Thomas Perez

'We Want to Learn from Germany'

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U.S. Secretary of Labor Thomas Perez. David Banks, Bloomberg via Getty Images
  • Why it matters

    Why it matters

    Unemployment in America is low, but real wage growth has remained stagnant since the 1980s. This year, the Obama administration will focus on raising minimum wage on a federal level.

  • Facts

    Facts

    • In the United States, 14.1 million jobs have been created since President Barack Obama took office.
    • The U.S. labor department expects real wages to increase by 3 percent this year.
    • Apprenticeship used to be respected work training in the United States, but its reputation declined, leaving a gap in the labor market.
  • Audio

    Audio

  • Pdf

With strong employment figures for the United States showing the country is putting the recession into the past, Thomas Perez is looking ahead at labor models for modern business.

Thomas Perez, a lawyer, used to head the Department of Justice’s civil rights division before becoming Labor Secretary in 2013.

In his current post, Mr. Perez seeks to balance innovative new working models with social security. He talked with German business weekly magazine WirtschaftsWoche about the low oil price, real wage stagnation and said Germany’s positive experiences with the minimum wage gives hope that an increase could be possible in the United States.

 

WirtschaftsWoche: With unemployment at 5 percent, your country is moving towards full employment. But many Americans rely on two or three badly paid jobs to feed their families. What’s going wrong?

Thomas Perez: We have some unfinished business, certainly. But why don’t you look at how far we’ve come, first: In the three months before President Barack Obama took office, two million jobs had been lost, the U.S. labor market was literally bleeding to death. Since then, 14.1 million jobs have been created, primarily due to our stimulus program for the economy in 2009. These stimuli are beginning to take effect now: 2015 was the strongest year ever for the automobile industry.

That is probably not solely due to the $625 billion stimulus. Self-sufficiency in energy supply through fracking attracted many investors. Now, low oil prices are making oil production unprofitable. Is the job boom a flash in the pan?

Two areas that have seen most growth in the past two years are business and professional services. Another source of new jobs are the industrial enterprises that benefit from low energy prices. In the past two years, a particularly large number of jobs have been created in the service sector – in education, for instance.

I see the current oil prices as a blessing for consumers: More money in people’s pockets means they will spend it, thus supporting the economy through consumption. As a result, 2015 was a sound year from an economic perspective. Although the strong dollar and declining global demand caused some headwind for our export economy.

Lately, real wages have only increased by 1.7 percent, below GDP growth. How can that be, with the economy performing so well?

Stagnation of real wages is not a new phenomenon. It has been a general trend in the U.S. since the early eighties. But we still have to change that. For this year, we expect real wages to increase by 3 percent.

The U.S. Economy-01 United States GDP unemployment

The Obama administration will be in office another year. What can you still achieve now?

We want to raise minimum wage on a federal level. Nobody can feed a family on $7.25 an hour in the United States.

But the Democrats don’t have the majority in Congress for this.

We are not only focused on Congress; we’re seeking support for minimum wage in the states, we are regulating compensation for overtime by decree, and we are taking federal money to subsidize individual low wage sectors like domestic care. Up to five million employees will benefit from this. On a federal level, we would like to point to the experience in Germany, where you’ve also introduced minimum wage, and doomsayers who predicted the collapse of the job market have been proven wrong once again.

In Germany, however, real wages are increasing, and unemployment is almost as low as in the U.S.

We are always looking for ideas. We do not only want to import products from other countries, but good business models, too. That is why I come to Germany often. One of the German success stories is its strong SMEs, which we want to advance in the U.S. as well. It is in Germany’s DNA to start out with small businesses, and we can learn from that.

The country of endless opportunities wants to learn from Germany?

Apprenticeship used to have stature in the United States; it has lost that stature, and that is a shame. We’re working to restore that stature and expand apprenticeship to a wide range of sectors in partnership with large companies in the IT sector, in health care, in agriculture and in industry. We invest hundreds of millions of federal resources in this every year. We also need a dramatic reform of our education system: It is easier to find a better job if you have better skills. We are also looking at adopting certain aspects of the German model of dual education.

Conversely, Berlin is hoping for advice on how to integrate a million refugees. Do you have any suggestions?

Refugee crises are also a test of our values, and I am sure that Germany will pass that test. In the nineties, thousands of refugees from Kosovo arrived in the U.S.; today, these people are an integral part of our society.

 

This interview originally appeared in business weekly WirtschaftWoche. To contact the author: florian.willershausen@wiwo.de

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