Three years ago, Harvard Business School asked thousands of its graduates, many of whom are leaders of America’s top companies, where their firms had decided to locate jobs in the previous year. The responses led the researchers to declare a “competitiveness problem” at home: HBS Alumni reported 56 separate instances where they moved 1,000 or more U.S. jobs to foreign countries, zero cases of moving that many jobs in one block to America from abroad, and just four cases of creating that many new jobs in the United States. Three in four respondents said American competitiveness was falling.
Harvard released a similar survey this week, which suggested executives aren’t as glum about American competitiveness as they once were; a majority of alums now say competitiveness is improving or treading water. Three years of economic growth and record corporate profits will do that for you.
Companies don’t appear any more keen on American workers today, though. The Harvard grads are down on American education and on workers’ skill sets, but they admit they’re just not really engaged in improving either area. Three-quarters said their firms would rather invest in new technology than hire new employees. More than two-thirds said they’d rather rely on vendors for work that can be outsourced, as opposed to adding their own staff. A plurality said they expected to be less able to pay high wages and benefits to American workers.
The researchers who conducted the study call that a failure on the part of big American business. They say the market will eventually force companies to correct course and invest in what they call the “commons” of America’s workforce. “We think this mismatch is, at some fundamental sense, unsustainable,” Michael Porter, one of the professors behind the studies, said in an interview this week.
But what if it’s not?
Why, if you were a multinational corporation, would you feel a need to correct that mismatch? Why would you invest in American workers? Why would you create a job here?
At what point does it become a rational business decision for American companies to write off most Americans?
The latest Harvard Business School survey shows little optimism for the fate of the U.S. workforce among corporate leaders – and relatively little effort afoot to improve the situation. Respondents see “skilled labor” as an American strength, but a deteriorating one. They call K-12 education a weakness. Yet the report cites an estimate that corporate spending on worker training fell by a third, as a share of GDP, from 2000 to 2012. U.S. managers, it says, have developed hiring techniques that discourage skill development among workers. In elementary and middle and high-school classrooms, business leaders are largely absent: Only 7 percent of respondents said their companies were deeply involved in public education; 62 percent said they were “barely or not at all involved”.
Harvard researchers have worried about this tension between corporate and national interests for a while. Last year’s report warned that the nation was on a course where “business leaders pursue their narrow, short-run interests and free-ride off others’ investments in the business commons. The U.S. business environment deteriorates, leading business to leave America and society not to trust business. As distrust grows, government enacts anti-business policies, companies reduce U.S. activities further, and distrust deepens.”
Surely, though, business leaders will find a way to push the nation to a different path, because the alternative could devastate the country. At least, that’s what the researchers are banking on. “High productivity without jobs – and without jobs at good wages – doesn’t build a future,” Rosabeth Moss Kanter, one of the co-authors of the 2013 report, said in an interview last year.
Porter said this week that three forces will drive business leaders to change: They need skilled workers. They need American workers to earn enough money to buy what they’re selling. And they need workers to support “pro-business” policies in government, which, he says, is less and less the case.
You could imagine a scenario where companies, especially really big companies, don’t need any of those things with the urgency they once did. In one of the Harvard studies, alums cited skills as a reason to outsource workers just as often as they cited them as a reason to create jobs here. The same was true for respondents who called “proximity to customers” a key location factor – it was just as big a reason to offshore work as to keep it in America.
When it comes to policies that businesses say they want, such as simplifying the tax code and reducing regulations, large companies might have less incentive to push them through than you’d think. That’s because – as a study out this week for the National Association of Manufacturers concludes – it costs large firms less per worker to comply with regulations and file their taxes than it does for smaller businesses.
This is the pessimistic scenario. For a more optimistic one, look inside one more report out this week, from the Progressive Policy Institute. It lists the 25 companies that invested the most in capital improvements in America last year, led by AT&T and Verizon. Most of the companies on the list come from the telecommunications sector, the energy sector or the tech sector – all areas where American minds have engineered big breakthroughs in recent years.
“The investments have followed the innovations,” one of the report authors, Michael Mandel, said in an interview. Jobs, he added, have followed the investments. So if you spur more innovation, you’ll spur more jobs.
Not surprisingly, innovation is a thing the Harvard Business School alums think America still does really, really well. They love the country’s universities and its entrepreneurship. You could read that hopefully, for the long-term prospects of American job creation. Or you could wonder why a nation that’s always prided itself on innovation now finds itself in what Mandel calls an “investment drought,” where capital spending remains below historical trend levels. You could wonder whether the innovators who run big American firms already have one eye on the door to other markets, other economies, other workers.