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U.S. Secretary of Labor Elaine L. Chao
National Association of Steel Pipe Distributors
Washington, D.C.
Friday, June 22, 2007
Thank you, John [Mocker, Pres. Lally Pipe and Tube] for that kind introduction.
Welcome to Washington. I know your Association President Dianne Burger and John have put together a packed schedule of tours, events, and topics.
I noticed that there was a heavy Kentucky tilt in your previous speakers. Congressman Geoff Davis and Sen. Jim Bunning both hail from Kentucky. Do I see the hand of John Mocker behind all this?
That's OK with me, John. After all, I am married to my favorite Kentuckian, Sen. Mitch McConnell, and am an adopted Kentuckian myself.
Now, I would like to chat with you about America's economy, how our nation can remain competitive in a changing economy, and what the Department of Labor is doing to strengthen our competitiveness.
Today, the U.S. economy is healthy and resilient. Despite a bumpy housing market and rising energy prices, the fundamentals of our economy remain positive. Job growth is healthy and wages are rising.
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. And our economy has created 8 million net new jobs since August 2003. That's more jobs than Eurozone countries and Japan combined have created.
Some of you may have seen the recent Gallup Poll reporting that Americans feel the economy is getting worse, perhaps because of the recent fluctuations in the residential housing market. But our economy is very large and diverse. The weakness in any one sector is offset by the strengths of the other sectors. And it is interesting to note that while consumers may report pessimistic feelings about the economy, they are behaving differently. Consumer spending remains strong. So the best barometer of how the economy is doing is not what people say, but how to actually behave!
Last week, I represented our country at the International Labor Organization in Geneva and traveled to Helsinki, Finland to meet with members of the new government. And it was interesting to note that wherever I traveled, the United States economy is admired. Its strength and resiliency are the envy of the world. Finland, for example, is a model Nordic country. Yet its unemployment rate is much higher than ours at 7.7 percent. And the unemployment rates of other European countries are even higher. That's why many of these countries are moving towards America's economic model.
And developing countries that adopt policies promoting trade and free markets are benefiting, also. The year 2006 was the fourth consecutive year in which growth in developing countries exceeded 5 percent — a record never previously achieved.
Countries embracing free markets and trade liberalization are showing the strongest growth, creating the greatest number of jobs, and lifting the largest number of people out of poverty. A recent World Bank study reported that those countries that have opened up their domestic markets and embraced trade liberalization have experienced growth rates in excess of 5 percent over the 1990s. Those that have not, by contrast, had a cumulative growth rate over the 1990s of only 1.4 percent.
These trends are creating new markets for the goods and services produced by America's workers, who are among the most productive of any major industrialized economy.
That productivity growth is translating into higher wages and a higher standard of living. By almost any measure, people 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 May. This translates into an extra $661 for a typical family of four with two wage earners.
But 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.
It's a tribute to the strength and resiliency of our free enterprise system that our country continues to grow and produce new jobs despite the challenges of the past six years. This is due, in part, to the President's policies of letting America's workers keep more of their hard earned wages and to reducing the excessive taxation, unnecessary regulation and abusive litigation that hamper growth.
But there are challenges. Our country is evolving into 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 workers with more knowledge, skills, and creativity are in greater demand. So their wages are rising much more quickly than others.
Over the decade ending in 2014, our country will need over 900,000 engineers, 1.3 million computer specialists, and 3.0 million healthcare professionals, including 1.2 million registered nurses. Employment in wholesale distribution, which includes part of your industry, will grow by 8.4 % or 476,000 jobs. We also need workers in other high growth industries including nanotechnology, geospatial technology, and the life sciences, to name a few.
So, more than ever before, education, training, and re-training are the keys to future earnings. In fact, here are just a few examples of the link between education, employment, and earnings:
Today, high school drop outs make about $519 per week for full-time work and their unemployment rate is about 6.7 percent. Workers with a high school diploma average $725 weekly and this group has a 4.5 percent unemployment rate. Workers with associates degrees average about $856 per week and this group's unemployment rate is 3.4 percent. But workers with a bachelor's degree or higher average $1,408 per week and have an unemployment rate of 2.0 percent.
