TIME India

Why India’s Modi and Japan’s Abe Need Each Other — Badly

India's PM Modi shakes hands with Japan's PM Abe during a signing ceremony at the state guest house in Tokyo
India's Prime Minister Narendra Modi, left, shakes hands with Japan's Prime Minister Shinzo Abe during a signing ceremony in Tokyo on Sept. 1, 2014 Shizuo Kambayashi—Reuters

The two Asian leaders are looking to strengthen ties during their meetings in Japan to counter a rising China

Cuddly is not an adjective that comes to mind when describing the Prime Ministers of either Japan or India. Shinzo Abe, like most Japanese politicians, often appears overly formal, while Narendra Modi has a reputation for being demanding and stern. But apparently the two feel warm and fuzzy about each other. Abe made the unusual gesture of welcoming Modi on his five-day official visit to Japan with an uncharacteristic hug. After that, the duo chatted over an informal dinner and strolled through a temple in the historic cultural center of Kyoto.

The leaders of Asia’s two most prominent democracies have good reasons to cozy up. Greater cooperation between India and Japan could prove critical in helping Abe and Modi achieve their economic goals at home and their strategic aims in the region — which means countering an aggressive China. That’s why the two have gushed about the importance of the India-Japan relationship. Modi said in a statement that his visit would “write a new chapter” in relations, while Abe in a Monday press conference said that their bilateral ties have the “most potential in the world.”

They have a lot of catching up to do. For economies of such size — Japan and India are the second and third largest in Asia, respectively — their exchange is still relatively small. Trade between the two reached only $15.8 billion in 2013 — a mere quarter of India’s trade with China. Japanese direct investment into India totaled $21 billion between 2007 and 2013, making Japan an extremely important investor for the country. But recently, the inflows have tapered off amid India’s economic slowdown. Over the past three years, Japanese firms have invested more in Vietnam and Indonesia than India.

That may be about to change. The fact is that the economic interests of the two nations dovetail nicely. Modi is looking to restart India’s slumbering economic growth by upgrading its woeful infrastructure, strengthening its manufacturing base and constructing a network of new “smart” cities across the nation — all of which Japanese money, technology and investment can help make a reality. Abe on Monday pledged $33 billion of financing and investment for India from public and private sources over the next five years. “Japanese trade and investment ties with India are set to strengthen significantly over the next decade and beyond,” Rajiv Biswas, Asia-Pacific chief economist for consulting firm IHS, predicted in a recent report.

Meanwhile, Abe is trying to jump-start a Japanese economy that has been stalled for two decades, and badly needs new sources of exports and revenue for ailing Japan Inc. India, with its 1.2 billion increasingly wealthy consumers and bottomless investment opportunities, can provide just what Japan requires. That is especially the case due to Tokyo’s souring relations with that other Asian giant, China. As tensions have risen over disputed islands in the East China Sea, investment and trade between China and Japan has deteriorated.

China is pressing Tokyo and New Delhi closer together for other reasons as well. Abe is trying to forge ties with countries across the region to contain a rising and increasingly assertive China. Meanwhile, Modi, who has his own territorial disputes with Beijing on India’s borders in the far east and north, is aiming to enhance the country’s military capabilities. Much of a joint declaration signed by the Prime Ministers dealt with strategic cooperation. The two pledged to “upgrade and strengthen” their partnership in defense by regularizing joint maritime exercises and collaborating on military technology.

China wasn’t specifically mentioned in the declaration, but which country Abe and Modi have in mind is no secret. Modi, in fact, took a clear swipe at Beijing in a speech to businessmen on Monday. “Everywhere around us, we see an 18th century expansionist mind-set: encroaching on another country, intruding in others’ waters, invading other countries and capturing territory,” Modi said.

None of this has gone unnoticed in the Middle Kingdom. An editorial in the state-run Global Times written in response to Modi’s comments attempted to downplay the friendly Abe-Modi summit. “The increasing intimacy between Tokyo and New Delhi will bring at most psychological comfort to the two countries,” the newspaper contended. “If Japan attempts to form a united front centered on India, it will be a crazy fantasy generated by Tokyo’s anxiety of facing a rising Beijing.”

Whether closer India-Japan ties are a fantasy will become apparent quickly. China’s President Xi Jinping is due to visit Modi in India later in September. Let’s see if he gets a hug.

TIME White House

Biden Celebrates Labor Day With Call For ‘Fair Wage’

A job's about a lot more than a paycheck. It's about your dignity, it's about your place in the community, it's about who you are."

Vice President Joe Biden celebrated Labor Day with a call for a “fair wage” at a union rally for workers in Detroit on Monday.

