the nation’s system.

Corporate Human Resource Policy Is Unduly Influenced By the Plaintiff’s Bar Using Ambiguities in Employment Laws and Regulations To Obtain Large Attorney’s Fees

Every large employer has stories about overly aggressive government enforcement authorities who have little understanding or regard for business realities. However, the biggest concern for employers is the explosive growth of employment litigation.

Over the years, the plaintiffs’ bar has learned ways of enriching itself through ambiguities in the law, and the fact that employers generally prefer to avoid the noisome experience of proving themselves innocent. As a result, corporate litigation costs have skyrocketed. This has led one blue ribbon panel to lament:

This tends to discourage even prudent risk-taking and con-sumes resources and vast amounts of time and imposes a severe opportunity-cost. Similarly, the judicial process for resolving disputes tends to be cumbersome and time-consuming, such that firms often have no choice but to settle even frivolous cases if they are to avoid still further damage. This legal process often consumes years or even decades to arrive at a resolution to a dispute, yet many businesses are born, prosper and sometimes fail in five years or less.134

Again, the FLSA provides one of the most egregious examples of this trend. As previously noted, the 1938 law has failed to track the dramatic changes in the workplace, resulting in a disconnect that inevitably leaves all parties—employers, employees, and often even the U.S. Department of Labor itself—guessing at what exactly the law requires. Moreover, many of these difficulties involve the exempt status of certain highly compensated professionals, where the back pay award for unpaid overtime is substantial, particularly when it is folded into a large class action involving all similarly situated employees of a large company. Thus, the number of FLSA lawsuits has quadrupled from about 1,500 per year in the early 1990s to over 6,000 in 2009, 135 and this does not count the number of cases brought under state laws, which often vary from the federal law. Faced with the uncertainties of the law, companies often settle these cases, with a median settlement cost of $7.4 million for federal cases and $10 million for state cases.136 In 2010, two companies settled FLSA class action cases involving misclassified employees for $44.0 million and $42.0 million.137

Despite the economic crisis the country has faced over

the past two and a half years and its impact on

employment, policymakers have generally failed to focus

on ways to alleviate the megaload of existing

employment regulation.

EMBARGOED



Even employers who are in compliance with the law spend a considerable amount of time and resources dealing with nuisance lawsuits driven by the plaintiffs’ bar. All too frequently, these suits are filed with the objective of shaking the employer down for a settlement in return for withdrawing the case, particularly in cases where the law is ambiguous. Moreover, after the plaintiffs’ lawyers take their cut of the settlement for both fees and “expenses,” plaintiffs are often left with crumbs. In the case of class actions, which are now available for most employment laws, the problem is compounded as lawyers often walk away with huge fees while individual plaintiffs may only receive a modest share of the recovery. It should come as no surprise that among all the industrialized nations, the United States has the highest number of lawyers per capita.138

The proliferation of nuisance lawsuits exploiting areas of uncertainty in the laws has become a major economic drain, stifling economic growth. In addition to the direct costs of litigation, critical employment decisions are often driven as much by protecting the enterprise against costly litigation as by making sure the right person is in the right job, which, from a human resources perspective, is the key to the competitiveness of the enterprise and, ultimately, the entire U.S. economy.

CHART 17

The proliferation of nuisance lawsuits exploiting areas of uncertainty in the laws has become a major economic

drain, stifling economic growth.

EMBARGOED



Several Employment Policy Proposals Under Consideration Would Create Additional Employer Liabilities at the Expense of American Jobs

Despite the economic crisis and its impact on employment over the past two and a half years, policymakers have generally failed to focus on ways to alleviate the burden of existing employment regulation. Instead, they have dwelt on a plethora of proposals, some of which have become law. Rather than fixing existing problems, these would add or have added to the costs of employment by mandating new benefits and/or creating new layers of regulation. Among others, these proposals have included:

• The Lilly Ledbetter Fair Pay Act of 2009139, which effectively eliminated the statute of limitations for many if not most pay discrimination actions by triggering a new period with each paycheck, thereby enabling individuals to bring allegations of discrimination years or even decades after the discrimination takes place, despite the fact that statutes of limitations exist for nearly all other criminal and civil laws to avoid fact-finding when memories, documentation, and witnesses have become inaccessible;

• The Paycheck Fairness Act, which would ignite a new explosion of litigation by establishing unlimited jury awards of compensatory and punitive damages for pay discrimination claims and setting a precedent for the same change in all other discrimination laws, while making it easier to prevail in such actions even where the employer used nondiscriminatory factors such as experience, productivity, and education in making selections;

• The Healthy Families Act, which would directly add to the costs of employing American workers by mandating paid sick leave policies—covering all full-time and part-time employees—that would extend well beyond the policies of most large and small businesses;

• The Employee Free Choice Act, which is designed to unionize more workplaces through so-called “card checks” that deny employees the ability to adequately assess the pros and cons of unionization and exercise their choice in an uncoerced confidential manner, while having government-appointed arbitrators decide the wages, benefits, and all other terms and conditions of employment in newly-unionized workplaces;

• New wage and hour reporting requirements, which the U.S. Department of Labor has announced will be proposed in 2011, that would invite employees and independent contractors to pursue litigation against companies based on disputes as to whether they are exempt or nonexempt; and

The government should view employers as partners, not

adversaries, in seeking to ensure that essential

employment protections are in place without impeding

practices that promote employment growth in a way

that benefits employers and employees.

EMBARGOED



• The Working Families Flexibility Act, which would insert the federal government into the decision between an employer and employee on the scheduling and location of work by regulating how the employer responds to those requests and generating litigation where they are denied in whole or in part.

What is most troubling is that these major policy changes, and numerous others, would be considered on a piecemeal basis, with little consideration for the broader perspective of how they would collectively add to the costs of employment, which are already significant under existing requirements. The change in Congress which followed the 2010 elections may slow consideration of the adverse legislative proposals described above, but the U.S. Department of Labor has clearly stated that the election results have had no impact on its agenda. This was underscored when, two weeks after the election, the Department launched a partnership with the American Bar Association (ABA) “to help workers resolve complaints received by DOL’s Wage and Hour Division,” establishing a toll-free number that will connect complainants to an ABA-approved attorney referral service “so they can find a qualified lawyer to help with their claims.”140 Indeed, this “partnership” with the plaintiffs’ bar highlights one of the most significant concerns we have with the existing system—the toll the costs of excessive litigation takes on employment growth.

EMBARGOED




1. A 21st Century Employment Law Reform Commission should be established to ensure a consensus-based review of all existing laws, starting with the antiquated Fair Labor Standards Act, to ensure that those laws fit the contemporary workplace.

Ideally, laws should be constantly reexamined and either fine-tuned or overhauled to reflect both the lessons learned under the law and changes in the activities being regulated. For many federal laws, including those governing most discretionary spending programs, this is ensured by periodic expiration of the law, generally after four or five years, forcing Congress to consider whether the program should be extended and, if so, how. It is true that Congress rarely allows these laws to expire, but by being forced to reconsider them, refinements are made, with some aspects being expanded and others being contracted or even abandoned. While the results are anything but perfect, at least the most obvious needs are addressed—often by consensus of all affected parties.

Regulatory laws, in contrast, virtually never sunset, with employment laws being no exception. Because they never have to be reauthorized, these laws and regulations are placed on the books without any built-in mechanism for reexamination or improvement. If anything, they become more complex and difficult for employers and their employees to navigate through the addition of layers of regulations and interpretations by the courts.

To sunset all federal workplace laws would be both politically and practically untenable. Still, a mechanism should be established for requiring the kind of periodic reexamination that occurs under federal spending laws. Clearly, the need is no less strong.

To fill this void, we propose the establishment of a 21st Century Employment Law Reform Commission. Its purpose would be to audit all existing and future employment laws and propose changes to ensure they are relevant to the existing workplace and responsive to the needs of employers and employees. The Commission would be primarily composed of private sector representatives, drawn from the business community and other key stakeholders. The public sector would be represented for purposes of review of any law whose coverage includes federal and/or state/local employees. Under the new system, the revision of employment laws would be achieved through a strong consensus—though not necessarily unanimity—of key stakeholders.

EMBARGOED



The review of each law would be subjected to a staggered schedule so that, at any given time, only one or two laws would be under review. Because it is so far out of step with the modern workplace, we would recommend starting with the Fair Labor Standards Act. The Commission would be charged with issuing a set of recommendations within a fixed period for each existing law. To ensure a consensus, a high percentage of commissioners—say 60 percent—would have to reach agreement. This would ensure that no side gets marginalized while also protecting against a small minority being able to thwart an otherwise broad consensus.

The key to such a system would be ensuring that the recommendations truly represent a consensus. This can be achieved by structuring the Commission in such a way that no single stakeholder has numerical strength to simply impose its will on all others. One potential way to ensure this would be by giving the President the power to appoint half of the commissioners and congressional leaders from the opposite party the power to appoint the other half. In addition, for each law under review, at least one current and/or former federal official from each party holding office in the agency with jurisdiction over that law would hold the powers of a Commissioner for purposes of that law’s review.

All too often, our employment laws are shaped by one group of stakeholders exerting its political strength to enact a law that meets its needs but not necessarily those of all others. This has a tendency to turn employment policy debates into political warfare even though, underneath the rhetoric, there may be areas of consensus. Under the proposed system, stakeholders would still be free to pursue their objectives, and Congress could still act upon their proposals. The value of the new system would be to engage all key stakeholders in a dialogue seeking common ground and, where a consensus exists, enabling Congress to act upon it.

2. The formulation of new employment policies should ensure that abuses are prevented without adversely impacting competitiveness, utilizing a consensus-building process involving key stakeholders.

Just as existing laws need to be reviewed for their impact on America’s competitiveness and their relevance to today’s workplace, new laws and regulations going forward must also meet this test. To do that, we must rethink how they are formulated. This can be done in the following ways:

EMBARGOED



A. Requiring Certain Components in Any New Law. Congress should impose on itself new constraints before passing any new employment law, requiring that the law include:

• A sunset provision to ensure the law’s reconsideration within a fixed period of time based on experience under the law;

• An analysis of the additional costs the new law will impose on hiring and retaining employees (see item C);

• Involvement by essential stakeholders at all stages of the process, beginning with a reasonable period of time for them to agree upon the terms of any new legislation prior to enactment, while also requiring that the enforcement agency utilize negotiated rulemaking prior to issuing the implementing regulations (see item D);

• An administrative enforcement scheme that ensures prompt resolution of claims, avoiding lengthy and costly litigation (see recommendation #3); and

• A broad federal preemption of any state or local laws regulating the same behavior (see recommendation #5).

