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Survey: Companies Hold Back On Hiring Full-Time Workers

STEVE INSKEEP, HOST:

The national economy in this country has been improving for years, but Jan Rivkin of the Harvard Business School says the economy is only doing half its job. That's the finding of his most recent survey on American competitiveness. He asked Harvard alumni who tend to hold pretty high-ranking corporate positions how things are going in their companies. On the whole, he says business leaders are less pessimistic than in recent years, but there's a big difference in the stories people tell - big companies doing pretty well, small businesses report less success and many executives told Professor Rivkin that as business grows, companies avoid hiring full-time workers.

JAN RIVKIN: The alternatives are things like the use of technology instead of hiring more people or their reliance on vendors that can do the work in outsourced fashion.

INSKEEP: When you say technology, what are some examples of the way that's being used to reduce workforces right now?

RIVKIN: Think about going through the checkout at the supermarket these days. How often do you actually use a human laborer to check you out? How many times do you go to the area where you can check yourself out?

INSKEEP: The self-checkout, sure.

RIVKIN: So self-checkout would be a great example of using technology instead of a person.

INSKEEP: I guess robots on assembly lines. We learned that auto plants hardly employ anybody compared to what they used to employ.

RIVKIN: One of the most striking observations I make whenever I visit a factory is I look around and ask myself, where are the people?

INSKEEP: So that's what happening. The economy is becoming more automated.

RIVKIN: Yeah, and this is not necessarily a bad thing for people in America, right? To the extent that our talents are leveraged by technology, certainly that makes us individually more productive, and productivity is what ultimately allows us to pay people well.

INSKEEP: In that equation, though, are people really getting better wages? When a company becomes more automated, do some of the savings get passed on to the remaining employees?

RIVKIN: So we certainly see that in areas where workers are more productive, wages are higher on average. I mean, we're not fated to a system in which workers are perpetually worse off. This is actually a very unusual time in the history of the American economy. Historically, workers' fates and firms' fates have moved together. They've thrived together after World War II or struggled together during the great recession.

INSKEEP: Doesn't your survey underline how unusual it is because companies are becoming more automated, in some ways more productive, but you find that a lot of the people you surveyed are not expecting their companies to raise wages?

RIVKIN: So we asked our alumni to assess many elements of the U.S. business environment - our tax code, our capital markets, our infrastructure and so on. When you look at their replies and take a step back, you see a striking pattern. The elements in which workers depend, things like schools and workforce skills, those tend to be weak or deteriorating. The elements in which firms depend, things like entrepreneurship, capital markets, management quality, those tend to be strong.

In addition, elements like our tax code and political system are judged to be weaknesses. The company is one tax inversion away from escaping the convoluted tax code of the United States. But workers don't have that option, so the upshot is workers are captives of the weakest elements of the U.S. business environment, while companies are the beneficiaries of America's greatest strengths.

INSKEEP: And I feel like I'm understanding why small businesses also report that they're not doing very well according to your survey.

RIVKIN: Absolutely.

INSKEEP: Small businesses also get stuck with taxes and stuck with worse services.

RIVKIN: Absolutely, and so we have to ask ourselves how can we get the elements of the business environment in which all citizens depend upgraded over time.

INSKEEP: So would that call for a smarter government, a more active government?

RIVKIN: We need a coordinated and sustained strategy for asking how are we going to invest in those elements of the business environment on which the living standards of the average American depend.

INSKEEP: What would be some element of that strategy?

RIVKIN: Certainly, you know, a deep investment in education and in the skills of the workforce, a deep investment in infrastructure. It is crazy in a period in which we have crumbling infrastructure, we have underemployed construction workers and the lowest interest rates that you and I will ever see. We still aren't investing deeply enough in our infrastructure. You know, look, historically in the U.S., government and business collaborated to produce an extraordinarily productive set of commons - the shared resources on which all companies rely to be productive -and yet in the past 12 decades, we've let those shared resources run down.

INSKEEP: Jan Rivkin of the Harvard Business School. Thanks very much.

RIVKIN: Thank you. Transcript provided by NPR, Copyright NPR.

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