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Remarks Prepared for Delivery By
U.S. Secretary of Labor Elaine L. Chao
Finnish Institute of International Affairs
"Meeting the Challenges of a Global Economy"
Helsinki, Finland
Wednesday, June 13, 2007
Thank you, Raimo [Väyrynen, Director of the Finnish Institute of International Affairs].
It's a pleasure to be here today with so many students and academics. Finland provides visitors with such warm hospitality and opportunities for exchange. I'm gratified to make this visit to the Finnish Institute of International Affairs as part of my visit to your beautiful country.
Today, the United States and Finland share common challenges as our countries become part of the worldwide economy. And this week, I look forward to meeting with my Finnish counterparts, and learning more about Finland's labor market and growth policies. Both the U.S. and Finland have shown that we can compete in a global economy, even though we have somewhat different approaches to many aspects of our economy. So there is much we can share and learn from one another.
Today I'd like to share with you some of the principles that are fundamental to the U.S. economy and its ability to create jobs. And I'd also like to discuss what the U.S. Labor Department is doing to help our country's workforce remain competitive in the worldwide economy.
The first and most important way the U.S. government helps workers is by creating the climate for growth and job creation. We believe that the private sector creates jobs, and that the role of the government is to create the climate for growth. That means reducing the over-regulation, excessive taxation, and abusive litigation that hamper growth. In the United States, about 29.1 percent of total labor costs are taken by tax and social security contributions. We believe this has helped keep job creation robust in our economy.
Today, despite rising energy prices and a bumpy housing market, the fundamentals of our economy remain positive. U.S. GDP growth slowed in the first quarter of 2007, due to a drop in exports and a few other factors that we believe will moderate in the rest of 2007. But the U.S. job market remains strong and is providing momentum for economic growth in the second quarter of 2007. Since August 2003, we've seen 45 consecutive months of job growth for a total of 8.0 million net new jobs.
The U.S. national unemployment rate remains low at 4.5 percent. That's more than a full percentage point lower than the average 5.7 percent unemployment rate of the 1990s.
The U.S. labor force is approximately 153 million people, of which approximately 54 percent are men and 46 percent are women. And our workforce has three unique assets: high productivity, flexibility and mobility.
America's workers are among the most productive of any major industrialized economy. In 2006, American workers contributed on average $46.30 to domestic output for each hour on the job.
In the U.S., productivity growth since the start of this Administration has averaged about 2.8 percent (annualized). And productivity growth in recent years is translating into higher wages and a higher standard of living. By most measures, Americans today have more money in their pockets. Real per capita disposable income since January 2001 has risen 10.2 percent. And earnings for workers grew 1.1 percent over the 12 months ending in April. This translates into an extra $672 for a typical family of four with two wage earners. And despite rising oil prices, the core inflation rate remains low at 2.3 percent.
But real wages alone do not give a full picture of how workers are doing in our economy, because more and more workers are asking for compensation in the form of benefits, rather than wages. For every dollar increase in employee compensation over the past decade and a half, 67 cents represented wages and salaries, while 33 cents represented benefits. These benefits include bonuses, paid leave, and employers' health insurance, Social Security, Medicare, and retirement contributions.
America's workforce is also characterized by its flexibility and mobility. Every year approximately one-third of the U.S. workforce leaves their jobs — largely because of better opportunities — and one-third finds new jobs. This level of change often astonishes my European colleagues! By the time he or she is 40 years old, the average American workers will have had 10 jobs. So change is the norm is our society.
The size of enterprises creating new jobs in our country is also changing. When many people think of America's economy, they think of large enterprises such as Microsoft or McDonald's. But in reality, small businesses are the engine for American prosperity. Over the past several years, about two-thirds of net job growth was in businesses with fewer than 500 employees.
Trade is also a key part of our economy. One in ten U.S. jobs depends upon exports. One in five factory jobs directly depend upon trade. And it is worth noting that factories that export at least some of their products pay 18 percent higher wages on average than non-exporting plants. Overall, 27 million Americans work for multinational corporations or companies that depend upon foreign trade. So trade is critical to our country's economy, as it is for Finland. And U.S.-Finnish trade is growing, as major Finnish companies such as Nokia locate large operations in America.
But our economy does face challenges, as do all industrialized countries in the era of the global economy. Our country is transitioning to a knowledge-based economy. Two-thirds of all the new jobs being created require post-secondary education. These jobs require more creativity and critical thinking. And so workers with more knowledge, skills, and creativity are in greater demand.
Over the next decade, for example, our country will need 3.4 million healthcare professionals. We will need over 900,000 engineers, including aerospace, biomedical, civil, computer software, and environmental engineers. We will also need workers in other high growth industries including nanotechnology, geospatial technology, and the life sciences, to name a few.
Higher-skilled jobs that require more education are clearly the future for the U.S. in the worldwide economy. And the U.S. Department of Labor plays an important role in helping American workers prepare for these challenges.
