Capitalists for Inclusive Growth

LONDON – In 2012, the Pew Research Center found that 85% of self-described middle-class adults in the United States believe that it is more difficult now than it was a decade ago for people like them to maintain their standard of living. The share of Americans who say that they are in the lower-middle or lower class has risen from a quarter of the adult population in 2008 to around a third today. And Pew’s research found that only 63% of those surveyed believe that hard work leads to success, down from 74% in 1999.

These statistics, which represent popular sentiment in the world’s largest economy, should raise significant concerns for governments and business leaders elsewhere, particularly in countries challenged by stagnant growth and rising levels of youth unemployment. Indeed, in January, the IMF revised its near-term outlook for eurozone growth downward, to -0.2% in 2013. Meanwhile, official data from Spain indicate that the jobless rate rose to 26% (almost six million people) in the last three months of 2012, the highest figure since the mid-1970’s, with the rate of youth unemployment reaching 55%.

The need for growth – specifically, the kind of inclusive growth that can provide jobs for the vast number of out-of-work young people and combat rising levels of income inequality – has never been more vital. Nevertheless, today’s debates about how to achieve sustainable, inclusive growth are too narrowly focused on the role of governments and policymakers. The role of the private sector – with its multinational reach, vast piles of cash, and ability to innovate – has been neglected.

There are three main areas to which business should turn its attention if capitalism is to function in a more inclusive way and meet society’s most pressing needs. First, companies should work to overcome skills/jobs mismatches by investing in vocational training and apprenticeships. Companies like Rolls-Royce and British Gas operate impressive apprenticeship schemes that add value for their businesses by creating a pipeline of talented recruits. Other initiatives have been established to scale up these efforts by engaging multiple companies to create entry-level positions for the significant number of young people who are currently unemployed.