“Folks, the middle class is in real trouble now,” Biden said to an enthusiastic crowd. “A job’s about a lot more than a paycheck. It’s about your dignity, it’s about your place in the community, it’s about who you are.”

Biden’s 20-minute speech employed a populist and personal tone as he took on everything from the estate tax to American corporations that have moved operations overseas.

Biden, who is known for his blue collar roots, referenced his family roots and his ties to labor.

“‘Joey, you’re labor from belt buckle to shoe sole,'” Biden said his uncle told him.

 

MONEY Jobs

The Economy is Improving, but May Face a New Speed Limit

empty cubicles
Get ready for Boomers to leave the work force. Getty Images

The recession is gradually ending, but we're about to enter a world where fewer and fewer people work.

While it might not feel like it yet, the economy is getting better. On Thursday, the Bureau of Economic Analysis announced the U.S. economy grew faster than expected in the second quarter of this year.

Here’s the thing, though. Even as employers add jobs, we’re about to enter an era with the lowest percentage of working Americans since 1973. Below is a Congressional Budget Office projection, from a new set of charts they’ve released here, showing the labor force participation rate—the number of people working or looking for a job—through the year 2024. As you can see, despite the economic recovery, it has a distinctly downward trend.

Screen Shot 2014-08-29 at 12.06.20 PM
Source: Congressional Budget Office.

Why doesn’t a better economic climate mean more workers? The boomers, largest generation in American history, is on the cusp of retirement, and will soon begin to drop out of the workforce in even greater numbers. Over time, this will have an dampening effect on the economy—though by how much is disputed. The CBO predicts that GDP growth will average around 2.2% per year, noticeably less than the growth we got used to in the 1980s and 1990s.

Another way to visualize the change is something called the dependency ratio, which measures the proportion of the population that aren’t of working age (below 18 or over over 65). As FiveThirtyEight’s Ben Casselman points out, that number is about to increase from 59% in 2010 to 75% in 2030.

Screen Shot 2014-08-29 at 12.05.20 PM
Source: U.S. Census.

As you’ll notice from the above chart, we’ve been a demographically fortunate nation of late, but we’re about to lose that tailwind. On the other hand, this country has faced big demographic changes before: Look the at the jump in the dependency ratio from the 1950s to the 1960s. Back then, an increasingly prosperous nation spent part of its wealth on kids. Those kids grew up and made the economy even larger, and soon we’ll have to spend part of that prosperity on their retirement.

TIME Education

Here Are the Crucial Job Skills Employers Are Really Looking For

483636127
Tom Merton—Gety Images

'Soft skills' like professionalism and oral communication rank among the most valued, regardless of education level

Labor Day offers an opportunity for politicians and economists to offer their two cents on the state of labor. It’s a good bet that some of that commentary will focus on the so-called “skills gap” — the notion that millions of jobs in highly technical fields remain unfilled while millions of Americans without those skills remain unemployed.

The solution according to the pundits? Education and training that focus on technical skills like computer engineering, or on crucial but scarce skills like welding. Match these newly trained employees with open jobs that require those skills and, voila, the skills gap is gone — and the labor market is steadied.

If only it were so simple.

Yes, more American workers need to learn skills that are underrepresented in the labor market. And yes, those technology titans who advocate for more challenging school curricula, for greater funding for science and engineering education and for immigration reforms to bring more skilled workers are responding to a real problem. But that’s not all there is to it. The problem with the skills gap argument is that it accounts for only one set of skills that employers consider important.

I work at Books@Work, a non-profit organization that brings university professors to the workplace to lead literature seminars with employees. The employers with whom we work want to provide professional development opportunities for all members of their organizations, and — we like to think — are more creative in their approach to doing so than most. Yet even this group of employers has few ways of helping their employees to develop skills that aren’t about content or subject matter — skills like communication, critical thinking, creativity, empathy and understanding of diversity.

Such skills cut across sector, hierarchy and function – and are, according to employers, crucial to the success of their companies. According to research conducted by the Association of American Colleges and Universities (AACU), 93 percent of business and non-profit leaders who were surveyed consider critical thinking and communication skills to be more important than a person’s undergraduate major when it comes to hiring.

That’s bad news because, while many public programs try to bridge gaps in the knowledge of future workers, there are few programs to address the gap in skills that are more difficult to measure, like creativity and critical thinking. My colleagues and I often hear from hiring managers who are hungry for programs that will encourage their employees (at all levels of the organization) to think more creatively, communicate more effectively and become more adept at reacting to changing circumstances.

The gap in these “soft” skills is very real. Professionalism/work ethic, teamwork/collaboration, and oral communication rank among the top five skills valued by employers hiring candidates at any educational level, according to one study. Yet employers rank significant portions of those entering the workforce deficient on all these dimensions. The problem is particularly acute among those without a college degree. Employers rate those entering the workforce with a high school degree deficient on professionalism/work ethic, critical thinking/problem solving, and oral communication. Meanwhile, employers do not regard a majority of college graduates deficient in any of these areas.

