Creating a "good jobs economy"?

Dani Rodrik and Charles Sabel have a new paper here on a strategy for a "good jobs economy", the defining political economy issue of our times. 

They point to a dual-economy world - oases of productive and good jobs in an ocean of low income and low productivity poor jobs. Any meaningful job creation strategy would have to address the issue of productivity on both the firm and worker sides, as well as expanding the stock of such productive jobs. They write,

Our approach has three, mutually re-enforcing components: increasing the skill level and productivity of existing jobs, and the competitiveness of firms, for example through provision of extension services to improve management or cooperative programs to advance technology; increasing the number of good jobs by supporting startups, the expansion of existing, local firms or attracting investment by outsiders— what the many state and local programs (of greatly varying quality) currently directed to this last purpose refer to simply as “economic development”; and active labor market policies or workforce development programs to help workers, especially from at-risk groups, master the skills required for good jobs. Redistribution, Keynesian demand management and anti-trust policies can and should be important complements to such interventions; alone or in combination they cannot be a substitute for them. Public-private collaborations are at the heart of this strategy.

It is likely that there is endogeneity through a version of Say’s law here - once the productivity is addressed on the supply-side, the demand for more stock will invariably follow. 

Some observations:

1. The problem with skilling workers is that short-term skilling programs are pretty much blunt, on all but a handful of occupational categories. Re-skilling for good jobs perhaps even harder. We can have short-term finishing schools (making candidates employable enough). As they say, you cannot teach in 3-6 months, what you did not learn in 10 years at school. 

India, for example, has had a massive national skilling efforts for more than a decade now. It is hard to come up with even one example of a positive deviance of the general model in even a district or occupation category or population group of success with skilling interventions. 

The only way out for countries here is to fix the school education system, in terms of quality of learning outcomes. Without fixing it, the productivity race is a non-starter. Skilling is just band-aid on a corpse.

2. On enhancing firm productivity, especially of the SMEs, management extension services are a very promising window. And it is doable even in developing countries. But the problem here is that of chicken and egg. The supply-side just does not exist. We need hundreds of low-cost, on-site, basic operational and financial management consultants across developing countries. India alone needs hundreds of them.

If this becomes available, governments could repurpose 5-10% of their industrial policy budgets, which currently go into fiscal incentives and input subsidies, towards supporting this type of management consulting. Government could empanel a list of consultants to offer a defined set of services, and subsidise 50% of its cost for young firms.

3. Finally, as with any such engagements, there is the lurking problem of weak state capacity. Such interventions demand very high quality state capacity, one which is invariably missing in these countries. It also demands partnerships and coalitions, and a high degree of social capital and trust, all chronically deficient ingredients in most developing countries.

Update 1 (10.12.2020)

Dani Rodrik writes about the need for both supply (workers) and demand (firms) side policies to create good jobs. 

On the skill-building front, so-called “sectoral training programs” have been especially successful. These programs go beyond traditional training: they are tightly coordinated with employers and provide skills customized to the needs of specific industries, such as health care or information technology. Workers enrolled in the programs receive a variety of “wrap-around” services, ranging from childcare to job placement, in addition to training and certification. The best known of these programs is Project QUEST in San Antonio, Texas, which has been in operation since the 1990s... Such sectoral training programs have been shown to increase disadvantaged workers’ earnings by more than 20% on average at a relatively low cost.

Likewise, we have considerable experience on the demand side to guide us... What works much better, as Tim Bartik of the Upjohn Institute has shown, is to provide customized business or infrastructure services – such as management and technology advice, a skilled workforce, or local land development – to local firms. Tailored to the needs of specific firms, assistance of this kind can help them become more productive and expand employment capacity by overcoming the particular constraints they face. These programs require building relationships between local firms and prospective investors who understand their needs, as well as a capacity to respond quickly and effectively.

He also points to the problems with their adoption,

The bad news is that these successful worker and firm-centered initiatives currently operate at very small scale. Sectoral training programs are typically operated by community groups or non-governmental agencies, and limited funding, as well as a lack of interest from state and federal agencies, prevents them from being scaled up. As a result, the workers they serve number in the thousands instead of the millions that need to be reached. Similarly, customized business service programs are severely underfunded. Bartik estimates that firms receive $47 billion annually in state and federal tax incentives for investment. By contrast, total annual spending on customized training and manufacturing extension services, which is far more effective in terms of job creation, amounts to only around $1 billion.

A second problem is that programs that are centered on workers and firms are often not well coordinated. Even though sectoral training programs are built around a “dual-customer” approach that serves employers as well as employees, their ability to influence firms’ employment policies – including technology adoption and human-resources practices – remains limited. And firm-centered policies can overlook local employment needs if they focus too much on other objectives, such as innovation through new technologies and export competitiveness.

This Tim Bartik presentation and brief paper on moving good jobs to places with people (instead of moving people to good jobs) is a good summary.