The Ivy League MBAs who go to work at consulting firm McKinsey & C0. may not have to worry about employment, but a new study by the firm shows that nearly everyone else should.

The McKinsey Global Institute, the research arm of the company, forecasts that “The US needs to create 21 million new jobs by 2020 to regain full employment – and only achieves this in our most optimistic job growth scenario.” The observation is made in McKinsey’s new report “An economy that works: Job creation and America’s future.” The primary reasons for its conclusions are that many US workers need to be retrained to find jobs in the new economy, that America has not done well creating and supporting new industries, and that the nation has not been aggressive enough in bringing in foreign capital.

It is hard to argue with the conclusions and may be even harder to address them. Public policy and the ability of government to support the initiatives mentioned by McKinsey have begun to move in the wrong direction if the consulting firm is right.

The Obama $787 billion stimulus package which began in early 2009 will not be repeated. Concerns about the deficit and US debt are too widespread. Pressure to rectify those deficits comes from sources ranging from Chinese policymakers to credit ratings agencies.

The horrible thing is that, if McKinsey is right, US GDP growth will remain stunted for a decade. Job growth is that essential to the economy. Most Administration and CBO estimates for federal receipts are based on unemployment rates which return to the 6% range two or three years from now and remain at about those levels through 2020. And, that creates a vicious cycle. As the recent CBO analysis of the President’s budget points out “Lower projected GDP, in turn, leads to a drop in estimated wages and sal­aries, corporate profits, and other taxable income.”

There is less question about which economic policies the federal government will adopt for the forseable future. None of these plans include major programs to increase jobs. That may be left to tax cuts, depending on how budget negotiations go, if they happen. The theory that lower taxes cause higher spending among businesses and individuals becomes the single buttress for sustained economic improvement. That is a great deal of pressure to put on one initiative.

Douglas A. McIntyre

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