B. Asking the Right Questions. Instead of asking whether the law has

identified every single potential abuse by an employer imaginable, policymakers should also ask:

• Is the proposed policy contemporary?

• Is the proposed policy readily understandable by all those affected by it?

• Can the proposed policy be easily and consistently applied and enforced?

• Is there sufficient flexibility in the rules such that employers can accommodate the need for family-friendly and employee-friendly policies without running afoul of the policy?

• Is the proposed policy consistent with what today’s employees genuinely want and need while providing sufficient protections for vulnerable workers?

• What is the objective of the proposed policy, and what is the best way to achieve that objective without causing undue disruptions to employers?

EMBARGOED



• Can the proposed policy account for changes and does it allow for changes in the use of technology, the workplace, and employee lifestyles?

• Do policymakers and regulators fully understand the consequences of the proposed policy’s regulatory scheme as designed before it has been implemented?

• Does the proposed policy demand information that employers do not have or cannot easily obtain without incurring new costs?

• Does the proposed policy contain any elements or requirements that unnecessarily create ill will among employees?

• In the case of regulations, do they impose requirements that are not contained in the statute?

C. Analyzing the Economic Impact on Hiring and Retaining

Employees. Currently, before passing laws and issuing regulations, Congress and the agencies are required to perform various analyses of economic impact, paperwork burdens, cost-benefit ratios, and so forth. Surprisingly, however, none of these required analyses specifically addresses the impact of employment regulations on the costs of hiring and retaining employees. At a time when real unemployment is at unacceptably high levels and likely to stay that way, we believe that an analysis should be conducted of all policy proposals to determine their potential impact on hiring and retaining employees, specifically by examining the following:

• The administrative costs associated with compliance;

• The costs entailed in time spent ensuring compliance by human resource departments and other levels of management;

• The legal costs associated with establishing protocols coupled with regular audits to ensure compliance;

• The potential costs of defending against and/or settling litigation and enforcement actions, recognizing that even employers who diligently comply with the laws are subjected to these; and

• The lost efficiency, productivity, and competitive advantage denied by precluding the development of certain workplace policies and procedures.

EMBARGOED



D. Involvement of Essential Stakeholders in the Formulation of New Policies. The previously described experience under the ADAAA has proven the value of having rules formulated by those actually affected by them, where possible. We recognize that the European social partners-style approach may not work in all instances when it comes to legislation. The dynamics of the American legislative process are such that it is rarely clear that a particular piece of legislation will become law. Nevertheless, we would encourage Congress to follow the ADAAA model when enacting all future employment legislation. Regulations, however, are far more amenable to this process.

Once a law is passed, regulations are a virtual certainty, and the affected parties know that, unless they reach agreement, a regulatory scheme may be imposed that bears little or no resemblance to workplace realities and may become subject to years of litigation.

Currently, the process of “negotiated rulemaking” is rarely used and is typically limited to highly technical areas such as environmental rules where much of the process is driven by scientific data. Yet the experience in passing the ADAAA shows that workplace rules are also amenable to negotiated solutions. Thus, any new employment legislation enacted henceforth by Congress should require the agency charged with promulgating regulations to first give employers and other constituencies a reasonable period of time to achieve a consensus approach before acting on its own. If a consensus is achieved, the agency should be required to adopt it as agreed upon by the parties.

In those cases where it is clear that regulations are not necessary in implementing the new law, the agency should be expressly forbidden from issuing regulations absent a negotiated rulemaking by the interested parties. This new approach to employment regulations could either be achieved on an ad hoc basis as a component of all new laws or, better yet, it could be achieved through amendment to the APA that would apply generically to all new employment regulations.

Any new employment legislation enacted

henceforth by Congress should require the agency

charged with promulgating regulations to first give

employers and other constituencies a reasonable period of time to achieve a

consensus approach before acting on its own.

EMBARGOED



3. Resolution of all federal employment claims should be handled by a dedicated administrative process, not through litigation in federal court.

The United States is one of the few nations that provides for enforcement of many of its employment laws through private actions before juries. These frequently result in significant monetary damages, including liquidated or punitive damages, that go far beyond making the aggrieved employee whole for his or her loss, and cause lengthy delays in the final resolution of employment claims.141 According to a recent report by the prominent law firm Seyfarth Shaw: “[T]he last several years have seen an exponential increase in class action and collective action litigation involving workplace issues. The stakes of this type of employment litigation can be extremely significant, and the financial risks of such cases are enormous.”142

Many employers have tried to address this problem through the formation of alternative dispute resolution (ADR) mechanisms that seek to resolve differences internally before resorting to litigation. If anything, federal employment policy should encourage this, yet policymakers have instead shown more interest in restricting ADR.143

If no other employment regulation reforms are enacted, improving the way those laws are enforced would be a major step toward improving competitiveness in and of itself. The objectives of the scheme should be to:

• Ensure that protections and remedies are quickly available for those individuals who have been wronged by an employer’s violation of the law;

• Deter employers from violating the law; and

• Avoid having employers dragged into lengthy litigation over frivolous and/or nuisance actions based on far-fetched interpretations of the law or facts in the case.

As noted, civil litigation often goes on for years, and it is not uncommon, particularly in class actions, for the plaintiffs to receive little after attorney’s fees, costs, and expenses. Thus, the law should facilitate the resolution of claims and grievances internally before resorting to administrative enforcement. Employers should be encouraged, but not required, to implement mechanisms such as alternative dispute resolution and other internal grievance claims and grievance processes.

For disputes that cannot be handled by employers’ own internal systems, the creation of an administrative hearing process that would be the exclusive adjudication forum would save precious resources and time for both employees and employers.

EMBARGOED



The administrative process would be initiated by an employee outlining the details of an alleged violation in a charge filed with the agency responsible for enforcing the law. The agency would do an initial investigation and, if it was determined that a violation may have occurred, the investigator would allow a claim to be filed with a panel of administrative law judges who focus exclusively on violations involving the law in question. The employee could retain counsel or be represented by counsel from the government agency before the administrative tribunal. Administrative law judges would hear and render a decision in each individual case.

This administrative approach would be superior to the current system because each case would be decided by a judge with significant subject matter expertise. In addition, a decision would be rendered within a matter of months, instead of years, and any back wages and other damages owed by an employer would all go directly to the employee rather than a group of plaintiffs’ lawyers, as is often the case with class actions. To ensure consistency with the underlying law, the decisions would ultimately be reviewable in the federal courts.

4. The U.S. workplace regulatory scheme should be premised on fostering the preservation and creation of jobs, targeting limited resources available for enforcement on those who mistreat their employees.

As long as our employment laws continue to operate on the premise that all employers will try to take undue advantage of their employees absent a specific prohibition in law or regulations, employment growth will continue to be inhibited by unnecessary rules that burden primarily the good employers. Meanwhile, a failure to target the laws and their enforcement will enable most scofflaws to continue to seek ways to circumvent the law, hoping they never get caught.

A recent example involves enforcement activity by the EEOC regarding alleged violations of the ADA. Though the ADA addresses legitimate workplace concerns, its basic requirement that employers make a “reasonable accommodation” for employees with disabilities is vague at best. In fact, well-intended employers struggle with it almost as much as any other requirement under employment law. One of the most difficult areas of accommodation for employers is providing leave to employees whose disability requires either brief or extended absences from the workplace. These leaves may be more extensive than those required under the FMLA, yet unlike that law, there are no precise contours for the amount of leave required—it is simply whatever is deemed a “reasonable accommodation.”144 Meanwhile, in enforcing this aspect of the ADA, the EEOC has targeted companies that already have the best workplace policies, such as those that already provide up to a year of leave for any purpose. Legal experts

EMBARGOED



may differ on what the law requires, but the real question is why is the EEOC singling out the most generous employers for its enforcement activities?

There will always be a small minority of employers who will try to take advantage of their employees, just as there will always be a small minority of employees who will try to take advantage of their employers. It is important to recognize that the vast majority of employers understand that running a workplace that lacks respect for employees, that does not have fair compensation, that does not provide essential health and safety protections, and that does not insist on nondiscriminatory treatment ultimately becomes a self-defeating practice that results in a loss of competitive edge.

5. Employers should be able to maintain uniform human resource policies in all fifty states through a broad federal preemption of state and local employment laws.

One of the most successful federal employment policies has been the broad preemption by the Employee Retirement Income Security Act (ERISA) of state and local laws regulating self-insured employer provided health insurance. This has saved employers and their employees considerable sums by enabling large employers with multi-state operations to provide uniform benefits across the country, thus avoiding administrative costs that would be involved in seeking to micromanage differences among thousands of jurisdictions. Unfortunately, with the exception of the NLRA, most federal employment laws lack such a broad preemption.

The wage and hour area provides a number of compelling examples. On top of all the problems created by the federal wage and hour laws described elsewhere in this paper, additional inflexibilities and complexities are created by state laws, which are not preempted as long as they are more “protective.”145 Thus, California has significantly narrower criteria for determining which employees are exempt from overtime. As a result, one employee working in California and another working in a neighboring state for the same company, may be subject to entirely different scheduling and compensation schemes even though they are performing exactly the same kind of work.146

In addition, states may provide varying definitions of the workweek or other factors determining when overtime must be paid. In California, most employees must be paid overtime for any hours worked in excess of eight in a single day, regardless of how many hours he or she works the rest of the week. In addition, an employer must provide a 30-minute meal break during which the employee is relieved of all duties, unless the job requires the employee to be on duty during meals, such as a security guard at a remote location.147

EMBARGOED



Thus, a nonexempt employee must be forced by the employer to take a half-hour lunch break, even if the employee would prefer a working lunch that would enable him or her to leave work a half hour earlier. In situations where nonexempt employees work closely with exempt employees, this is yet another situation where the wage and hour law creates divisions in the workplace.

As has been done under ERISA and the NLRA, federal policymakers should recognize that employment policy is a national concern, and federal laws should serve as both a floor and a ceiling for what is required and what is protected. Because state and local laws have proliferated in a number of areas—most prominently wage and hour and employment discrimination—we fully recognize the political obstacles to dismantling these laws by applying preemption to existing statutes. However, at a minimum, any new enactments should include preemption as a standard feature. In addition, Congress could create a far more competitive economic environment if multi-state employers were only subject to federal labor, employment, and benefit laws.

