Pouring government stimulus funds into clean technology may be a great way to boost the economys potential. But it isn’t the best way to create jobs, according to the consultants at McKinsey & Co.
The McKinsey Global Institute, the firms research arm, has produced a new tome of advice for governments as they become more deeply involved in markets and the economy. One message: Policy makers can have a bigger immediate impact on jobs by focusing their efforts on service businesses — such as retail and telecoms — than by trying to boost manufacturing or innovative technologies.
To offer a sense of how much difference an emerging sector such as clean tech can have on jobs, the authors look to the example of the highly successful semiconductor industry. In the U.S., they note, the semiconductor sector accounts for 0.3% of total nonfarm employment. That compares to 11.3% for retail trade. Even Indias dynamic software industry accounts for only 0.1% of that countrys employment.
While many policy makers see innovative technologies as the answer to the challenge of job creation, our analysis indicates that governments are likely to be disappointed in such hopes, the authors write.
Governments can get more bang for their buck, the authors say, by finding ways to promote growth in service sectors, which have generated more than 100% of net job growth in wealthy countries over the past couple decades (goods-producing sectors lost jobs). In telecommunications, they recommend policies to increase the availability of broadband. In retail, they note that employment tends to be greater in countries that have low minimum wages and allow part-time employment.
But wont such policies lead to a proliferation of McJobs that offer low wages and little security? James Manyika, one of the reports authors and San Francisco-based director at the institute, says that isn’t true of all service sector jobs. Beyond that, he says, the advice on the labor market wasnt aimed at countries such as the U.S. that already have flexible labor laws.
Policy makers looking for a simple prescription to boost growth and competitiveness across an entire economy will be disappointed. Each sector requires its own approach, says Mr. Manyika. A countrys success, he says, depends much less on what it does than on how well it does it: All too often policy makers think Do we have the right mix of industries? and dont think Are those industries globally competitive?