For those of you who may not be familiar with our department, let me describe briefly the scope of our mission. The Department of Labor is one of the largest regulatory departments in the U.S. government. Its mission is to promote and protect the health, safety, retirement security and competitiveness of America's workforce. It carries out this mission with a budget of about $51 billion — give or take a few billion — and about 17,000 workers.
The Department regulates every private workplace to ensure that workers are safe on the job and that they are paid a full day's wages for a full day's work. The Department also regulates every private pension plan in America. And it funds a nationwide system of over 3,000 employment centers to help workers access job training and find good jobs.
The Labor Department also enforces transparency and accountability requirements for labor organizations. Union members comprise about 12.0 percent of America's total workforce and only 7.4 percent of the private-sector workforce. That's part of a trend — labor union membership has been declining in the United States since the 1950s.
But the largest part of our budget is devoted to worker training, and ensuring that our workforce has the skills necessary to compete in the growing worldwide economy.
The U.S. has a nationwide network of what are called One-Stop Career Centers. There are more than 3,000 of them throughout the country and they are in almost every community. They are full-service centers that the Department of Labor administers in conjunction with state and local workforce and economic development offices. These centers are very welcoming, with banks of computers and career counselors, to help workers connect to jobs and education opportunities.
And the Department is the lead agency on three key Presidential initiatives to ensure that our nation's workforce remains competitive in the worldwide economy.
They include the WIRED (Workforce Innovation in Regional Economic Development) Initiative. This program provides seed capital to bring employers, entrepreneurs, educators, and others together at the regional level to nurture the talent base that will attract new industries to regions undergoing economic transitions.
Another competitiveness initiative is the President's High Growth Job Training Initiative. This program recognizes that our country's economy is facing a skills gap. That's the mismatch between the skills in demand in the new, knowledge-based economy and the skills of many in our workforce. This program is helping to close the skills gap by providing workers with expanded opportunity to gain the skills in demand. In addition, the Department's Community Based Job Training Initiative ensures that community colleges are included as part of the job training community.
Community colleges are 2-year institutions that award degrees and certificates. They are supported by funding from federal and state governments, and tuition that is kept low. There are 1,200 community colleges in the United States. They hold evening and weekend classes. They focus on specialized skills needed for specific industries. A key value of community colleges is ensuring that the skills they teach are relevant to the workplace.
In 2005 and 2006, the Department awarded $125 million to over 70 community colleges and organizations for worker training. For 2007, the Department anticipates issuing the third grant competition of this kind. And for 2008, the President proposes in his budget an additional $150 million for this program.
The skills and education necessary in a modern economy can also be gained through apprenticeships that combine classroom and on-the-job training. This is noteworthy because over the decade ending 2014, there will be great demand in the U.S. for workers in the skilled trades, with 1.8 million job openings in the building trades alone.
And I understand that Finland's Finance Ministry will be diverting 200 million euros from the Labor Ministry to support vocational training, with the aim to train workers to fill jobs in fields where there is higher demand.
America is a very compassionate nation. We realize that in a dynamic and changing economy there will be disruptions. And some workers become unemployed from time to time. For those workers, the U.S. Department of Labor helps in three major ways. The first is to provide unemployed workers with temporary income assistance and other services. The second is to help workers access education so they can learn the skills that are in demand in the workplace. And the third is to help workers — both unemployed and those trying to enter the labor force — find jobs.
The longer a worker stays out of the workforce, the more outdated his or her skills become. So our policies emphasize job training and getting workers back into the labor market as soon as possible. And because of our strong record of job creation, it takes the typical unemployed worker in America about 8.3 weeks to find a job. About 10 percent of unemployed Americans remain jobless for a year or longer.
One of the reasons our country has thrived over the past six years despite so many challenges, is the President's strategy of letting Americans keep more of their hard earned money. This has given workers more money to spend during an economic downturn, which stimulated the economy and provided more capital for employers to expand and create new jobs. And it has worked. Despite unprecedented challenges over the past six years — an economic downturn, terrorist attacks, corporate scandals, the worst natural disaster in our nation's history and rising oil prices — our economy continues to grow at a steady, sustainable rate and create new jobs.
Meeting the challenges of a worldwide economy is a top priority in the United States. To remain competitive, the Administration has created an environment for growth so that innovation and investment can thrive, creating jobs. At the same time, our country continues to invest in workforce training that is relevant and responsive to the changing times. Part of that investment includes training individual workers for jobs in the new, knowledge-based economy. Other investments serve as the catalyst for entire regions to align their resources so they can compete globally. These developments take place in our local communities and in the states. But thinking globally and continually updating the skill levels of our workforce are the keys to ensuring that America remains a leader in the worldwide economy.
So thank you for inviting me to the Institute, and now I would be pleased to take a few questions.
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