EMBARGOED


V. Reining In U.S. Health Care Costs To

Encourage Employment Growth: A Challenge to the Health Care Supply Chain

The United States has among the highest labor costs in the world, a factor that inhibits companies from expanding existing operations inside its borders and from locating new operations here. A significant contributor to this high-cost equation is health care benefits. Despite myriad attempts over the years to rein in the cost of health care in the United States and improve its efficiency, including passage of the Patient Protection and Affordable Care Act, health care costs continue to outpace general inflation and are having a dampening effect on job growth in the United States. This dampening effect will continue to worsen as long as this trend continues.

To Be Competitive, U.S. Employers Need a Healthy and Productive Workforce Supported by a Stable Health Care System Providing High Quality Care at Affordable Prices

Employers need our nation’s health care system to ensure:

• A healthy and productive workforce;

• A high quality health system that delivers affordable care;

• Greater consumer accountability;

• Predictable health care costs for which they can budget; and

• Costs that do not outpace those of our global competitors.

The strength of an economy depends on the quality of its workforce, and employers cannot be successful without having access to a pool of healthy and productive employees. In the United States, many employers sponsor comprehensive health benefits because they believe it is the best way to ensure their employees and families will receive timely access to health care. Consequently, an effective health care system in the U.S. must incorporate the five basic characteristics listed above.

EMBARGOED

Blueprint for Jobs Reining In U.S. Health Care Costs To Encourage Employment Growth


The Health Care System in the United States Is Not Stable Nor Does It Provide High Quality Care at Affordable Prices

It is axiomatic that in addition to ensuring the health and productivity of their employees, employers need access to a health care system that avoids making the costs of the goods and services they provide consumers unaffordable. However, the high cost of health care in the United States not only places an unsustainable strain on employers, individuals, government, and the nation’s economy, it is also a major barrier to job growth.

The United States spends approximately $7,681 per person on health care, or nearly 17 percent of its GDP, more than any other industrialized nation.148 Canada, by contrast, spends $2,998 per person, approximately ten percent of its GDP on health; the U.K. spends $2,317 per capita, which is about 7.5 percent of GDP; and Germany spends $2,983, or about 11 percent of GDP.149 Moreover, since 1980, the U.S. has had one of the highest growth rates in per capita health spending among industrialized nations.150 Because more Americans—160 million—are covered through employer-sponsored benefits than any other source of coverage, employers and employees are heavily impacted by the problems plaguing our health care system.

CHART 18

EMBARGOED



Family premiums for employer-sponsored health insurance increased 138 percent between 1999 and 2010, while employees’ wages increased by only 36 percent and overall inflation increased by an even lower amount, 31 percent.151 Of particular concern, health care premiums could rise an additional 94 percent to an average of $23,842 per family by 2020 if health costs continue on the current trajectory, which will further constrain take-home pay and stifle job creation.152 Businesses, their employees and families, and state and local governments are straining to finance health care, and they will reach a breaking point in the near future if costs cannot be controlled.

CHART 19

Despite the high cost of medical treatment in the U.S., the quality

of care that Americans receive for many conditions does not justify the cost. The average American life expectancy of 78 years is below that of its major trading partners.153 For example, Canada’s life expectancy is 81, with Germany’s and the U.K.’s life expectancy at 80.154 While the U.S. receives high marks relative to other nations overall in certain areas such as cancer treatment, it consistently ranks below average on other performance measures. America has the highest infant mortality rate when compared to Canada, Germany, and the U.K. The U.S. also falls below average in areas amenable to prevention and treatment, such as adult asthma care, premature mortality due to complications from diabetes, and patient safety.155 In addition, when ranked against Austria, Canada, Germany, the Netherlands, New Zealand, and the U.K., the United States falls dead last when measuring access, coordination of care, efficiency, and equity.156

Health care costs in the United States far exceed

those of its global competitors; therefore,

companies doing business in America and their workers

are at a significant competitive disadvantage in

the international marketplace.

EMBARGOED



The Cost of Health Benefits in the United States Hinders the Competitiveness of Employers Doing Business in America

Because health care costs far exceed those of the nation’s global competitors, companies doing business in the U.S. and their workers are at a significant competitive disadvantage in the international marketplace. Health care is one of the most expensive benefits paid by American employers, exceeding costs for life insurance, paid leave, and all legally required benefits such as Social Security and unemployment.157 In 2009, employers spent $648.3 billion on health care, or approximately 42.4 percent of the total they spent on all benefits.158 This situation only grows worse as costs rise at a more rapid rate than employees’ earnings, company profits, and corporate revenue. One RAND study found that faster growth in health care costs has a greater adverse impact on the employment and output of those industries with the highest percentages of employees with employer-sponsored health benefits (e.g., manufacturing, telecommunications, education, and finance), compared to those industries with lower levels of employment-based coverage.159 As a result, the burden of high health care costs is a major factor that global employers must take into consideration when determining where to place jobs and whether to increase or decrease employment levels.

The New Health Care Reform Law Does Not Adequately Address Underlying Cost and Quality Issues. It Has Increased the Cost of Health Care for Employers and Employees

Reforming health care is not only a moral obligation that must address the problem of the uninsured; it is an economic imperative if America is going to compete in a global economy. Large employers were hopeful that the most recent effort to reform America’s health care system would move the nation in both directions, but they do not believe the recently enacted Patient Protection and Affordable Care Act (PPACA) provides a comprehensive enough solution. PPACA’s primary focus was addressing the problem of the uninsured and expanding access to care. The law puts in place strong mechanisms aimed at ensuring all Americans have access to health insurance. It does so through a combination of broadened government entitlement programs such as Medicaid, requiring employers to cover certain employees and dependents or pay fines, establishing new health insurance exchanges, mandating that health insurers take all comers without regard to preexisting conditions, obligating most residents to maintain health insurance, and providing subsidies to help people afford coverage.

Reforming health care is not only a moral obligation that

must address the problem of the uninsured; it is an

economic imperative if the U.S. is going to compete in a

global economy.

EMBARGOED



Where PPACA falls significantly short is in controlling health care costs. In fact, PPACA will actually increase costs for many large employers because of new benefit mandates, taxes, and increased cost-shifting from Medicare and Medicaid. In a March 2011 survey of HR Policy Association members, not a single company said the law would lower its health care costs. They further said that reform will increase costs, with 33 percent saying it will do so by six to ten percent, 12 percent saying it will increase costs by more than ten percent, and 53 percent say it will increase costs by zero to five percent. Similarly, a Towers Watson survey found that 69 percent of large employers believe health reform will increase the cost of their benefit programs.160 In addition, a Commonwealth Fund survey of a diverse group of health care experts found that only 38 percent believed PPACA legislation will improve the affordability of health insurance for Americans who already have coverage, and only 35 percent believe the law will begin to control rising health care costs and not add to the federal budget deficit.161

To be sure, PPACA does take some important steps that can begin to make the health care marketplace more competitive and accountable, as well as steps to improve health care quality. The law includes pilot projects to address delivery system reforms that can ultimately help contain costs, such as investments to strengthen primary care, efforts to make health care pricing and quality more transparent, and steps to begin reforming the way health care providers are paid under public programs. For example, PPACA will require the release of Medicare claims data, for the first time facilitating the ability of purchasers to use that information to compare the relative efficiency and quality of health care providers.

Also, PPACA will phase in payment reform requiring hospitals to risk a percentage of Medicare payments if they do not meet certain quality measures. Further, the statute provides for comparative effectiveness research to assess the relative value of treatment alternatives and help patients make informed decisions. And it allows employers to increase the financial reward for employee participation in workplace wellness programs.

Though these are important steps, the law viewed in its totality primarily broadens access while failing to make meaningful changes in the way health care is delivered by the supply chain, and then places the primary burden for paying for this broadened access on employers and employees. Even after the passage of PPACA, spending on federal health care programs is expected to more than double between 2011 and 2021, rising by an average of about seven percent per year.162

PPACA primarily broadens access while failing to make

meaningful changes in the way health care is delivered

by the supply chain, and then places the primary burden for

paying for this broadened access on employers

and employees.

EMBARGOED



According to Andrew Liveris, chairman and chief executive of Dow Chemical, “I not only have high taxes, I have uncertain taxes… health care and the uncertainty around the health-care bill, and what’s going to end up happening there.”163 He continues, “Right now, I have more regulations coming at me that are not fact-based, not science-based, not data-based. I actually don’t even know what my costs are going to be in the next five years.”164

If federal health care policy fails to rein in costs, the United States can expect health care to continue to be a drag on both job creation and the take-home pay of American workers.

The Legal, Legislative, and Political Challenges Confronting PPACA Leave Employers and Employees in Limbo Regarding the Future of Health Care, Inhibiting Employers From Implementing Long-Term Hiring and Benefits Strategies

Currently, a foundational element of PPACA—the individual mandate requiring people to maintain health insurance—is being challenged as unconstitutional in federal courts.165 Conflicting decisions on this issue have set the stage for the U.S. Supreme Court to settle the matter, but this resolution will very likely not occur for years. Given that people generally wait until they are sick to buy coverage, removing the individual mandate would likely destabilize the private insurance market and drive up premiums for all, collapsing the entire system created by PPACA.

At the same time, the House of Representatives has already voted to repeal PPACA, and Congressional opponents of the law are discussing ways to not provide funds to implement many of its key provisions. The state exchanges are a key element of the bill, yet each state appears to be taking a different approach regarding whether to set up an exchange and how will it will operate the exchange, a trend that negatively impacts large employers operating in several different states. Other PPACA provisions, such as the controversial excise “Cadillac” tax on high-cost plans, are not scheduled to take effect until 2018, providing ample time for the unpopular provision that provides key financing for the program to be amended or overturned by Congress. Further, public support for the new law is marginal, and its approval ratings have not increased since enactment in April of 2010, which means the political process could produce more changes to the law following the 2012 elections.

Employers require some level of certainty not only about costs, but also about the rules and regulations under which they will have to operate their benefits programs. The current ambiguity regarding the

If PPACA fails to rein in costs, our nation can expect health care to continue to be a drag on both job creation and the

take-home pay of American workers.

EMBARGOED



eventual shape of the health care system created by PPACA renders it impossible for companies to make long-term plans regarding employer-sponsored benefits. That factor, coupled with PPACA’s acceleration of health care cost increases for large employers, explains why larger companies are hesitant to expand operations and increase employment levels in the United States. Employers in the U.S. are sitting on cash right now, and one reason is because they cannot be sure what the bill for PPACA might be in the coming years. Also, it should not be forgotten that PPACA, while seeking to transform health care in the United States, was not enacted with a broad mandate. Rather, it was a bitterly partisan piece of legislation which cleared Congress by the thinnest of margins. For many employers, that means it could be pulled back by Congress in the coming years by equally thin margins.

