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Industry Speaks: How to Kick-start the Job Market

WWD asked industry executives and economists their views on the key question: “What is the one thing that can be done to stimulate job creation?”

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Get a job.

But how to do that when 8.3 percent of America’s workforce remains unemployed — not counting the number of people who have given up looking for jobs or who are underemployed in low-paying ones they had to take simply to help pay their bills? The U.S.’ weak employment picture is one of the key issues in the presidential race, as well as for state and city governments and businesses across the country. It also is one of the reasons the Federal Reserve is said to be mulling a third stimulus package later this year as the U.S. gets dragged down by the ongoing ills of the European economy and slowing growth in China, Brazil and India.

RELATED STORY: A Survey of Who’s Adding Employees and Why >>

President Obama and putative Republican presidential nominee Mitt Romney continually attack each other over the economy and unemployment. Obama blames Congress for failing to adopt the jobs proposal he unveiled last September, even though it did pass some elements of the plan, such as extending a payroll tax cut for individuals. Other business tax cut proposals at the heart of the President’s $447 billion American Jobs Act stalled, however. They include a tax break of up to $4,000 for employers who hire workers unemployed for more than six months and a payroll tax cut for employers on the first $5 million in wages and a tax break that will allow companies to immediately deduct the full value of new equipment and plants this year.

Obama has also made several tax-break proposals aimed at encouraging U.S. manufacturers to move production back to the U.S., and implemented a new trade enforcement unit to crack down on unfair trade practices.

Romney unveiled his economic plan in September, which included imposing sanctions on China over its undervalued currency, reducing the corporate income tax rate to 25 percent and immediately implementing federal budget cuts. On the trade front, Romney said he would conclude the Trans-Pacific Partnership negotiations between the U.S. and eight other countries, as the Obama administration has said it is committed to doing.

As the two politicians ramp up their rhetoric in the run-up to their parties’ nominating conventions, the fashion and retail sectors are beginning to choose their sides and express their views on how to stimulate employment and the economy. The retail sector employs more than 14 million people, and even domestic manufacturers, while hard-hit by globalization, still employ about 12 million people — although this is down from a peak of nearly 20 million around 1980, according to data from the U.S. Department of Labor.

WWD asked industry executives and economists their views on the key question: “What is the one thing that can be done to stimulate job creation?” Here is what they said:

Terry J. Lundgren, chairman, president and chief executive officer of Macy’s Inc.: “Through the Business Roundtable and the National Retail Federation, the message we have been communicating to political leaders is that we are very anxious for a bipartisan agreement to extend the Bush-era tax cuts and enact appropriate spending cuts. We are about to face tax Armageddon. I understand it will be very hard to get anything passed before the election, but work done between now and the election could put in place a structure to allow Congress to take action….What American people and corporations are looking for is certainty, something we can plan on and make business decisions, based on fact rather than guesswork. There’s a 36 percent corporate tax rate for retailers and certain other industries pay less than 10. We have to level that playing field, take away the loopholes and have a tax for everyone that is fair. You could lower the effective corporate tax rate to 25 to 28 percent for everyone by eliminating these loopholes. That would spur job creation in the industry.”

Stephen I. Sadove, chairman and ceo, Saks Fifth Avenue: “Overall job creation is tied to economic growth. You’ve got to score growth in the economy….One avenue for generating job growth is stimulating international tourism and relaxing the restrictions on visas. That could be worth a couple of million jobs at hotels, restaurants and retailers. But there is no one silver bullet. There are lots of things that could help. Corporate tax reform is another opportunity for job creation. Retail pays among the highest tax rate in America. This offers an opportunity to further investments back into retail businesses [leading to] job creation. To the extent that there is investment in America’s infrastructure represents another opportunity, but the concern is that incremental investment could exacerbate the budget deficit. Longer term, developing new forms of energy, like solar, offer long-term job creation possibilities, but there is risk associated with this, too.”

Kay Krill, president and chief executive officer, Ann Inc.: “Retailing is the third-largest private-sector employer in the U.S., providing jobs for one in ten working Americans. For our industry to grow, and to create more jobs, it is up to us to create exciting, quality products and sell them at good value to encourage consumers to spend.

Government has a role to play as well. For example, we have seen that ‘sales-tax holidays’ definitely work. Some studies show that tax holidays can boost sales by as much as by 4 percent statewide, and some individual retailers have seen sales grow by as much as 50 percent during tax holidays.

“There are ancillary benefits as well. For example, when New York City instituted its back-to-school tax holidays, not only did retailers see their sales increase, but restaurants, parking garages, even the theaters saw their volumes increase as people flocked to Manhattan to shop the stores. As sales grow, retailers need to hire more personnel in their stores and in their supply chain, to meet higher demand. I would encourage lawmakers to consider instituting more tax holidays, which will provide a catalyst for increasing retailers’ sales and help create jobs. Notably, cities and states do not even ‘lose tax revenues,’ since the increased sales get taxed eventually as companies report higher revenues.”

Roger Farah, chief operating officer of Ralph Lauren Corp.: “American companies with businesses in Europe can’t bring cash back to the U.S. without paying tax. They should repatriate the foreign cash being held overseas and apply it to job creation.”

Wilbur Ross, chairman and ceo of W.L. Ross & Co., which owns International Textile Group: “The only way to boost the economy quickly is to improve public confidence. To do so, the President should announce licenses for the pending natural gas export facilities, his support for a one-year emergency extension of the Bush tax cuts coupled with a debt-ceiling increase and a long-term commitment to Simpson-Bowles. Finally, he should direct all federal agencies to suspend new rule making until unemployment goes below 7 percent. The shock value of such an announcement would overcome instantaneously concerns about antibusiness attitudes and about failure to provide economic leadership.”