The introduction at the K-12 level of the Common Core, which is supposed to emphasize critical thinking and problem solving, may produce changes in these figures in the years to come. But for now, those without access to a university education — and even some workers with college degrees — enter the workforce lacking the interpersonal, reasoning and thinking skills necessary for success. Unlike direct knowledge areas — like computer basics — that can be taught through employer training sessions, there is no set curriculum for critical thinking or applied reasoning.

There is no silver bullet for addressing this gap, though our approach at Books@Work, having employees read literature and reflect on it, is one example of an attempt to disseminate some of the benefits of a liberal arts education beyond the confines of the traditional university setting. We need many more such efforts. In discussing Macbeth or Frankenstein, workers explore complex (and timeless) interpersonal dynamics — an opportunity that a training on the latest operating system or review of safety regulations is unlikely to provide.

We’ve found that reading literature with colleagues can offer a new perspective on the practice of work itself, leading to greater professionalism and new ways of doing things. Themes of empathy in a powerful novella by May Sarton, As We Are Now, which is about a woman in a terrible nursing home, led workers in one hospitality company to reconsider their approach toward customers, resulting in a renewed awareness of customer needs and expectations. A conversation about the racial tension in the post-war Northwest in David Guterson’s Snow Falling on Cedars became a platform to discuss personal integration issues in a company growing rapidly through acquisition and organizational acculturation.

Programs like Books@Work are not an adequate substitute for public policy solutions to the gap in thinking and interpersonal skills. We do not address disparities in such skills among job applicants — only among those who are hired. And they place the burden for addressing the problem squarely with employers. But programs that address the significant divide in soft skills are a first step toward realizing that solving the so-called skills gap requires more than teaching kids to code, retraining the unemployed as welders or encouraging college dropouts to complete technical degrees. We all need to continue to improve the most important skill of them all – our thinking.

Rachel Burstein, Ph.D. is Academic Director at Books@Work. This piece originally appeared at Zocalo Public Square.

MONEY Jobs

If Jobs Are Back, Where’s My Raise?

Empty pockets of businessman
Dude, where's my raise? Jeffrey Coolidge—Getty Images

Despite good jobs numbers, wages aren't growing much. The reason why is the biggest debate in economics right now

Today’s strong jobless claims data, which show that applications for unemployment benefits dropped again, is one reason to be cheerful heading into the Labor Day weekend.

Yet despite this, and the fact that the unemployment rate is now down to 6.2%, the economy still has this glaring weak spot: Workers aren’t getting serious raises.

Here’s how two important measures of wage growth have done since the recession. (The Brookings Institution keeps a running tab of these and other key economic indicators in the excellent interactive graphic here.)

fredgraph

Basically, what you are seeing is that pay to workers, whether measured as hourly wages or salaries plus benefits, has been running neck-and-neck with inflation of a bit under 2%. As Fed chair Janet Yellen pointed out in her recent speech at a Fed symposium in Jackson Hole, Wyo., wages are also growing less than workers’ productivity.

Why is this happening? Yellen, for one, likely thinks there’s some remaining “slack” in the economy. Employers are still wary about whether there’s growing demand for their stuff, and so they remain slow to hire. The low unemployment figures leave out a large number of workers who have become discouraged after a long time out of work. But if the slack explanation is right, as companies continue to hire, more of those labor-force dropouts will be drawn back into the employment pool. You won’t see companies under serious pressure to raise wages until that process has played out and companies start competing for a scarcer pool of job-seekers.

Yellen points to (though doesn’t endorse) another possible explanation. Many economists believe wages are downwardly “sticky”—even when companies want to cut costs, they’d rather lay people off than reduce the pay of the people they hang onto. That means that for people who kept working after the recession, wages were higher than they’d otherwise be. And now that the economy is (fitfully) coming back, maybe that means there’s also less room for wages to rise.

Another factor, of course, is that both corporate managers and workers are human, and people can take some time to adjust to new economic signals. Back in July, I sat down with a stock fund manager, who talked about what he was seeing going on at the companies he kept in touch with. More than five years after the financial crisis, he said, the corporate culture among top managers had changed. The people in the C-suite got their positions not by expanding their companies and finding great new hires, but by cutting costs. And they got used to a slack labor market. The manager used the specific example of truckers: You always know you can get a guy to drive a truck from your warehouse to your customer on a moment’s notice. So why worry about hiring more truckers?