Fueling Uncertainty for Large Multi-State Employers Is the Drift Towards Shifting the Responsibility for Health Care Reform from a Uniform Federal Approach to 50 States Going in Different Directions

All HR Policy Association members operate in several states across America, and a large number operate in all 50 states. That means these employers provide health care to their employees in multiple states. The ability of large multi-state employers who provide health care on a self-insured basis to administer their programs uniformly across America has been a relative success in the otherwise flawed health care system in the United States. Their ability to do so is the result of the strong preemption provision under ERISA.

ERISA preemption prohibits state and local governments from imposing requirements on self-insured, employer-sponsored plans that would interfere with the ability of multi-state employers to design and maintain health care plans that meet their unique needs. Nationwide uniformity in benefit design and administration is extremely important because it promotes substantial efficiencies and significantly reduces costs to employers, employees, and dependents. It streamlines communications and promotes better understanding of coverage options by allowing employers to offer a standard set of benefits across the country. Further, it allows employers to obtain better pricing with national or regional health care providers by allowing them to negotiate contracts on a national basis. Finally, uniformity permits companies to provide similar benefits to their workers (regardless of where they reside), which promotes equity and the ability of employees and retirees to freely move from state to state and city to city without concern for benefit changes.

The uncertainty and ambiguity surrounding

PPACA prevents companies from making long-term plans

regarding employer-sponsored benefits.

EMBARGOED



Of great concern is the steady drift in public policy towards allowing each state to go in its own direction on health care. One of the chief concerns of multi-state employers is that the states, in establishing the health insurance exchanges under PPACA, may undermine the ability of multi-state employers to uniformly design and administer health benefits. This would result in subjecting multi-state employers to numerous sets of operating requirements, a change that would be administratively burdensome and costly for them, and may make it unworkable for these employers to continue providing employer-sponsored benefits. The Association is hopeful that no attempts are made to weaken ERISA preemption in connection with the creation of health insurance exchanges or in any other aspect.

The Cost of Undercompensated Care in the United States Is Unfairly Shifted by Health Care Providers To Employers and Employees Who Purchase Care, Driving Up the Cost of Labor

Employers, who are the primary source of private health insurance coverage in the United States, must also contend with cost shifting—the practice of health care providers charging private payers higher rates to compensate for the cost of care that is unpaid or only partially paid by uninsured patients and government programs such as Medicare and Medicaid. In 2006, for example, physicians made an average of 20 percent less from Medicare than private payments, and Medicare paid hospitals up to 30 percent less. 166 Similarly, Medicaid typically pays physicians and hospitals about 30 to 40 percent less, respectively, than private rates.167 Unlike the federal and state governments, which legislate reimbursement levels for entitlement programs, employers must negotiate with doctors and hospitals for their services, and they cannot force them to accept unilaterally imposed payment rates as the federal and state governments are able to do. As a result, efforts to arbitrarily cut reimbursement rates for public programs to control government costs will very likely result in higher costs for private payers.

Although PPACA will reduce cost shifting to private payers from uncompensated care as the number of uninsured individuals is reduced, it is very likely to increase cost shifting from Medicare and Medicaid. For example, PPACA calls for significant reductions in hospital payments under Medicare. Unless this can be achieved through the more efficient delivery of hospital services, those reductions are likely to lead hospitals to make up some or all of the cuts through higher fees for private payers.

EMBARGOED



In addition, the law expands Medicaid eligibility to cover all adults whose family income is below 133 percent of the federal poverty level, adding an additional 16 million Americans to the program. Given the gap between Medicaid reimbursement rates and private insurance rates, it can be expected that providers will charge employers higher fees to make up for the Medicaid expansion. One study estimates that PPACA will increase cost shifting to private-sector payers by an average $20.7 billion per year if the law is fully implemented.168

Attempts by Employers As Well As Federal and State Governments to Rein In Health Care Costs Have Largely Failed to Achieve Their Objectives

During the past three decades, there have been numerous attempts to control health care costs by private sector employers as well as state and local governments, yet they continue to face unsustainable cost increases. For example, private payers and governments tried managed care and HMOs in the 1990s, but it resulted in severe consumer backlash with only limited and temporary success at holding down costs. Similarly, employers have worked collectively with insurers through regional initiatives to increase transparency by trying to push for public reporting of cost and quality information by health care providers. These efforts have met with mixed success, but here again, those initiatives that are considered successful have not been able to bring costs anywhere close to general inflation trends. Consumer-directed health plans are now being tried to determine whether they can check costs. While these plans are showing signs of lowering costs relative to other benefit designs, it is still unclear whether they will yield significant long-term improvements. A key element needed for these programs is transparency in cost, price, and quality, something that the health care supply chain has been unwilling to provide.

The federal and state governments have not had any better success. Although fees paid for services within Medicare and Medicaid are lower because the government can dictate reimbursement rates, these programs will be a growing strain on federal and state budgets as the baby-boomers retire and PPACA significantly increases the number of Medicaid beneficiaries. Even with the passage of PPACA, spending for health programs will more than double between 2011 and 2021, rising by an average of about seven percent per year according to the CBO.169 Of that growth, higher spending for Medicare will account for about 30 percent, higher spending for Medicaid accounts for roughly 40 percent, and the remainder will stem primarily from the new subsidies provided through health insurance exchanges beginning in 2014.170

EMBARGOED



Moreover, the current formula that governs fees for physician services under Medicare has called for significant reductions in those fees for the last several years. However, every year since 2003 Congress has blocked those politically unpopular cuts to physician fees with so-called “Doc Fix” bills that either freeze current rates for a year or two or provide slight increases for Medicare fees. Assuming this pattern holds and future legislation overrides the current Medicare reimbursement formula, spending on Medicare will be $250 billion higher than the CBO projected when PPACA was analyzed. Medicaid spending is projected by CBO to grow at an average of more than nine percent per year, primarily because of the substantial jump in the number of beneficiaries under PPACA and the increase in the federal share of spending for certain groups of new enrollees.

Significantly, these problems are not limited to private employers and the U.S. federal government. The health care costs of state employees and the retirees of state governments have risen at a similar rate to those of private employers, creating serious budgetary problems in many states and localities. For example, in 1994, the State of Tennessee enacted a Medicaid waiver program to expand access to Medicaid coverage and control rising state health care expenditures. The program led to massive increases in the state’s health funding obligations. Ultimately, state lawmakers had to slash enrollment and reduce benefits.

More recently, Massachusetts put in place a health reform law that is similar to PPACA with its reliance on health insurance exchanges, means-tested premiums subsidies, benefit mandates, and an individual mandate. Several years after enactment, however, the state is facing significant funding challenges in spite of a large infusion of federal funding to keep the program solvent in its early years. Costs are increasing, and initial estimates about the number of people who would receive subsidized coverage proved to be below actual enrollment. Massachusetts will soon have to face the prospect of scaling back benefits, increasing penalties and mandates, or reducing enrollment.

Two Elements That Drive Healthy Markets—Transparency and Choice—Are Woefully Lacking in the U.S. Health Care System

Most economic markets are driven by consumers who have at their fingertips information on the cost, price, and quality of the goods and services available in those markets. Over time, markets with such transparency trend towards lower costs and higher quality. The health care market place, however, is not one of those markets. Instead, the price and quality of health care is one of the best kept secrets in

EMBARGOED



America. At the same time, many consumers have no knowledge of the cost of their health care services because they receive coverage through a third party that pays for their health insurance.

We want consumers to take greater responsibility for their health and have readily available information and strong incentives to motivate them to select the most cost-effective providers and treatments. To that end, consumers should pay more when they use low-quality services and providers. In addition, it is essential that Americans take personal responsibility for their health. Whether managing chronic conditions or paying more for health insurance for avoidable high-cost behaviors such as smoking, consumers must be more engaged in the effort to contain health care costs.

The Prevailing Reimbursement System in Health Care Encourages Higher Volume and Intensity of Services Instead of Providing the Most Effective Treatments As Efficiently As Possible

Health care providers, including doctors, hospitals, and medical device and drug manufacturers, have contributed impressive advances in technology and practices that have improved health, safety, and longevity. Unfortunately, these same advancements in health care have also been accompanied by skyrocketing costs. In other fields such as the automotive industry, transportation, consumer appliances, and personal technology, advances in products and systems design yield consumer enhancements that improve the consumer experience while also lowering costs overall for new services and products. Just the opposite is too often the case in health care.

A major factor driving this trend is that the prevailing reimbursement system in health care provides the wrong incentives. Most health care in the United States is paid on a fee-for-service basis, which encourages providers to deliver a higher volume and higher intensity of services, instead of providing the most effective treatments as efficiently as possible.171 In other words, the prevailing incentives in the U.S. health care system have been aligned to maximize the volume of health care transactions, not wellness and efficiency, and those incentives have been remarkably successful in making health care in the United States more expensive than in any other country in the world. In addition, new procedures and treatments along with broader application of existing treatments often add to health care spending without yielding improved outcomes to justify the added cost.

EMBARGOED




1. The executive, legislative, and judicial branches of the federal government, as well as state governments, need to move as quickly as possible to resolve the uncertainties over the future of the health care system in America.

The debate over the Patient Protection and Affordable Care Act needs to be brought to an end and a stable system put in place so that employers understand their obligations under the law for providing health care to employees, their dependents, and retirees. If the court challenges drag on for years, if the law remains in place while key elements of the PPACA program are defunded by Congress, and if states cannot figure out amongst themselves the most efficient way to operate exchanges, it will be very difficult for employers to make long-term business and staff plans in the United States other than by minimizing the number of new people they employ while the politics of the issue plays out. Business thrives in the soil of a certain and predictable regulatory environment. For the foreseeable future, American employers have little idea of what they will be required to provide in health care coverage for their employees over the long term.

2. The health care supply chain must accept responsibility for reengineering itself to improve quality and reduce the cost of health care in the United States for both employers and employees in order to make American products and services more competitive.

As documented in detail above, the cost of health care in the United States is already far too high. Allowing those costs to rise higher will have an even more negative impact on job growth in the United States. In this paper, we are not making a series of specific recommendations regarding how the health care supply chain should reengineer itself to reduce costs and improve quality. Employers have been trying to do that for years with little, if anything, to show for their efforts. Hundreds of thousands of papers have been written on the subject. University chairs have been endowed to study the issue. Hundreds of think tanks have been working on the challenge. Entire careers of some of the smartest people in the country have been devoted to trying to find the cure. But in the end, to borrow a phrase, only the physician can heal himself or herself. The health care supply chain has within itself all the solutions to achieving greater quality at a lower cost. The nation is waiting for the person or organization from this sector with the courage and vision to step forward and make the necessary changes.

