Can a 'Multiplier Effect' Catalyse a Job Creation Chain Reaction?

Can a 'Multiplier Effect' Catalyse a Job Creation Chain Reaction?

Earlier this month, the latest Labour Market outlook from the CIPD on the propensity to hire among British companies painted a pretty dire picture, pointing to a "slow, painful contraction" and long-term, steady decline in employment.

Despite the fact that many individual businesses -- large and small -- continue to have reasonable performance and significant cash piles, at the International Business Leaders Forum we see the report as another indicator of the lack of confidence and macro-economic uncertainty driving businesses to "wait and see" rather than invest.

This absence of confidence and leadership from business is bad news for immediate economic growth prospects. However, it also contributes to the lack of trust in the private sector as the engine of job creation at a time when we are staring at staggering levels of youth unemployment.

And yet we see glimmers of lights in an otherwise bleak picture. A major automotive company recently announced the creation of 1,000 jobs in one of their factories, bringing their yearly total of new jobs to 3,500. Another multinational company has set a goal to create 5 million jobs for women around the world directly and indirectly through their activities.

These are contributing pieces of evidence that with the right combination of business leadership, innovation and long-term thinking, business can be on the front foot and act as the positive driver to pull us out of our current state of affairs.

And it is not just the direct employment that we should be celebrating -- it is the "multiplier effect" of this increased activity that is the real story.

Taking the case of the auto manufacturer, aside from the 1,000 new consumers with disposable income to spend on goods and services which will sustain other employment, there is the strengthening of the small and medium enterprises that provide the raw materials and components required by these new workers to produce more cars. The multiplier effect can also catalyse a job creation chain reaction in the distribution end of the business model - more vehicles will require more dealers, after-sales, advertising and brand development.

We should also note that this is not just about volume, which can fluctuate a lot in this kind of business. It is also about innovation. For instance, the reason for the expansion is the plan to develop 40 new models over the coming period. The jobs are being created where they are because they have easy access to a century of R&D capability in the region - a capacity which will be increased and multiplied again as the new models are developed.

In our work with member companies, we see that the challenge of finding "inclusive growth" (which will create jobs both home and away) has become top of mind with businesses. And we view this mindset - together with ongoing efforts to operate sustainably, leverage technology and reduce corruption - as the means to have business take the lead in drawing us back towards durable growth.

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