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Remarks Prepared for Delivery by
U.S. Secretary of Labor Elaine L. Chao
IMC Fachhochschule Krems
Krems, Austria
Tuesday, June 6, 2006
I am delighted to be here today to talk about the mission of the U.S. Department of Labor, how the U.S. economy is doing, and some other issues about our labor market that might interest you.
So first, let me share with you a little about the portfolio of the U.S. Department of Labor and how we serve the American workforce.
The U.S. workforce is about 150 million people — give or take a few million.
The mission of the Department of Labor is to promote and protect the health, safety, retirement security and competitiveness of America's workforce.It carries out this mission with a budget of $51 billion and about 17,500 workers.
The Labor Department is the largest regulatory department in the U.S. government. It regulates every private workplace to ensure that workers are safe on the job and that they are paid a full day's wages for a full day's work.
In addition, the Department regulates every private pension plan in America. And it funds a nationwide system of 3,500 employment centers to help workers access job training and find good jobs.
The Labor Department also enforces transparency and accountability requirements for labor organizations so that workers can know how their hard-earned dues money is spent. Union members comprise about 12.5 percent of America's total workforce and only 7.8 percent of the private-sector workforce. That's part of a trend — labor union membership has been declining in the United States since the 1950s.
I know that is different from many European countries. In the United States, the government has no role in setting wages, except to set a minimum wage. Wages are determined by employers and workers privately, either through the collective bargaining process or individually.
The Department is also responsible for monitoring national employment trends.
Last Friday, the Department of Labor announced that the national unemployment rate dropped to 4.6 percent, the lowest point in nearly 5 years. That's a full point lower than the average 5.7 percent unemployment rate of the 1990s. For a comparison, look at other mature industrialized economies of equivalent size. For example, France and Germany have persistent unemployment rates nearly double the U.S. rate. The U.S. has had 33 months of uninterrupted job growth with more than 5.3 million net new jobs created in the U.S. since August 2003.
Currently, the demand for workers in the U.S. is especially high in the business, computer, engineering, education and health-care fields. In fact, America will need 4.7 million new workers in health-care professions, including 1.2 million registered nurses in the next 10 years. Other growing sectors in the U.S. economy include aerospace, biotechnology, nanotechnology, energy, financial services, homeland security, information technology and the skilled trades.
The level of job creation in the U.S. reflects the overall economic growth that our country has been experiencing. The U.S. economy grew at a rate of 5.3 percent during the first quarter of 2006. The 2005 growth rate for our economy was 3.5 percent. That's the best record among the major G-7 industrialized nations, and is remarkable for a mature, industrialized nation.
So, despite the difficult challenges that America has confronted over the past five years — terrorist attacks, corporate scandals, devastating hurricanes and high oil prices — our economy is doing well.
Our country has achieved this growth, in part, because the United States believes that the role of government is to create the climate for growth, so the private sector can create more jobs. That means reducing the over regulation, excessive taxation and abusive litigation that hamper growth.
This is especially important for small businesses, which are a key part of our economy. In fact, 64 percent of the new jobs created in the U.S. in the last several years have been created by small businesses with fewer than 500 employees.
The flexibility and mobility in the U.S. economy are also unique, and somewhat surprising to workers and students in other countries. Every year, approximately one-third of the total U.S. workforce — or about 50 million people — leave their jobs and find new jobs, largely because of better opportunities. The average American worker has had 10 jobs by the time he or she is 38 years old because of these new opportunities. So, change is the norm in our society.
This may seem unusual. But in the United States, we believe our country has achieved a favorable balance between workforce security and workforce flexibility. This strategy has helped to create more jobs, lower unemployment, lower long-term unemployment and higher incomes for our workers. Here are some comparisons that may interest you:
- Among the G-7 countries, long-term unemployment of 12 months or more is least prevalent in the United States; and
- Long-term unemployment is about three times higher in Germany and France than it is in the United States.
The United States, however, is a compassionate and generous nation. We are very mindful of the impact of the worldwide economy on our workers. So the government offers a generous package of assistance for workers dislocated by trade. It includes 104 weeks of income support; 104 weeks of job training, job search and relocation assistance; help with child care, transportation and other services. And the government pays 65 percent of health-care premiums. And for workers over 50 years of age: if their new job pays less than their old job, the government makes up 50 percent of the difference up to $10,000.
But our country believes that the best way to help a dislocated or unemployed worker is to help him or her get a job. Technology has accelerated the pace of change in the workplace so much, that the longer a worker stays out of the job market, the more outdated his or her skills become. That makes it harder to find a good paying job. So, the largest part of the Labor Department budget is dedicated to programs that help workers access job training and find new jobs in their communities.
Keeping taxes relatively low on labor is also critical to creating the climate for job growth. The OECD measures how much average employers and employees pay out in social security and income taxes. Germany has the highest tax on labor — 51 percent of total labor costs — while the United States was among the lowest — 29 percent. It's not surprising, therefore, that over the last couple of years, job growth in the U.S. has outpaced the European Union and Japan combined. Indeed, the United States' record of job growth and low unemployment are the envy of many industrialized nations.
But like every other country, the United States also has its special challenges.
Our country is increasingly part of the worldwide economy and is transitioning to a knowledge-based economy. The majority of the new jobs being created in the United States are higher skilled and require more education. By definition, they pay above average wages. But our country is facing a growing skills gap. That's the mismatch between the skills required for the new jobs being created and the skills of our workforce. So, there are shortages of workers with the right skills for the high value, high-paying jobs that are being created. And helping America's workers remain competitive in the worldwide economy is a critical part of my mission.
The government funds many programs to help workers get the skills they need to access these new opportunities. One is the American Competitiveness Initiative, which the President announced in the State of the Union address in January. It addresses the core issues at the heart of our nation's competitiveness, which is innovation and research. One part of the proposal would provide workers with up to $3,000 to purchase the education and training that suits them best.
Another program is the High Growth Job Training Initiative, which identifies and trains workers for sectors of the economy that are growing. And the President's Community Based Job Training Initiative expands the capacity of community colleges to train workers. But the government is not the only entity that invests in training. The private-sector investment in training far exceeds what the government spends. Our society recognizes that keeping the skills of our workers updated is one of the major challenges facing America today.
So, thank you for inviting me here today, and now I will be pleased to take some of your questions.
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