EMBARGOED



Moreover, most members of the HR Policy Association do business globally, and they have great familiarity with systems in other countries that work far more efficiently than the system currently in place in the United States. They know that America can come up with an efficient health care system if it chooses to do so.

For years employers have studied all the various factors that influence cost and quality in the American health care system. They know that providers operate under perverse incentives that reward the volume of services delivered, rather than the quality and efficiency of the care provided. Those who pay for health care services have tried to inject market-based principles that foster competition among health care providers and choice among consumers to help lower overall costs and increase value within our health care system. Yet it is indisputable that those who pay for health care have been unable to obtain greater efficiency and lower costs, no matter what changes they have suggested. Perhaps employers and individual consumers do not have the adequate leverage to force change in certain geographic markets. Perhaps it is the lack of transparency regarding the pricing of services and treatments. Regardless of the cause, the health care supply chain must stop resisting these forces and accept the task of reengineering itself to lower costs. If it does not do so, then it needs to prepare itself for the eventual political pressures that will result in greater government intervention to regulate the market.

What employers find particularly surprising is the lack of breakthrough thinking by the health care system to drive rapid innovation and improvement. Virtually every other economic sector of the United States has met the challenge of global competition and the opportunities created by the information age to keep costs in check and quality high. But not health care.

The health care organization that figures out a way to reengineer the existing dysfunctional system successfully, that comes up with a system that provides employers certainty by having an affordable, fixed, per-employee cost that emphasizes high-quality care, and that focuses on keeping people healthy instead of maximizing health care transactions, will find both employers and employees lined up outside its door. Yes, governments may not have the political will to move away from the fee-for-service payment systems, but providers still have it in their power to take control of their own destiny and promote new approaches to health care delivery and financing.

EMBARGOED



3. The cost, price, and quality of health care in the United States must be far more transparent.

For consumers to drive the health care market, it is imperative that the cost, price, and quality of health care be completely transparent. Purchasers and consumers of health care need national standards that require comprehensive disclosure and public reporting of cost and quality information for health care providers, insurers, and treatment options to make informed decisions for themselves and their families when choosing care and care givers. This includes providing access to Medicare claims data to facilitate health care payers’ and consumers’ efforts to assess the relative effectiveness and efficiency of health care providers.

4. The ability of multi-state employers to design and maintain health care plans that meet their unique needs must be maintained.

As discussed above, one aspect of the otherwise flawed health care system in the United States that has actually worked well has been the ability of large multi-state employers who provide health care on a self-insured basis to administer their programs uniformly across states. ERISA preemption protects an employer’s ability to maintain national uniformity in benefit design and administration. This is extremely important because it promotes substantial efficiencies and significantly reduces the complexities and costs to employers, employees, and dependents. Attempts to weaken or infringe on employers’ ability to uniformly administer their health plans across state lines should be rejected. Such measures would increase administrative burdens and costs and seriously undermine multi-state employers’ ability to continue providing employer-sponsored benefits.

EMBARGOED


VI. Conclusion

In this report the members of HR Policy Association have presented a detailed description of the perspectives of chief human resource officers from America’s largest employers regarding the changes needed to stimulate greater job growth in the private sector in the United States. To be effective, these changes will require a significantly different approach to educational achievement, government policymaking, and employment practices in America by government, educators, students, jobseekers, employees, and employers. Distilled to the key point, there must be a recognition of the significance of the new global economy coupled with a will to work collaboratively to overcome the challenges and take advantage of the opportunities it brings.

We hope that the reader comes away from reading Blueprint for Jobs in the 21st Century with a realization that the approaches used to educate, regulate, and protect the workforce in the last century need to be modernized if American competitiveness is to be restored. American employment policy in the 20th century was based on balancing competing blocks of economic, regulatory, and legal power located inside the borders of the United States. Employment policy during the past 100 years, for example, has been characterized by union versus management interests, trial lawyers against employers, and regulatory policy pitting worker rights against corporate power. In the new global economy, there are significantly different forces competing with one another. The economic borders of nations have disappeared, and the new competition is between the quality of the American workforce against that of the many nations now contending for the resources, investment, and economic opportunities that Americans have long enjoyed.

Therefore, for quality jobs to be located in the United States, all Americans and all of America’s institutions should neither be operating in conflict with one another nor failing to support each other as happens too often today. Rather, they should be working in close collaboration to develop the skills, human resource policies, and regulatory systems necessary for quality employment opportunities in the United States that retain the fundamental protections characteristic of the American commitment to fairness and justice.

EMBARGOED

EMBARGOED


VII. Appendix

The National Commission on Fiscal Responsibility and Reform, The Moment of Truth, December 2010. The President’s Economic Recovery Advisory Board, The Report on Tax Reform Options: Simplification, Compliance, and Corporate Taxation, August 2010. U.S. Department of the Treasury, Treasury Conference on Business Taxation and Global Competitiveness, Background Paper, July 23, 2007. Patrick Fleenor and Jonathan Williams, Options for Reforming the U.S. Corporate Income Tax, Tax Foundation, May 8, 2006. Alan J. Auerbach, A Modern Corporate Tax, Center for American Progress and The Hamilton Project, December 2010. Taxing American Corporations in the Global Market Place, Business Roundtable, April 2011. Roadmap for Growth, Business Roundtable, December 2010. Chuck Marr and Brian Highsmith, Six Tests for Corporate Tax Reform, Center on Budget and Policy Priorities, February 28, 2011. Understanding Trade, Business Roundtable, January 2007. The State of World Trade, U.S. Chamber of Commerce, May 2010. Opening Markets, Creating Jobs: Estimated U.S. Employment Effects o f Trade with FTA Partners, U.S. Chamber of Commerce, May 2010. A Transition Plan for Securing America’s Energy Future, Institute for 21st Century Energy and U.S. Chamber of Commerce, November 2008.

EMBARGOED

EMBARGOED


VIII. Endnotes

1 President Barack Obama, State of the Union Address (Jan. 25, 2011), available at

http://www.whitehouse.gov/the-press-office/2011/01/25/remarks-president-state-union-address. 2 See generally NAT’L ACAD. OF SCI., NAT’L ACAD. OF ENGINEERING & INST. OF MED., RISING ABOVE THE

GATHERING STORM, REVISITED: RAPIDLY APPROACHING CATEGORY 5 (The National Academies Press 2010). 3 Interview on Morning Joe, “Brown: World facing epidemic of youth unemployment”, available at http://www.msnbc.msn.com/id/3036789/vp/42531432#42531432 4 Peter Ha, Amazon Announces New $139 Kindle, TIME MAGAZINE, July 28, 2010,

http://techland.time.com/2010/07/28/amazon-announces-new-139-kindle/. 5 Thomas Jefferson: Jefferson’s Library, LIBRARY OF CONGRESS,

http://www.loc.gov/exhibits/jefferson/jefflib.html. 6 Alan Fram, One in Four Read No Books Last Year, WASH. POST, Aug. 21, 2007, available at

http://www.washingtonpost.com/wp-dyn/content/article/2007/08/21/AR2007082101045.html 7 Julianne Pepitone, Amazon sales pop as Kindle books overtake paperbacks, CNNMONEY (Jan. 27, 2011),

http://money.cnn.com/2011/01/27/technology/amazon_earnings/index.htm. 8 Inc. (UPS) United Parcel Service – Early History, FREE ENCYCLOPEDIA OF ECOMMERCE, INC.,

http://ecommerce.hostip.info/pages/1025/United-Parcel-Service-Inc-UPS-EARLY-HISTORY.html. 9 ABOUT UPS: WORLDWIDE, http://www.ups.com/content/us/en/about/facts/worldwide.html (last visited Apr. 5,

2011). 10 Inc. (UPS) United Parcel Service - Early Information Technology Efforts, FREE ENCYCLOPEDIA OF ECOMMERCE,

INC., http://ecommerce.hostip.info/pages/1026/United-Parcel-Service-Inc-UPS-EARLY-INFORMATION-TECHNOLOGY-EFFORTS.html.

11 ABOUT UPS: 1981-1990, http://www.ups.com/content/corp/about/history/1990.html (last visited Mar. 30, 2011). 12 Inc. (UPS) United Parcel Service - Early Information Technology Efforts, FREE ENCYCLOPEDIA OF ECOMMERCE,

INC., http://ecommerce.hostip.info/pages/1026/United-Parcel-Service-Inc-UPS-EARLY-INFORMATION-TECHNOLOGY-EFFORTS.html. [INTERNAL X-REF: Inc. (UPS) United Parcel Service, supra note XX. ]

13 Walter Williams, True or False: Global Warming, Manufacturing Decline, NEW AMERICAN (Jan. 5, 2011), available at http://www.thenewamerican.com/index.php/opinion/walter-williams/5764-true-or-false-global-warming-manufacturing-decline.

14 BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR, DATA RETRIEVAL: LABOR FORCE STATISTICS (CPS), HOUSEHOLD DATA, TABLE A-8, EMPLOYED PERSONS BY CLASS OF WORKER AND PART-TIME STATUS (Feb. 4, 2011), http://www.bls.gov/webapps/legacy/cpsatab8.htm.

15 BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR, DATA RETRIEVAL: EMPLOYMENT, HOURS, AND EARNINGS (CES), ESTABLISHMENT DATA, TABLE B-1, EMPLOYEES ON NONFARM PAYROLLS BY INDUSTRY SECTOR AND SELECTED INDUSTRY DETAIL (Feb. 5, 2010), http://www.bls.gov/webapps/legacy/cesbtab1.htm (last visited Mar. 30, 2011).

16 Stephen Manning, Is Anything Made in the U.S.A. Anymore?You'd Be Surprised, N.Y. TIMES, February 20, 2009, available at http://www.nytimes.com/2009/02/20/business/worldbusiness/20iht-wbmake.1.20332814.html.

17 Amazon.com, Inc., Annual Report (Form 10-K) (Dec. 31, 2010). 18 BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR, OCCUPATIONAL EMPLOYMENT STATISTICS, MAY 2009

NATIONAL INDUSTRY-SPECIFIC OCCUPATIONAL EMPLOYMENT AND WAGE ESTIMATES , NAICS 517200 – WIRELESS TELECOMMUNICATIONS CARRIERS (EXCEPT SATELLITE) (May 14, 2010), http://www.bls.gov/oes/current/naics4_517200.htm.

19 JEREMY RIFKIN, THE END OF WORK: THE DECLINE OF THE GLOBAL LABOR FORCE AND THE DAWN OF THE POST-MARKET ERA 144 (Jeremy P. Tarcher/Penguin 1995).

