NEWS ANALYSIS : Doubts Cloud President’s Job Conference

It was nearly a year ago that President Clinton and his senior advisers began kicking around the idea of hosting an international conference to figure out why high unemployment rates seemed to have become a fact of life in the world’s industrialized nations.

The phrase “jobless recovery” was in vogue among American economists, who were trying to explain why the U.S. economy was bouncing back from recession but the number of working Americans was not. In ailing Europe and Japan, no one was even talking about recovery.

But as Clinton opens the international jobs conference today, the increasing strength of the U.S. recovery and a steady decline in domestic unemployment are causing economists to question the usefulness of seeking global solutions to national problems.

Clinton, however, said in Detroit on Sunday that he will present a proposal today calling for efforts by Japan and Europe to do more to stimulate their economies through tax and interest rate cuts and other measures.

Clinton Administration officials, meanwhile, are struggling to lend an air of relevance to the gathering they dreamed up a year ago.

“They are trying to make it more of a low-key event than they originally intended. They don’t feel as strong a political need,” said Marvin Kosters, director of economic policy studies at the American Enterprise Institute and an economist in Gerald Ford’s White House.

Yet even if the political need has dissipated, the underlying problem remains perplexing. Many of the world’s most affluent nations have found that the pursuit of prosperity has been accompanied by an unexpected and to some extent unexplained side effect: A growing legion of able-bodied men and women in Europe and the United States have either dropped out of, or been driven from, the work force and appear to have poor prospects of rejoining it.

In the 24 most-industrialized nations of the world, about 30 million people are now without work. If all the developing nations are taken into account, a staggering 3 billion people are out of work or earning too little to live a decent life--proportionally the worst global unemployment figures since the Great Depression, according to the United Nations’ International Labor Organization.

The combined unemployment rate among the 12 members of the European Union is nearly 11% and is expected to reach 12% by the end of the year. In the United States, unemployment has dropped to 6.5%, but government and labor officials say the overall rate understates the true extent of the nation’s employment malaise.

Hundreds of thousands of people have simply given up the search for work, dropping out of the labor pool and getting by on public assistance. Forty-six percent of unemployed Europeans have been out of work for at least a year, compared to 6% in the United States.

With nearly 9% of American men between the ages of 25 and 55 not working, said Lawrence H. Summers, Treasury undersecretary for international affairs, “I don’t think you can say we are without problems in the employment sphere.”

Meanwhile, a related phenomenon is causing increasing concern in the developed countries. It is broadly known as underemployment : highly trained workers toiling at jobs that require few of the skills they possess, and employees making do in part-time or temporary positions paying considerably less than they once commanded.

Viewed in this context, Administration officials argue, the international conference is needed to avoid go-it-alone policies that could send living standards into a collective downward spiral as individual nations try to take market share away from each other.

Still, the United States is not Europe is not Japan. Conditions in each place are different. Embattled political leaders agree that they share a common problem, but they have been unable to identify acceptable joint solutions.

A strategy that could cause economic hardship on one continent might not on another; similarly, a remedy that could solve a problem on one side of the Atlantic might not work on the other.

For example, political and social traditions that shape worker benefits in industrial France--free child care and lengthy vacations, sickness pay and comprehensive health care--have no history or little political weight in rust-belt Detroit.

The conference will be attended by economics, finance and labor ministers from the Group of Seven industrial nations: the United States, Britain, Canada, France, Germany, Italy and Japan. One key objective is to help political leaders determine the extent to which their unemployment problems are “cyclical” or “structural” in nature.

Cyclical problems are linked to the inevitable economic ebb and flow of recession and growth. While they cause real pain, history shows that relief will come with the next recovery.

Structural problems, which appear to be increasing in scope, are attributable to fundamental, long-term trends that may be irreversible. Examples include the changes wrought by technology, permanent work force reductions designed to increase efficiency, ineffective education and training programs, the consequences of generous social programs and job creation disincentives such as high minimum wages and restrictions on firing workers.

Officials responsible for setting policy and spending priorities hope to hear what is working in other nations--and perhaps what is not--as they seek to create jobs in industrialized societies facing stiff competition from low-wage, low-skill developing nations.

Administration officials say the conference will seek to address several crucial questions:

* What has allowed the United States to race so far ahead of Europe and Japan in the recovery from the global recession that began in 1991?

* Can Europe cut back its expensive social welfare programs without courting the sort of political upheaval that few elected officeholders can withstand?

* Can the industrialized nations stitch together a comprehensive social safety net without overburdening businesses and individual taxpayers?

* Can Western nations and Japan increase international trade without triggering a protectionist backlash from vulnerable workers, companies and communities?

* Have technological advances and global competition permanently widened the wage differential between low-skilled and high-skilled jobs?

While Administration officials have high hopes for the conference, some economists doubt that it will produce tangible results.

A high-profile meeting such as the Detroit conference, said Massachusetts Institute of Technology economist Rudi Dornbusch, “makes everybody stand up and look good because they are concerned about unemployment.”

“They’ll say you have to reform, and be socially concerned and responsible in doing that, and the only way out is training,” Dornbusch said. “But that anything should come out of it is a joke.”

Indeed, senior Administration officials agree that the deliberations are unlikely to produce a “grand global initiative,” observed Summers, adding: “This is not a conference that will produce an immediate take-home (benefit) for the unemployed auto worker in Detroit.”

The skeptics say there is little likelihood that Europe will be willing to undergo the radical upheaval that conceivably could shake it out of its economic torpor.

An effective solution, they say, would require drastic changes in a hidebound social welfare system, a rigid workplace imposed by powerful labor unions and an inefficient investment structure that tends to deny capital to the small businesses that could create the most new jobs.

For the United States, finding answers to the conference’s central questions is more than just an altruistic exercise aimed at improving the plight of European workers. In the increasingly interconnected global economy, a thriving Europe is not just a competitor for U.S. businesses. It is a market.

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The Workplace According to Reich

On the eve of the Clinton Administration’s international jobs conference in Detroit, U.S. Labor Secretary and economics author Robert Reich offered his assessment of the underlying trends affecting employment in the United States, Europe and Japan:

“Not too many years ago, the conventional wisdom was that Europe and Japan did it all right and the United States did it all wrong, and everything that could be learned, we could learn from them and, indeed, they had nothing to learn from us. Now, the new conventional wisdom is just the opposite: We’re doing everything right, and Europe and Japan are doing everything wrong.

“Neither of those positions is correct. . . . There’s a great deal to learn from one another. Their job growth has not been very healthy, although those who have jobs have seen wage increases of very healthy proportions. The United States is almost the mirror image. Over the past 15 years, we’ve created a lot of new jobs, but . . . a majority of Americans have seen their wages stagnate or decline and many of their benefits disappear.

“The underlying question is: Are we condemned to choose between these two alternatives, neither of which is very appealing: either more jobs but declining real incomes and (a) widening gap between rich and poor, or fewer (but) better jobs with a bigger and bigger social safety net catching more and more people?

“There may be another alternative. . . . Some would say that in Europe and Japan they’ve done a much better job bringing the bottom two-thirds of their populations up to a high minimal level of competence in education and training and skills. Some would say that in the United States, our great strength is our labor market mobility, the dynamism and change that our markets allow.”