How can the US ensure sustained growth?

The January unemployment report released earlier this month was a real cause for joy among labor market watchers and the 140 million people in America’s workforce.

The economy added 257,000 jobs in January for an average gain of 336,000 over the last three months. More importantly, the report showed that real wages grew by 1.5% in 2014, the biggest gain since before the Great Recession. And job openings rose 3.7% in January, the biggest increase since 2001, signaling companies are having a hard time filling positions, which should put more upward pressure on wages.

But to put this in perspective, these gains come five years after the end of the recession, which cost 6.5 million jobs, and thirty-five years after the beginning of America’s long-term wage stagnation – productivity may have surged but worker compensation has essentially flatlined.

Before 1980, wages kept pace with productivity, but since then they’ve languished. Economic Policy Institute

It will take sustained job growth of 200,000 a month for another two years to regain the level of employment that existed before the recession, including making up for lost labor force growth. It will take both continued robust economic growth and fundamental changes in labor market institutions and policies to keep wages and living standards on an upward path.

The lessons of the past are that good numbers like these won’t last on their own. The markets go up and can come down due to forces partially outside of our control, especially in today’s global economy. So let’s build on this momentum and put in place the strategies needed to keep the good news coming.

Here’s how.

Invest in infrastructure and education

First, the slowdown in growth outside the US requires the government to substantially increase public investment at home, starting with what’s needed most and what has the opportunity to generate strong positive returns: infrastructure and education.

The consensus estimate that the overall economy has a US$3.5 trillion infrastructure deficitmay be abstract and daunting. But if you can’t see the obvious need in your hometown, come visit Boston during our winter of discontent.

Our subway system collapsed under the repeated severe winter storms because of outdated electrical rail systems and cars. Unless we significantly boost our infrastructure spending, our railroads, bridges and tunnels will continue to crumble.

And for education, look at the horrors taking place in my native state of Wisconsin, where the governor is attacking teachers and their unions and now has turned on the state’s jewel of a university system.

Wisconsin Governor Scott Walker wants to cut the university system’s budget by 13% and suggests it should become a trade school for state employers rather than a place that pursues that old fashioned “Wisconsin idea” of searching for the truth and using it to promote the public good.

Higher education is a lynch pin of any civilized society and essential to propel long-term economic growth. It is time to invest in education -– from pre-k to life-long learning and in between – if we want to build both the society and the workforce of the future we want and need.

Investing in infrastructure and education now will sustain the recovery, produce positive returns on investment and spread the benefits widely across today and tomorrow’s workforce.

Invest in America’s workforce

Government leaders needs to stop attacking worker rights in states, Congress and courtrooms. Instead, they should focus on fixing and modernizing labor policies to promote new ways for workers to rebuild their bargaining power and contribute their ideas, talents and energies to improving productivity and the quality of goods and services they produce.

It is time to finally learn the lessons brought home to all in New England this summer by employees at the family-owned grocery chain Market Basket. They revolted to save the business model that had sustained healthy profits, great customer service and great jobs for years. Employees were well paid and as a result highly productive and loyal.

CEOs of large, small and start-up firms should look to examples like Market Basket, Southwest Airlines and other leaders in their industries to manage in ways that value their employees. Otherwise, they risk losing their best and brightest to better companies as the economy improves.

We know how to do this: invest in training, engage employees in joint efforts to improve productivity and customer service, and share the gains they produce. That will keep employees loyal, reduce turnover costs, increase profits and sustain wage growth.

Invest in families

Finally, we need to bring all the talent into the workforce we can find by better integrating work and family responsibilities.

It is time to end the embarrassment of being the last developed country on earth to provide for some form of paid family leave so parents can take the time needed to care for young children or elders.

Studies of the states that have enacted paid leave policies have documented that they help reduce turnover and increase loyalty and commitment. And that’s without any adverse effects on company profits.

This window of opportunity may be our baby boom generation’s last chance to turn the economy around for the next generation.

This article is published in collaboration with The Conversation. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Thomas Kochan is a Professor of Management at MIT Sloan School of Management.