20 U.S. CENSUS BUREAU, STATISTICAL ABSTRACT OF THE UNITED STATES: 2001 380 (121st ed. 2004) ( referring to Table No. 593, calculated as the number of executive, administrative, and managerial employees divided by the number of secretaries, stenographers, and typists).

21 Press Release, United Nations Econ. Comm’n for Europe, World Robotics 2004 (Oct. 20, 2004) (see Table 1); Press Release, United Nations Econ. Comm’n for Europe, World Robotics 2002 (Oct. 1, 2002) (see Figure 1).

22 Oliver Wyman, The Harbour Report 2005 (2005); weighted average based on North American production volume.

EMBARGOED

Blueprint for Jobs Endnotes

23 INT’L MONETARY FUND, WORLD ECONOMIC OUTLOOK UPDATE: GLOBAL RECOVERY ADVANCES BUT REMAINS

UNEVEN (Jan. 25, 2011) (see Table 1), http://www.imf.org/external/pubs/ft/weo/2011/update/01/index.htm. 24 CENT. INTELLIGENCE AGENCY, THE WORLD FACTBOOK, Country Comparison: Population,

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2119rank.html (last viewed Mar. 30, 2011).

25 CENT. INTELLIGENCE AGENCY, THE WORLD FACTBOOK, Country Comparison: GDP (Purchasing Power Parity), https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html (last viewed April 12, 2011).

26 Beth Day Romulo, Asia’s Rising Middle Class, THE MANILA BULLETIN, Sept. 29, 2010, available at http://www.mb.com.ph/node/279682/a.

27 Id. 28 John Reed, U.S. car sales below 10m despite discounts, FIN. TIMES, Feb. 4, 2009, available at

http://www.ft.com/cms/s/0/e99e8514-f234-11dd-9678-0000779fd2ac.html#axzz1Ias1qCn2. 29 Tania Branigan, State owned China Mobile is world's biggest mobile phone operator, THE GUARDIAN, Jan. 11,

2010, available at http://www.guardian.co.uk/business/2010/jan/11/china-mobile-telecomms. 30 Id. 31 Economic Report of the President, 2009, Chapter 4, page 139, February 2009, available at:

http://www.gpoaccess.gov/eop/2009/2009_erp.pdf. 32 James K. Jackson, Foreign Direct Investment in the United States: An Economic Analysis, Congressional

Research Service, February 1, 2011, page 5, available at: http://assets.opencrs.com/rpts/RS21857_20091105.pdf. 33 Bureau of Economic Analysis, Employment of Majority-Owned U.S. Affiliates, State by Industry of Affiliate,

2008, available at: http://www.bea.gov/international/di1fdiop.htm; and William J. Zeile, U.S. Affiliates of Foreign Companies, Survey of Current Business, Bureau of Economic Analysis, August 2005, Table 1, page 1, available at: http://www.bea.gov/scb/pdf/2005/08August/0805_Foreign_WEB.pdf.

34 James K. Jackson, Foreign Direct Investment in the United States: An Economic Analysis, Congressional Research Service, February 1, 2011, page 5, available at: http://assets.opencrs.com/rpts/RS21857_20091105.pdf.

35 Economic Report of the President, 2009, Chapter 4, page 137, February 2009, available at: http://www.gpoaccess.gov/eop/2009/2009_erp.pdf.

36 News Release, Bureau of Labor Statistics, U.S. Dep’t of Labor, International Comparisons of Hourly Compensation Costs in Manufacturing, 2009 (Mar. 8, 2011), available at http://www.bls.gov/news.release/pdf/ichcc.pdf .

37 News Release, Bureau of Labor Statistics, U.S. Dep’t of Labor, Employer Costs for Employee Compensation – December 2010 (Mar. 9, 2011), available at http://www.bls.gov/news.release/pdf/ecec.pdf.

38 Neeraj Sood & Arkadipta Ghosh, Employer-sponsored Insurance, Health Care Cost Growth, and the Economic Performance of U.S. Industries, HEALTH SERV. RES. 44 (Oct. 2009).

39 NICOLE V. CRAIN & W. MARK CRAIN, OFF. OF ADVOC., U.S. SMALL BUS. ADMIN., THE IMPACT OF REGULATORY COSTS ON SMALL FIRMS 48 (Sept. 2010).

40 Id. 41 Sanjay B. Varshney, Ph.D. & Dennis H. Tootelian, Ph.D., Cost of State Regulations on California Small

Business Study 14 (Sept. 2009), http://www.sba.ca.gov/Cost%20of%20Regulation%20Study%20-%20Final.pdf. 42 NICOLE V. CRAIN & W. MARK CRAIN, OFF. OF ADVOC., U.S. SMALL BUS. ADMIN., THE IMPACT OF REGULATORY

COSTS ON SMALL FIRMS 7 (Sept. 2010). [INTERNAL X-REF POST-EDIT: NICOLE V. CRAIN & W. MARK CRAIN, supra note XX, at XX. ]

43 Id. 44 NICOLE V. CRAIN & W. MARK CRAIN, OFF. OF ADVOC., U.S. SMALL BUS. ADMIN., THE IMPACT OF REGULATORY

COSTS ON SMALL FIRMS 7 (Sept. 2010). [INTERNAL X-REF POST-EDIT: NICOLE V. CRAIN & W. MARK CRAIN, supra note XX, at XX. ]

45 Barack Obama, Op-Ed., Toward a 21st-Century Regulatory System, WALL ST. J., Jan. 18, 2011. 46 Id. 47 Terry Miller & Kim R. Holmes, WALL ST. J. & HERITAGE FOUND., 2011 INDEX OF ECONOMIC FREEDOM,

http://www.heritage.org/index/explore (viewer must click “labor freedom” heading twice to arrive at cited data). 48 Id. 49 Thomas Friedman, Op-Ed., A Word from the Wise, N.Y. TIMES (Mar. 2, 2010), available at

http://www.nytimes.com/2010/03/03/opinion/03friedman.html?_r=1&ref=paulsotellini.

EMBARGOED


50 See ORG. FOR ECON. CO-OPERATION & DEV., Economic Policy Reforms: Going for Growth 2010, Chapter 2,

http://www.oecd.org/dataoecd/37/20/44691523.pdf. 51 BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR, DATA RETRIEVAL: EMPLOYMENT, HOURS, AND EARNINGS

(CES), ESTABLISHMENT DATA – TABLE B-1, EMPLOYEES ON NONFARM PAYROLLS BY INDUSTRY SECTOR AND SELECTED INDUSTRY DETAIL (Feb. 5, 2010), http://www.bls.gov/webapps/legacy/cesbtab1.htm.

52 Id. 53 The Economic Outlook & Monetary & Fiscal Policy: Hearing Before the Comm. on the Budget, U.S. Senate,

112th Cong. (Jan. 7, 2011) (testimony of Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve) (emphasis added), available at http://www.federalreserve.gov/newsevents/testimony/bernanke20110107a.htm.

54 BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR, DATA RETRIEVAL: EMPLOYMENT, HOURS, AND EARNINGS (CES), ESTABLISHMENT DATA – TABLE B-1, EMPLOYEES ON NONFARM PAYROLLS BY INDUSTRY SECTOR AND SELECTED INDUSTRY DETAIL (Feb. 5, 2010), http://www.bls.gov/webapps/legacy/cesbtab1.htm (last visited April 12, 2011). INTERNAL X-REF POST-EDIT: BUREAU OF LABOR STATISTICS, supra note XX, at XX.]

55 BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR, DATA RETRIEVAL: LABOR FORCE STATISTICS (CPS), HOUSEHOLD DATA – TABLE A-12, UNEMPLOYED PERSONS BY DURATION OF UNEMPLOYMENT (Feb. 4, 2011), http://www.bls.gov/webapps/legacy/cpsatab12.htm (last visited April 12, 2011).

56 BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR, DATA RETRIEVAL: LABOR FORCE STATISTICS (CPS), HOUSEHOLD DATA – TABLE A-1, EMPLOYMENT STATUS OF THE CIVILIAN POPULATION BY SEX AND AGE (Feb. 5, 2010), http://www.bls.gov/webapps/legacy/cpsatab1.htm (last visited Mar. 30, 2011).

57 The Economic Outlook & Monetary & Fiscal Policy: Hearing Before the Comm. on the Budget, U.S. Senate, 112th Cong. (Jan. 7, 2011) (testimony of Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve) (emphasis added), available at http://www.federalreserve.gov/newsevents/testimony/bernanke20110107a.htm.[INTERNAL X-REF: The Economic Outlook & Monetary & Fiscal Policy: Hearing, supra note XX.]

58 News Release, U.S. Dep’t of Labor, Bureau of Labor Statistics, Employment Projections: 2008–18 PAGE # 1 (Dec. 10, 2009), available at http://www.bls.gov/news.release/archives/ecopro_12102009.pdf (The BLS produces employment projections every two years. The next projections will be available in December 2011).

59 Id.at Appendix Table 9. No page number. 60 Id at 2 and 3. 61 Id at 4. 62 Id at 4. 63 Id. at 3. 64 Id. at 4. 65 U.S. Department of Labor, America’s Dynamic Workforce: 2008, August 2008, page 37, available at:

http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1545&context=key_workplace&sei-redir=1#search="america's+dynamic+workforce+2008

66 U.S. Department of Labor, America’s Dynamic Workforce: 2008, August 2008, page 37, available at: http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1545&context=key_workplace&sei-redir=1#search="america's+dynamic+workforce+2008"

67 David Autor, Frank Levy and Richard J. Murnane, “The Skill Content of Recent Technological Change: An Empirical Exploration.” Quarterly Journal of Economics, 116(4). Available at: http://www.frbsf.org/economics/conferences/0311/alm-skillcontent-qje.pdf

68 MITRA TOOSSI, BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR, Labor force projections to 2018: older workers staying more active, 132 MONTHLY LABOR REVIEW ONLINE, Nov. 2009, at 30, http://www.bls.gov/opub/mlr/2009/11/art3full.pdf.

69 Jessica R. Sincavage, Bureau of Labor Statistics, U.S. Dep’t of Labor, Labor force and unemployment: three generations of change, MONTHLY LABOR REVIEW, June 2004, at 34, available at http://www.bls.gov/opub/mlr/2004/06/art2full.pdf.

70 CARRIE WERNER, U.S. CENSUS BUREAU, SELECTED CHARACTERISTICS OF BABY BOOMERS 42 TO 60 YEARS OLD IN 2006 (2006) (see slides 9 and 20), available at http://www.census.gov/population/www/socdemo/age/2006%20Baby%20Boomers.pdf.