As it happens, at the New York Times Upshot blog earlier this month, Neil Irwin wrote that this may be changing. A trucking company called Swift told investors it was having hard time finding enough drivers. The company says the problem is that there aren’t enough skilled people, but Irwin wonders if the problem is really that companies just aren’t paying enough. Trucker pay has fallen, in real terms, over the past decade. Irwin writes:

The most basic of economic theories would suggest that when supply isn’t enough to meet demand, it’s because the price—in this case, truckers’ wages—is too low. Raise wages, and an ample supply of workers should follow…. But corporate America has become so parsimonious about paying workers outside the executive suite that meaningful wage increases may seem an unacceptable affront.

The question now is, how strong does the economy have to get before employers are forced to change their thinking?

Related:
If You’re Looking for Work, the Outlook is Brightening
Why the Fed Won’t Care About Higher Prices Until You Get a Real Raise
What’s the Deal With America’s Declining Workforce?

TIME nation

Detroit: America’s Emerging Market

How the city can teach us to reinvest the rest of the U.S. economy

In August, a year after I wrote a TIME cover story on Detroit’s bankruptcy, I visited Motown again. This time I found myself reporting on a remarkable economic resurgence that could become a model for other beleaguered American communities. Even as Detroit continues to struggle with blight and decline–more than 70,500 properties were foreclosed on in the past four years, and basic public services like streetlights and running water are still spotty in some areas–its downtown is booming, full of bustling restaurants, luxury lofts, edgy boutiques and newly renovated office buildings.

The city struck me as a template for much of the postcrisis U.S. economy–thriftier, more entrepreneurial and nimble. Many emerging-market cities, from Istanbul to Lagos to Mumbai, share similar characteristics, good and bad. The water might be off on Detroit’s perimeter, but migrants are flooding into its center, drawn by lower-cost housing and a creative-hive effect that’s spawned a host of new businesses.

Much of the resurgence has been led by Quicken Loans founder Dan Gilbert, who a few years back decided to relocate his company’s headquarters downtown, moving from the suburbs to take advantage of the city’s postcrisis “skyscraper sales,” as well as the growing desire of young workers to live in urban hubs. “If I wanted to attract kids from Harvard or Georgetown, there was no way it was going to happen in a suburb of Detroit, where you’re going to walk on asphalt 200 yards to your car in the middle of February and have no interaction with anyone in the world except who’s in your building,” says Gilbert, 52.

Since 2010, Gilbert has created 6,500 new jobs downtown, bought up tens of thousands of square feet of cheap real estate and brought in 100 new business and retail tenants, including hot firms like Twitter, as well as a bevy of professional-services firms. Lowe Campbell Ewald, one of General Motors’ advertising agencies, recently moved back downtown after years in the suburbs, citing better client-recruitment possibilities there. Companies of all types are catering to a growing number of young entrepreneurs who are making the most of cheap real estate (Quicken subsidizes rents and mortgages) and local talent (southern Michigan still has one of the nation’s highest concentrations of industrial-product designers) to create new businesses. For instance, there’s Chalkfly, a dotcom that sells office and school supplies online, and Shinola, the cult-hit watch company that advertises $600 timepieces as “made in Detroit.” Their success is already raising rents–per-square-foot rates have doubled in the past four years–and bringing in tony retail brands like Whole Foods.

The question now is how to spread the prosperity. The answer starts with better public transportation. Motown has always been a disaster in this respect. It used to be that nobody wanted to go downtown; now nobody wants to leave. The M-1 Rail, a new public-private streetcar due to be completed in 2016, aims to link neighborhoods. GM, Penske, Quicken and other firms are contributing the majority of its $140 million cost, and the rail will be donated back to the city within a few years. Studies show that a similar project in Portland, Ore., has generated six times its cost in economic development. In the past few months, officials from New Orleans and Miami have visited Detroit to study the project.

Reinventing Detroit’s manufacturing sector is the next step. That means connecting the dots between the public and private sectors, businesses and universities, and large and small firms. Detroit’s old industrial model was top-down: the Big Three dictated terms to thousands of suppliers, who did what they were told. The new model will be more collaborative. Many of the innovations in high-tech materials, telematics and sensors are happening on campuses or at startups, with the aid of groups like the Michigan Economic Development Corp. The University of Michigan has become a test bed for driverless cars. A new federally funded $148 million high-tech manufacturing institute just opened in Detroit’s Corktown neighborhood.

One could imagine the automakers playing a key role in this resurgence by investing more broadly in local innovation, via their own venture-capital arms. Ford, which acquired a local digital-radio technology startup last fall, is beginning to do just that. It would provide a much needed injection of cash into the city’s innovation economy and offer the automakers a new line of business.

Ultimately, it will take all that and more to ensure that Detroit’s downtown rebirth grows into a boom that is more broadly shared.

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