So higher education really pays off!
This Administration recognizes the importance of investing in worker skills. Each year, it spends nearly $15 billion on worker training and employment services. The Labor Department administers nearly $10 billion of this amount. The private sector spends much more. Everyone recognizes that training is key, if our nation's workforce is to remain competitive in the global economy.
Other changes have affected the workforce as well. America's workers are more mobile, and change jobs more often than their parents did. By the time the average American worker is 40 years old, he or she will have changed jobs more than ten times. About one in four workers in the U.S. has been with their current employer for less than a year.
And about one-third of 137 million jobs changes hands every year, as workers move from one employer to another, largely to access better opportunities. Let me emphasize that the majority of people who leave their jobs do so voluntarily, because they have found a better job.
These changes have impacted health and pension plans.
Today's highly mobile workers want benefits that are portable. This is one of the major reasons why defined benefit pension plans are decreasing in popularity, while defined contribution plans that can be rolled over from job to job are increasing. Just look at the numbers:
- In 1980, 30 million Americans participated in private defined benefit plans and only 19 million were enrolled in defined contribution plans.
- At end of 2005, 57 million workers were enrolled in defined contribution plans — such as 401(k) plans — compared with 22 million active participants in defined benefit plans.
- From 1980-2005, participants in defined benefit plans declined by 26.7 percent, while participants in defined contribution plans rose by 200 percent!
The Pension Protection Act, championed by President Bush and signed into law last year, made important changes that help employer-provided plans adapt to the needs of America's dynamic workforce. Studies show that automatic enrollment alone can help increase participation in plans to a level of 66 to 92 percent.
The Act also strengthens retirement security by:
- Strengthening plan funding requirements,
- Providing for greater plan transparency and disclosures to workers, and
- Improving the solvency of the pension insurance system.
Similar ownership-oriented proposals have been made for healthcare. As almost all employers know, the cost of healthcare has an impact on competitiveness. So President Bush supports several efforts to lower the cost and increase the availability of affordable healthcare. His proposals include Association Health Plans (AHPs), Medical Liability Reform, and Health Savings Accounts (HSA).
Association Health plans let small businesses or other organizations band together to get the same cost benefits that are enjoyed today by large employers. According to the U.S. Chamber, AHPs could save employers from 15 to 30% in healthcare costs.
And Health Savings Accounts, owned by workers themselves, are proving popular. Over 18% of companies currently offer an HSA, up from 8.7% that offered them in 2005. Workers like them, as well. The President's HSA proposals are projected to increase the number of Americans with HSAs by nearly 50 % to 21 million by 2010. And so far, they are expanding medical coverage to more Americans. 30 % of the new HSA owners were previously uninsured.
So solutions that emphasize individual-ownership not only work — they are being embraced by workers. Whether it is tax policy, healthcare, pensions, or protecting the rights of workers, this Administration will continue to promote strategies that emphasize the empowerment of the individual.
This strategy applies to immigration reform, as well, which is an issue that concerns us all. President George W. Bush deserves tremendous credit for launching a national dialogue about this very emotional issue.
The President supports comprehensive legislation that addresses all elements of this complex issue. The first important element is securing our border against terrorism and drug trafficking. Another is providing a realistic and effective temporary worker program for workers and employers. And the legislation the President envisioned would also give the undocumented an opportunity to come in out of the shadows. Those who demonstrate good citizenship could enter into the immigration process in a way that is fair to those at the front of the line. Importantly, these men, women and children of good character would benefit from the protection of the law after years of contributing to society.
Many people have waited years, and in some cases decades, to receive their green cards. The proposal aims to clear out the backlog of green card applications within eight years. It will also increase the number of H1-B visas from 65,000 to 115,000. And, under this proposal, to meet the needs of our workforce, the future immigration system will place greater weight on education and skills in prioritizing green card recipients. This will held our country remain competitive in the worldwide economy.
By working together and pursuing policies that empower Americans, we can continue to ensure that our nation's economy remains strong and the beacon of opportunity.
Thank you!
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