71 Carole Rickard Hedden, Demand For Talent Grows Despite Shrinking Economy, AVIATION WK., Aug. 13, 2010, available at http://www.aviationweek.com/aw/generic/story_channel.jsp?channel=defense&id=news/talgrow_wkf10.xml.

EMBARGOED


72 MITRA TOOSSI, BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR, Labor force projections to 2018: older

workers staying more active, 132 MONTHLY LABOR REVIEW ONLINE, Nov. 2009, at 31, http://www.bls.gov/opub/mlr/2009/11/art3full.pdf. [INTERNAL X-REF: MITRA TOOSSI, supra note XX, at 31.]

73 Id. 74 Id. 75 Id. 76 DAVID AUTOR, CTR. FOR AM. PROGRESS, THE POLARIZATION OF JOB OPPORTUNITIES IN THE U.S. LABOR

MARKET: IMPLICATIONS FOR EMPLOYMENT AND EARNINGS 8 (2010). 77 Id. 78 DAVID AUTOR, CTR. FOR AM. PROGRESS, THE POLARIZATION OF JOB OPPORTUNITIES IN THE U.S. LABOR

MARKET: IMPLICATIONS FOR EMPLOYMENT AND EARNINGS 9 (2010).[INTERNAL X-REF: DAVID AUTOR, supra note XX, at 9. ]

79 Id. 80 JODIE T. ALLEN & MICHAEL DIMOCK, PEW RES. CTR. FOR THE PEOPLE & THE PRESS, A NATION OF "HAVES" AND

"HAVE-NOTS"? (Sept. 13, 2007), available at http://pewresearch.org/pubs/593/haves-have-nots. 81 CONG. BUDGET OFF., CHANGES IN THE DISTRIBUTION OF WORKERS’ HOURLY WAGES BETWEEN 1979 TO 2009,

Feb. 2011, available at http://www.cbo.gov/ftpdocs/120xx/doc12051/02-16-WageDispersion.pdf. 82 Id. 83 Bureau of Labor Statistics, Table 1.6 Occupational Employment and Job Openings Data, 2008—18, and worker

characteristics, 2008, available at: http://www.bls.gov/emp/ep_table_106.htm. 84 Id. 85 Id. 86 Id. 87 CENT. INTELLIGENCE AGENCY, THE WORLD FACTBOOK 2009 PAGE # - OLDER VERSION – IS THIS A

HARDCOPY?? (2009). 88 President Barack Obama, State of the Union Address (Jan. 25, 2011), available at

http://www.whitehouse.gov/the-press-office/2011/01/25/remarks-president-state-union-address. [Internal X-REF: President Barack Obama, supra note XX. ]

89 NAT’L ACAD. OF SCI., NAT’L ACAD. OF ENGINEERING & INST. OF MED., RISING ABOVE THE GATHERING STORM, REVISITED: RAPIDLY APPROACHING CATEGORY 5 43 (The National Academies Press 2010). [INTERNAL X-REF: NAT’L ACAD. OF SCI., NAT’L ACAD. OF ENGINEERING & INST. OF MED., supra note XX, at 43.]

90 Id. at 4. 91 Kelly S. Mikelson and Demetra Smith Nightingale, Estimating Public and Private Expenditures on Occupational

Training in the United States, U.S. Department of Labor, Employment Training Administration, December 2004, available at: http://wdr.doleta.gov/research/FullText_Documents/Estimating%20Public%20and%20Private%20Expenditures%20on%20Occupational%20Training%20in%20the%20United%20States.pdf.

92 Secretary Arne Duncan, U.S. Dep’t of Educ., Remarks at OECD’s Release of the Program for International Student Assessment (PISA) 2009 Results (Dec. 7, 2010), http://www.ed.gov/news/speeches/secretary-arne-duncans-remarks-oecds-release-program-international-student-assessment-.

93 THE CONF. BD. ET AL., ARE THEY REALLY READY TO WORK? 13 (2006), available at http://www.p21.org/documents/FINAL_REPORT_PDF09-29-06.pdf.

94 Id. 95 Heather Wilson, Editorial, Our Stunted Scholars, WASH. POST, Jan. 23, 2011, available at

http://www.washingtonpost.com/wp-dyn/content/article/2011/01/21/AR2011012106906.html. 96 U.S. CENSUS BUREAU, HISTORICAL TIME SERIES, LIVING ARRANGEMENTS OF CHILDREN - TABLE CH-1: LIVING

ARRANGEMENTS OF CHILDREN UNDER 18 YEARS OLD: 1960 TO PRESENT (Nov. 2010), available at http://www.census.gov/population/www/socdemo/hh-fam.html#ht.

97 Encyclopedia of Children’s Health, Single-Parent Families (2006), available at http://www.answers.com/topic/single-parent-families.

98 Andrew L. Yarrow, State of Mind, EDUCATION WEEK, Oct. 21, 2009.

EMBARGOED


99 METRO. LIFE INS. CO., METLIFE SURVEY OF THE AMERICAN TEACHER: PAST, PRESENT AND FUTURE 130

(Oct. 2008), http://www.eric.ed.gov/PDFS/ED504457.pdf. 100 IES NAT’L CTR. FOR EDUC. STATISTICS, U.S. DEP’T OF EDUC., Table 232 - Enrollment in postsecondary

education, by student level, type of institution, age, and major field of study: 2003-04, DIGEST OF EDUCATION STATISTICS (Sept. 2005), available at http://nces.ed.gov/programs/digest/d09/tables/dt09_232.asp.

101 Id. 102 Id. 103 Michelle Nealy, NACME: Growing ‘Opportunity Gap’ Exists in the Number of Minority Students Pursuing

STEM Degrees, DIVERSE, May 2, 2008, available at http://diverseeducation.com/article/11106/. 104 U.S. DEP’T OF EDUC., COLLEGE COMPLETION TOOLKIT 8 (Mar. 2011), available at

http://www.whitehouse.gov/sites/default/files/college_completion_tool_kit.pdf. 105 Aaron Benavot, The Rise and Decline of Vocational Education, 56 SOC. OF EDUC. 63, 73 (Apr. 1983). 106 R. NATA, VOCATIONAL EDUCATION: CURRENT ISSUES AND PROSPECTS 180 (Nova Science Publishers 2003). 107 Sherry Posnick-Goodwin, Vocational ed gets a new lease on life, 11 CALIFORNIA EDUCATOR (Apr. 2007). 108 BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR, EMPLOYMENT PROJECTIONS 2008-18 (on file with

Applied Economic Strategies). 109 Id. 110 Id. 111 Senator Tom Coburn, Help Wanted: How Federal Job Training Programs are Failing Workers 16 (Feb.2011),

http://coburn.senate.gov/public/index.cfm?a=Files.Serve&File_id=9f1e1249-a5cd-42aa-9f84-269463c51a7d. 112 President Barack Obama, State of the Union Address (Jan. 25, 2011), available at

http://www.whitehouse.gov/the-press-office/2011/01/25/remarks-president-state-union-address. [INTERNAL X-REF: President Barack Obama, supra note XX. ]

113 Under Secretary Dr. Martha Kanter, U.S. Dep’t of Educ., Remarks at the Council of Scientific Society Presidents: Meeting Our 21st Century STEM Education Challenges (Dec. 3, 2010).

114 WORLD ECON. F., STIMULATING ECONOMIES THROUGH FOSTERING TALENT MOBILITY 7-8 (2010), available at http://www3.weforum.org/docs/WEF_PS_TalentMobility_report_2010.pdf.

115 Stopping Trained in America Ph.D.s From Leaving the Economy Act of 2011, H.R. 399, 112th Cong. (2011) (proposed to amend the Immigration and Nationality Act to authorize certain aliens who have earned a Ph.D. from a U.S. institution of higher education in science, technology, engineering or mathematics to be admitted for permanent residence and to be exempted from the numerical limitations on H-1B non-immigrants).

116 Senator Mark R. Warner, Op-Ed., To revive the economy, pull back the red tape, WASH. POST, Dec.13, 2010, available at http://www.washingtonpost.com/wp-dyn/content/article/2010/12/12/AR2010121202639.html.

117 Law Offices of Snider & Associates, LLC, Department of Labor FLSA Overtime Grievance, http://www.sniderlaw.com/pages/FLSADOL.html.

118 NAT’L ACAD. OF SCI., NAT’L ACAD. OF ENGINEERING & INST. OF MED., RISING ABOVE THE GATHERING STORM, REVISITED: RAPIDLY APPROACHING CATEGORY 5 56 (The National Academies Press 2010). [INTERNAL X-REF: NAT’L ACAD. OF SCI., NAT’L ACAD. OF ENGINEERING & INST. OF MED., supra note XX, at XX.]

119 Barack Obama, Op-Ed., Toward a 21st-Century Regulatory System, WALL ST. J., Jan. 18, 2011. [INTERNAL X-REF: Barack Obama, supra note XX. ]; see also Exec. Order No. 13563, 76 Fed. Reg. 3,821 (Jan. 21, 2011), available at http://www.gpo.gov/fdsys/pkg/FR-2011-01-21/pdf/2011-1385.pdf.

120 Administrative Procedures Act, 5 U.S.C. §§ 500-596 (2006). 121 1 INTERNATIONAL LABOR AND EMPLOYMENT LAWS, 39-41 (William L. Keller & Timothy J. Darby eds., 2003). 122 Pub. L. No. 101-336, 104 Stat. 328 (2008). 123 See 147 Cong. Rec. S8840-41 (Sept. 16, 2008) (Senate Manager’s statement); 106 Cong. Rec. H6067 (June 25,

2008) (joint statement of Reps. Hoyer and Sensenbrenner). 124 29 U.S.C. § 207 (2006). 125 Family and Medical Leave Act of 1993, 29 U.S.C. §§ 2601-54 (2006). 126 WAGE & HOUR DIV., U.S. DEP’T OF LABOR, FAMILY AND MEDICAL LEAVE ACT REGULATIONS: A REPORT ON

THE REQUEST FOR INFORMATION 16 (2007). 127 Id. 128 Id. 129 Id. at 42-45. 130 Law Offices of Snider & Associates, LLC, Department of Labor FLSA Overtime Grievance,

http://www.sniderlaw.com/pages/FLSADOL.html.

EMBARGOED


131 Exec. Order No. 11246, as amended, available at http://www.dol.gov/ofccp/regs/statutes/eo11246.htm. 132 OFF. OF INFO. & REG. AFFAIRS, OFF. OF MGMT. & BUDGET, Information Collection Budget, OMB Control

Numbers 1250-0001 and 1250-0003, available at http://www.reginfo.gov/public/do/PRAMain (to see cited data, go to “Current Inventory” section; click on “Department of Labor”; click “Submit”; OFCCP Recordkeeping and Reporting Requirements--Supply and Service, OMB Control Number 1250-00003, 10.046 million hours; plus OFCCP Construction Recordkeeping and Reporting, OMB Control Number 1250-0001, 2.491 million hours; equals 12.537 million hours).

