Job creation in Davos

By Felix Salmon
January 30, 2012

Many thanks to Vikram Pandit for so perfectly encapsulating the hypocrisy of Davos with a pair of big announcements, seven weeks apart.

December 7, 2011:

Citigroup to Cut 4,500 Jobs on Slumping Revenue

Citigroup Inc. Chief Executive Officer Vikram Pandit will cut about 4,500 jobs in coming quarters as he seeks to reduce costs amid slumping revenue and “unprecedented” market conditions.

January 29, 2012:

Jobs are Top Priority, Business Leaders Say as World Economic Forum Annual Meeting 2012 Closes

The 42nd World Economic Forum Annual Meeting closed today, with business leaders urging resolute action to promote growth and employment, particularly among young people. “Jobs should be our number one priority,” declared Annual Meeting Co-Chair Vikram Pandit, Chief Executive Officer of Citi, in a session on the global agenda for 2012.

There was a lot of talk about jobs in Davos, in a way which was directly related to the talk of inequality. The assembled plutocrats had their party line on the latter — that the best way to address inequality is to make poor people richer rather than rich people poorer. (See James Q Wilson for the ur-example of this meme.) And clearly, the best way to make poor people richer is to give the unemployed jobs.

But beyond that, things got very fuzzy very quickly, and more than a little depressing. LSE economist Christopher Pissarides, for instance, basically said that it was delusional to hope for significant job growth from the technology sector or from manufacturing, and that if employment is going to go up, it’s going to be from people basically acting as servants to the rich — whether it’s looking after their children, giving them personal-fitness sessions, or making them coffee.

The sad thing is that I think he’s probably right. The likes of Vikram Pandit can declaim ad nauseam about the importance of creating jobs, but no matter how successful Citigroup becomes, it’s never going back to the headcount it had pre-crisis. And everybody knows, in any case, that profits are Pandit’s number one priority; to be honest I’d be surprised if jobs are on his priority list at all. The markets like it when big banks cut jobs, and hate it when they add jobs. And Pandit’s job is to do what the market wants. Which is, fire people.

Venture capitalists in pre-IPO Silicon Valley circles are good at rewarding companies for growing fast and hiring lots of people. But they’re pretty much the only ones. Once you’re public, your shareholders generally don’t like it very much when you hire rapidly, especially if those new hires don’t immediately feed through into increased profits. And so long as the CEOs in Davos prefer empty exhortations to actually doing something, it’s fair to assume that when they talk about job creation being a high priority, they mean it should be somebody else’s high priority. After all, when was the last time that you heard a public-company CEO boast that she was hiring lots of new people, with money that would otherwise go directly to shareholders?

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