4. Should Companies “Care” About Job Growth?

Do companies have a selfish or societal interest in creating jobs?

While different governance systems in use around the world place radically different weight on the rights of shareholders as against employees and other stakeholders, very few business initiatives are pursued with the express purpose of creating jobs. Indeed, there is very little consensus about whether it is business’s “job” to create jobs, and what kind. In a recent radio interview, a Boston entrepreneur noted, “I’d much rather create 100 good-paying jobs than 200 minimum-wage jobs.” Is she right, in your view?

While it is hard to imagine a boardroom conversation in which “creating jobs” is the primary focus, it is nonetheless true that many executives take pride in the ability of their companies to support communities, and they measure growth by overall employment.

Where are you on this question? With a new Administration here in the U.S. that is holding companies’ feet to the fire on this question, should companies rethink their role in job creation? Are they responsible to their own economics and efficiency, or to the larger system?

8 thoughts on “4. Should Companies “Care” About Job Growth?

  1. This is a really interesting question. From personal experience, I can say that I have never been in a meeting where we were planning an innovation or a platform extension where we used job creation as a goal–as an objective function of the exercise. But at the same time, whenever we would rattle off growth milestones–for investors, for our clients, or for our parents (!)–we’d always mention our employee headcount, and with pride.

    As I’ve been doing this research with the team, talking to management teams at world-class companies, I’ve seen this same phenomenon, but on steroids: A lot of leaders of first-tier companies take satisfaction from job creation, and yet they would seldom highlight this fact in an analyst call, or in a chairman’s letter. In fact, Donald Trump has done more than anyone else I can think of to move this issue front and center (though I disagree with his preferred solution).

    What do you think? Does your company care about job growth? Do you?

    1. OK, kind of weird to reply to myself, but a question occurred to me: We’ve been trying to study where companies come up with employment impact estimates (like this one, where Intel estimates that it will create 10,000 jobs:

      http://thehill.com/policy/technology/318533-intel-trump-tout-new-7-billion-investment-to-create-10k-jobs)

      We tried to get Intel to comment on this number, or how it was developed, or what it was based on, but no dice. What do you think? When companies publish these estimates, what are they based on? Are there rules of thumb they use for direct/indirect impact? This seems too important to be smoke and mirrors.

    1. Very interesting article and perspective! I found it interesting that NAFTA and other factors were successfully decried by Trump as primary contributors to loss of manufacturing jobs, when in reality automation (which was not scapegoated or even really addressed in his campaign) trumped (pun intended) other causes.

      I’m currently on the side that while automation does replace jobs in the short-term, it’s a job-creator in the long-term, with the number of eventual jobs created likely significantly exceeding those lost.

    2. The article is more or less in line with how I’m thinking about the matter (i.e. eventually there will be net job creation). I still haven’t really made up my mind, though…

      The authors of the book “The Innovation Illusion” have a chapter called “Capitalism and Robots”, where they offer their take on the whole “robots are going to eliminate tons of jobs” scare that’s been going on. They seem to be more optimistic, saying that the rate of adoption for radical technological innovation usually takes a long enough time for the economy to adjust, and ultimately results in a much smaller impact on employment than anticipated. Here’s what they say in the chapter, after discussing the societal panic in the 1960s when people were scared of mass unemployment due to machine and computer development:

      “…Automation, like previous technological shifts, destroyed jobs, but it also created new ones, and much safer and better-paid jobs at that. An automation blitz never occurred; the process took several decades as technology had to adjust to the composition of markets, companies, and several other aspects than simply the capacity of machines to substitute for labor. Just as in the industrial revolution, automation did not win merely by showing up. It progressively improved and adjusted to the economic, social, and institutional conditions for innovation.

      Contemporary prophets of the New Machine Age make the same mistake. They judge the speed and quality of future innovation on the technological creation they see today, not on how the economy works…”

      1. Playing the devil’s advocate for a moment, if I am a current factory employee and we end up net-net with automation and jobs lost/created, was there really any value in the automation? Sure, it does increase volume (Amazon, Google, etc) and efficiency, but there is the counterbalance of all the investment that went into educating technicians or engineers or managers to manage and troubleshoot automated processes, versus the less classroom educational and more skills based training for past manufacturing jobs.
        A part of me does wonder if when the economy adjusts, a college education will also become ‘commoditized,’ making the only way to succeed in the future to be with advanced degree(s). In this case, multiple degrees and hundreds of thousands of dollars later for the entry level employee, do we just delay job growth by 5-7 years as compared to skilled labor training?

        1. A very compelling counter argument. I agree that a comprehensive cost/benefit analysis of automation vs. skilled manufacturing labor over an extended period may show there’s not that significant of a long-term advantage for automation, but I think much of that (as most economic analysis) is contingent upon metrics used.

          But automation that enables scalability seems an inevitability regardless of any past training investment or even future training costs. For instance (much to Nate’s pt), automation of bank-tellers (ATMs) increased both non-manufacturing jobs in its sector and created new manufacturing and service jobs that hadn’t existed.

          I’m still unsure about an answer to commoditization of education….

          1. Good point! I wonder if there is a difference in outcome between automating technical/skilled labor jobs versus more service oriented jobs.
            In the case of the ATM, I would guess that service jobs (tellers) were the first to go, but tech and maintenance jobs were the first to be created. If cars were to go driverless, the service jobs (drivers) again would go first, but would technical jobs get created? Similar to the Prius/Camry example, the actual cars would be performance improving so it could net out.
            In the case of manufacturing, technical jobs would go first, but what gets created?

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