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Speeches by Secretary Elaine L. Chao
Remarks Prepared for Delivery by
U.S. Secretary of Labor Elaine L. Chao
Yale Chief Executive Leadership Institute Summit
New York, New York
Friday, June 6, 2008
Thank you, Clarke [Murphy, Managing Director, Head of CEO/Board Services Practice at Russell Reynolds Associates].
Thanks also to Jeff Sonnenfeld, [Founder, President, & Chief Executive Officer of The Yale Chief Executive Leadership Institute] for putting together this great event.
It's a pleasure to be here this afternoon to share some thoughts on the economy, trade and global statesmanship.
This meeting is very timely, since just this morning the Labor Department released the latest employment numbers.
As you know so well, slowdowns in the housing sector, and the under-pricing of risk in the financial sector have impacted the U.S. economy significantly. This Administration was watching carefully and took action to soften the blow.
More than $50 billion in stimulus payments have already gone out the door — we expect to see the impact beginning this summer. The financial markets have been stabilized and we're just beginning to see the impact of the interest rates cuts in the economy.
But as you know, today's employment report isn't what we wanted to see. The jobs numbers are consistent with the slow rates of economic growth that we've had. Let me note that job losses over the past five months, although unwelcome, have averaged about 65,000 compared with averages of about 125,000 during the prior two recessions. And May's unexpected rise in the unemployment rate to 5.5 percent reflects the fact that an unusually large number of students and young people are entering the labor market. We believe that about two-thirds of the increase in unemployment in May was accounted for by new entrants or reentrants, not workers who are currently employed losing their jobs.
And the other economic indicators are mixed. GDP growth is slow, but still in the positive range — revised up to 0.9 percent in the first quarter of 2008. Real personal income so far this year is holding steady. And industrial production has slowed, but is not a recession levels. The only factor clearly in the recessionary range is real whole, retail and manufacturing sales.
As always, this Administration is continuing to keep a close eye on the economy and the job market.
Let me also give some long term perspective. Some pundits are saying that today's economic conditions are not that far removed from those that existed during the Great Depression. But during that period in our nation's history, nearly 25 percent of the workforce was unemployed, compared with an unemployment rate of 5.5 percent today. And GDP fell by about half during the four key years of the Depression. Today, GDP growth is slowing, but it's still in positive territory. But the one similarity that should be of concern — rising protectionism, which was a major factor in deepening and prolonging the Great Depression — is hardly commented upon at all.
And that's of concern. A growing world economy is important for the United States for many reasons. There is a direct link between the growth of our trading partners and the demand for U.S. products and services.
A one percent increase in growth in the economy of a trading partner translates into a one percent increase in demand for products from the United States. And exports are an increasingly important part of our nation's economy.
In 2007, real net exports contributed over one-half percentage point to real GDP growth. That's especially good for U.S. workers, since export-related manufacturing jobs pay on average 13-18 percent more than non-export related jobs.
One of the challenges facing American leaders today in both the public and private sectors is articulating this win-win scenario. The world is not a zero sum game, in which some win at the expense of others. That's the old thinking — the old class warfare paradigm that world events have largely discredited.
Today, the growth of global prosperity is lifting unprecedented numbers of people out of poverty and increasing the size of the "pie" available for everyone to share.
The IMF recently reported that 2007 was the fifth consecutive year in which growth in developing countries exceeded 6 percent — a record never previously achieved. And the IMF expects that this growth will continue in 2008, at the rate of 6.7 percent.
The free enterprise model of encouraging risk taking, innovation and competition is flourishing and being adopted by increasing numbers of entrepreneurs worldwide. New products and services are constantly being refined and improved, first on a small scale regionally, and then launched into global markets.
This dynamism is constantly creating new opportunities. But it also has short term impacts that hurt some disproportionately more than others, especially lower skilled workers. In the United States, the fast past of change and the transition to higher skilled jobs has created a lot of uncertainty and fear that some in our country are being left behind.
In response to these concerns, our country has created a very generous assistance package for workers impacted by trade. These benefits, called Trade Adjustment Assistance, are far more extensive than regular unemployment insurance.
Depending on the state, dislocated workers receive up to 104 weeks of unemployment insurance, up to 104 weeks of training, up to 104 weeks of direct income assistance such as childcare, transportation, and relocation expenses, 65 % of their healthcare is taken care of by the government. And if the worker is over the age of 50, and they get a new job that pays less than their old job, the government will pay 50% of their wage differential.
Despite these programs, however, some public figures argue that the solution is for the United States to take a time out from the worldwide economy and abandon decades of bipartisan support for free and fair trade.
So in today's environment, the art of communications, building grass roots support and mobilizing outside stakeholders is more important than ever for public and private sector leaders. In the United States especially, the lines between public and private sector leadership have blurred. Boards of Directors increasingly find their business decisions subject to scrutiny from environmental, labor, human rights and other groups. These activist groups can not only bring political pressure in Washington to bear on private sector decisions.
They are acquiring access to the boardroom itself through shares in pension funds. So business leaders are increasingly finding themselves in the unaccustomed position of reaching for a public voice to cultivate support from outside stakeholders.
As someone who has worked in the public, private and non-profit sectors, let me share with you a few of my experiences with this process. Many leaders in the private sector, especially those from more hierarchical cultures outside the United States, are not used to working with a broad diversity and cross section of interest groups. They are more accustomed to operating on a bottom line basis and being able to act unilaterally. For them, public opinion is not a factor. But in today's world of rapid, global communications, understanding and working with public opinion is an important competitive advantage.
Working in the public sector is actually good preparation for private sector leaders because it teaches the importance of having a very good awareness of the external environment and how to leverage it.
In the United States, as many of you know, there is another avenue that advocates can use if they are not successful in influencing public opinion or the legislative and executive branches of government. They can — and often do — pursue a litigation strategy in the courts. In fact, the U.S. government is frequently sued over major regulatory reforms. Some are initiated by business groups, many are initiated by advocacy groups and labor unions.
While every leadership challenge is different, the convergence of public and private sector stakeholders makes it easier to apply lessons learned in one sector to another. Whether it's investing in a culturally sensitive institution or commodity, there is a common need today to build bridges of understanding that can help outside stakeholders understand the benefits of our increasingly interdependent world.
When speaking to the public, I continually emphasize the resiliency of our free market system and its unprecedented ability to overcome challenges, adapt and grow. The fundamental criteria for competitiveness include: a culture that encourages risk taking, rewards individual initiative and emphasizes transparency, accountability and the rule of law.
The rise of the rest of the world is a good thing and in many ways is a vindication of these principles. The challenge is to ensure that the benefits of the free market system are preserved and strengthened for all: employers, workers and investors.
So thank you for inviting me here today and thank you for everything you are doing to create hope and opportunity for others.
Now, I will be happy to take a few questions.
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