133 President Barack Obama, State of the Union Address (Jan. 25, 2011), available at http://www.whitehouse.gov/the-press-office/2011/01/25/remarks-president-state-union-address. [INTERNAL X-REF reference: President Barack Obama, supra note XX. ]

134 NAT’L ACAD. OF SCI., NAT’L ACAD. OF ENGINEERING & INST. OF MED., RISING ABOVE THE GATHERING STORM, REVISITED: RAPIDLY APPROACHING CATEGORY 5 56 (The National Academies Press 2010). [INTERNAL X-REF: NAT’L ACAD. OF SCI., NAT’L ACAD. OF ENGINEERING & INST. OF MED., supra note XX, at 56.]

135 STATISTICS DIV., OFF. OF JUDGES PROGRAMS, ADMIN. OFF. OF THE U.S. COURTS, JUDICIAL BUSINESS OF THE UNITED STATES COURTS- 2009 ANNUAL REPORT OF THE DIRECTOR 146 (2009).

136 Samuel Estreicher & Kristina Yost, Measuring the Value of Class and Collective Action Employment Settlements: A Preliminary Assessment 8 (N.Y.U. School of Law, Working Paper No. 08-03 2008).

137 Seyfarth Shaw LLP, Annual Workplace Class Action Litigation Report 9 (7th ed. 2011). 138 Mark C. Miller, Lawyers as Politicians, Encyclopedia of Law and Society 1143 (David S. Clark ed., 2006). 139 Lilly Ledbetter Fair Pay Act of 2009, Pub. L. 111-2, 123 Stat. 5 (2009). 140 Brian Levine, Helping Middle-Class Families Pursue Justice, MIDDLE CLASS TASK FORCE, WHITE HOUSE BLOG

(Nov. 19, 2010, 4:31PM), http://www.whitehouse.gov/blog/2010/11/19/helping-middle-class-families-pursue-justice.

141 Paula L. Hannaford-Agor, Some Differences Between States, 14 EJOURNAL USA 36 (July 2009) (noting that a unique characteristic of American law is the availability of jury trials in civil disputes whereas most other countries reserve jury trials “for their most serious criminal cases”), available at http://photos.state.gov/libraries/korea/49271/dwoa_122709/ewoa_0709.pdf. See also Baker & McKenzie, Worldwide Guide to Termination, Employment Discrimination and Workplace Harassment Laws 401-08 (discussing remedies for discrimination and sexual harassment in the U.S.).

142 Seyfarth Shaw LLP, Annual Workplace Class Action Litigation Report, Introductory Letter by J. Stephen Poor 7th ed. 2011). [INTERNAL X-REF: Seyfarth Shaw LLP, supra note XX, at XX. ]

143 Department of Defense Appropriations Act, 2010, Pub. L. No. 111-118, 123 Stat. 3409 (2010). This bill included a rider prohibiting DOD contractors from having pre-dispute arbitration agreements with employees working under the contracts. In addition, legislation has been introduced in each of the past several Congresses imposing such restrictions on all employers. See, e.g., the Arbitration Fairness Act of 2009, H.R. 1020, S. 931, 111th Cong. (2009).

144 Americans with Disabilities Act of 1990, 42 U.S.C. § 12112 (2010); EQUAL EMP’T OPPORTUNITY COMM’N, ENFORCEMENT GUIDANCE: REASONABLE ACCOMMODATION AND UNDUE HARDSHIP UNDER THE AMERICANS WITH DISABILITIES ACT, NO. 915.002, Question 17 (Oct. 17, 2002), http://www.eeoc.gov/policy/docs/accommodation.html.

145 Fair Labor Standards Act, 29 U.S.C. § 218 (2006). 146 For example, in order to be considered an exempt computer employee in California, an individual must perform

duties involving the exercise of discretion more than 50 percent of the time in each work week and earn at least $79,050 annually. See CAL. LAB. CODE § 515.5. Under federal law, there is no discretion requirement. The exemption is measured over a longer period of time and is not based on a hard-and-fast percentage test, and the employee needs to earn $23,660 annually.

147 Even in those instances, there must be a written agreement for an on-the-job paid meal period that is revocable by the employee at any time. Cal. Code Regs. tit. 8, §11040 (2008).

148 Micah Hartman et al, Health Spending Growth At A Historic Low In 2008, 29 HEALTH AFF. 147 (Jan. 2010), available at http://content.healthaffairs.org/content/29/1/147.full.pdf+html.

149 KAISER FAMILY FOUND., SNAPSHOTS: HEALTH CARE COSTS. HEALTH CARE SPENDING IN THE UNITED STATES AND OECD COUNTRIES (Jan. 2007), http://www.kff.org/insurance/snapshot/chcm010307oth.cfm.

150 Id.

EMBARGOED


151 KAISER FAMILY FOUND., EMPLOYER HEALTH BENEFITS - 2010 ANNUAL SURVEY 84 (2010), available at

http://ehbs.kff.org/pdf/2010/8085.pdf; BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR, USUAL WEEKLY EARNINGS OF WAGE AND SALARY WORKERS, Table 1, available at http://www.bls.gov/webapps/legacy/cpswktab1.htm; BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR, CONSUMER PRICE INDEX (Mar. 17, 2011), available at ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt.

152 C. Schoen, J. L. Nicholson, & S. D. Rustgi, The Commonwealth Fund, Paying the Price: How Health Insurance Premiums Are Eating Up Middle-Class Incomes—State Health Insurance Premium Trends and the Potential of National Reform 4 (Aug. 2009), available at http://www.commonwealthfund.org/~/media/Files/Publications/Data%20Brief/2009/Aug/1313_Schoen_paying_the_price_db_v3_resorted_tables.pdf.

153 WORLD HEALTH ORG., WORLD HEALTH STATISTICS 2010 54 (2010), available at http://www.who.int/whosis/whostat/EN_WHS10_Full.pdf.

154 Id. 155 ELIZABETH DOCTEUR & ROBERT A. BERENSON, THE ROBERT WOOD JOHNSON FOUND. & THE URBAN INST., HOW

DOES THE QUALITY OF U.S. HEALTH CARE COMPARE INTERNATIONALLY? 5 (Aug. 2009), available at http://www.urban.org/uploadedpdf/411947_ushealthcare_quality.pdf.

156 KAREN DAVIS. CATHY SCHOEN & KRISTOFSTREMIKIS , THE COMMONWEALTH FUND, MIRROR, MIRROR ON THE WALL: HOW THE PERFORMANCE OF THE U.S. HEALTH CARE SYSTEM COMPARES INTERNATIONALLY v (June 23, 2010), available at http://www.commonwealthfund.org/~/media/Files/Publications/Fund%20Report/2010/Jun/1400_Davis_Mirror_Mirror_on_the_wall_2010.pdf.

157 News Release, Bureau of Labor Statistics, U.S. Dep’t of Labor, Employer Costs for Employee Compensation - September 2010 6, Table 1 (Dec. 8, 2010), available at http://www.bls.gov/news.release/archives/ecec_12082010.pdf

158 EMP. BENEFITS RES. INST., DATABOOK ON EMPLOYEE BENEFITS, Chapter 2, Table 2.2 (Nov. 2010), http://www.ebri.org/pdf/publications/books/databook/DB.Chapter%2002.pdf.

159 Neeraj Sood & Arkadipta Ghosh, Employer-sponsored Insurance, Health Care Cost Growth, and the Economic Performance of U.S. Industries, 44 HEALTH SERV. RES. 6 (Oct. 2009). available at http://findarticles.com/p/articles/mi_m4149/is_5_44/ai_n39306021/?tag=content;col1. [INTERNAL X-REF: Neeraj Sood & Arkadipta Ghosh, supra note XX, at PAGE #.]

160 Press Release, Towers Watson, Health Care Reform Will Increase Costs, Reduce Benefits, Towers Watson Surveys Find (Jan. 27, 2010), http://www.towerswatson.com/press/958.

161 KRISTOF STREMIKIS, KAREN DAVIS, & RACHEL NUZUM, THE COMMONWEALTH FUND COMM’N ON A HIGH PERFORMANCE HEALTH SYS., HEALTH CARE OPINION LEADERS’ VIEWS ON HEALTH REFORM, IMPLEMENTATION, AND POST-REFORM PRIORITIES 3 (Apr. 2010), http://www.commonwealthfund.org/~/media/Files/Publications/Data%20Brief/2010/Apr/1387_Stremikis_HCOL_postreform_priorities_data_briefrev.pdf.

162 CONG. BUDGET OFF., THE BUDGET AND ECONOMIC OUTLOOK: FISCAL YEARS 2011 TO 2021 61 (Jan. 2011), http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf

163 Interview with Andrew Liveris, National Public Radio, Manufacturing Is Vital Component to U.S. Economy, (Jan. 25, 2011), available at http://www.npr.org/2011/01/25/133201751/Manufacturing-Is-Vital-Component-To-U-S-Economy.

164 Id. 165 N.C. Aizenman & Amy Goldstein, Judge strikes down entire new health-care law, WASH. POST, Feb. 1, 2011,

available at http://www.washingtonpost.com/national/us-judgein-floridarejects-health-law/2011/01/31/ABhhBbE_story.html.

166 CONG. BUDGET OFF., KEY ISSUES IN ANALYZING MAJOR HEALTH INSURANCE PROPOSALS XIX (Dec. 2008), available at http://www.cbo.gov/ftpdocs/99xx/doc9924/12-18-KeyIssues.pdf.

167 Id. 168 D. Mark Wilson, Applied Economic Strategies, LLC, Employer Costs for Health Care Reform, Economic

Analysis No. 2010-1 2 (Mar. 25, 2010), http://www.hrpolicy.org/downloads/2010/3-25-10%20AES%20Employer%20Costs%20for%20Health%20Care%20Reform.pdf.

EMBARGOED


169 CONG. BUDGET OFF., THE BUDGET AND ECONOMIC OUTLOOK: FISCAL YEARS 2011 TO 2021 61 (Jan. 2011),

http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf. [INTERNAL X-REF: CONG. BUDGET OFF., supra note XX, at XX. ]

170 Id. 171 GEORGE HALVORSON, HEALTHCARE REFORM NOW!: A PRESCRIPTION FOR CHANGE 157-8 (John Wiley & Sons,

Inc. 2007).

EMBARGOED