It is widely recognized that human capital is essential to sustaining a competitive economy at high and rising living standards. Yet acceptance of persistent high unemployment, stagnant wages, and other indicators of declining job quality suggests that policymakers and employers undervalue human capital. This paper traces the root cause of this apparent paradox to the primacy afforded shareholder value over human resource considerations in American firms and the longstanding gridlock over employment policy. I suggest that a new jobs compact will be needed to close the deficit in jobs lost in the recent recession and to achieve sustained real wage growth.

Resolving America's Human Capital Paradox was originally published on the W.E. Upjohn Institute for Employment Research website. The policy paper is available here. A working paper is available here. Prepared for a joint project of the W.E. Upjohn Institute for Employment Research and the Employment Policy Research Network.

"Even those who denounce our “unsustainable welfare state” don’t agree on what it is or how its spending should be measured.

"Brandishing the phrase in his recent call for a structural revolution, David Brooks of The New York Times didn’t get specific.

"The Heritage Foundation sometimes offers a narrow definition of the “unsustainable welfare state,” based on means-tested programs – benefits directed to those with income below a poverty threshold, like Temporary Assistance to Needy Families, food stamps and Medicaid.

"Like many conservative Republicans, however, the Heritage Foundation often includes bigger entitlement programs that are not means-tested, like Social Security and Medicare, within its unsustainable category.

"The ball seems to get bigger as it rolls downhill. Some critics consider the entire government payroll part of the unsustainable welfare state. Others use government spending as a share of gross domestic product as a warning sign. By these measures, military expenditures also count. ..." <Read More>

Jobs report: On the March 9 PBS NewsHour Brandeis Dean and LERA president-elect Lisa Lynch discussed the February jobs report with reporter Ray Suarez and Mesirow Financial's Diane Swonk. Lynch was cautiously optimistic: "... it is important to start doing a little bit of addition and looking at what we're seeing on the employment front, having three very strong months of robust job growth, well beyond the number of jobs we need to keep pace with the growth of the population, on top of 17 months overall of adding jobs every month to the economy. Seeing the unemployment rate coming down, even as more people are entering if into the labor market, seeing wages increasing, seeing temporary help go up, seeing hours of work go up, all of that added together on top of decreasing unemployment insurance claims data, really suggest that we have turned a significant corner with regards to improvement in the labor market. ..."