Allen Questrom, former ceo of J.C. Penney, Barneys and Federated Department Stores: “In the short term, the one thing that must be done is to create an attitude in Washington where the government is helpful to business instead of putting more regulations down. I am not advocating spending more money, but there are bridges that need to be redone, roads that need to be redone. There are all these projects where you could make the case that government should spend money, which would create jobs. So why not do it now if you are going to have to do it anyway? Why delay these decisions?

“Long term, you’ve got to solve the education problem in America, so our children are properly educated so we can compete in the world. What America needs more than anything is new ideas. If you don’t have creators coming up with new ideas, you won’t have job growth….Both parties have got to start thinking like it’s one country. We can certainly be the most productive because we have the advantage of being a multicultural country with different ideas, as long as we keep encouraging individual success, allow the smallest entities to thrive and we are not government-run.”

Josie Natori, ceo of the Natori Co.: “Job growth can be stimulated by relieving concerns about potential tax hikes, easing burdensome regulation at all levels of government and helping slow the relentless increases in health-care costs. The costs of running a business are increasing faster than the rate of economic growth, making it more difficult for any established business to hire aggressively.”

Chris G. Christopher Jr., senior principal economist at IHS Global Insight: “At the federal level, they have a payroll tax cut for individuals, and they need to make sure they don’t let that expire at the end of the year. Let’s say someone in a household gets $100 extra from that tax cut. They might go to a restaurant or buy a pair of sneakers to make themselves feel better,” which stimulates the economy and in turn more hiring by businesses. Christopher said state governments need the help of the federal government to start hiring more teachers, firefighters and police, even though they are taking austere budget cuts.

John Donahoe, president and ceo of eBay Inc.: “This is an incredibly exciting time in commerce. Technology-led innovation is changing the way people shop and pay, and the ways in which merchants of all sizes can grow their businesses on a global scale. By embracing innovation, together we can create opportunity that creates jobs.”

Harvey Weinstein, co-chairman, The Weinstein Co.: “Goldman Sachs and Warren Buffett worked together to create 10,000 new small businesses, which generated many of thousands of new jobs. I’ve seen this plan, and I think the country should emulate it and create a private sector that takes on this approach to create 100,000 new small businesses, with new ideas, and generate millions of new jobs. Congressman Tip O’Neill once said, ‘All politics are local.’ I believe job creation can be the same.”

Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition: “U.S. manufacturing investment is dramatically undermined by our trade policy when it allows people to produce goods and access our market under extraordinarily more advantageous circumstances, such as cheap labor, manipulating currency or illegal subsidies. You can eliminate corporate taxes and other things [to bring back investment], but if you still allow someone [in another country] to cheat, they will find a way to negate that advantage.”

Matthew Shay, president and ceo at the National Retail Federation: “The one thing that Congress and the administration could agree on that would be beneficial to getting the economy moving in the right direction and creating jobs would be reforming our tax code. There is so much complexity and, at the moment, so much uncertainty around obligations of business that relate to many various tax provisions, some of which are expiring and some of which need to be extended and will likely be changed, that it is very difficult for any business to make a judgment about how and where and when to make investments. From our perspective, the best way to unlock the potential of our economy is to adopt a tax code that is competitive with other markets around the world, so that the U.S. does not have the highest corporate tax rate in the world, and to adopt a straightforward tax code that is not filled with the kinds of loopholes that create incentives to do business planning by taxes as opposed to business planning by the conditions of the marketplace.”

Hal Reiter, chairman and ceo of Herbert Mines Associates: “Billions of U.S. dollars are languishing in foreign countries because we can’t incent U.S. companies to repatriate their international income. Bringing that money back home will create jobs. Congress has to get together and revise the tax code to allow for such return.”

William McComb, chairman and ceo of Fifth & Pacific Cos. Inc.: “Right now, across all industries and regions, the most efficient and effective single stimulus would be bonus depreciation. By accelerating depreciation schedules in a meaningful way, it creates the incentive for companies, both big and small, to replace old, inefficient manufacturing processes and capital assets with newer, more efficient ones. Historically, when companies of all sizes invest in property, plant and equipment, we get just what the doctor ordered: economic growth and job creation.”

Karen Griffith Gryga, chairman of FashInvest: From the venture-capital perspective, emerging growth companies are an important source of job creation and overall growth. Government and industry can help create jobs by providing support programs for early-stage companies, both programmatically and financially. Support of seed and early-stage financing programs are critical, both from a capital perspective, where available, and a favorable tax treatment for both VCs and angel investors.

Stanley Officina, president of Ultimate Financial Solutions: “To create more jobs, the government needs to lower corporate taxes for companies other than multinationals. They need to cut taxes for companies that produce product and employ people in the U.S., and increase taxes on multinational firms, because they’re employing people internationally that have replaced the U.S. workforce.”

Madison Riley, managing director, North America, for Kurt Salmon: “You need to think the future is sound. If the government could come together around the Simpson-Bowles deficit-reduction plan, it would make a difference, show that the government is working to help both the spending and debt crises.”

Riley said he believes ceo’s are looking for indications that government gridlock isn’t going to continue. “The ceo’s running major corporations want the economic house to be in order. They want to see signs of progress,” he noted. “If we get to the end of the year without some kind of a budget agreement, it’s going to have a big effect.”

Philip Bleser, ceo of global corporate banking in North America for J.P. Morgan Chase: “Everybody should call their senators and congressmen and say, ‘Work in a collaborative way to resolve what’s really an impasse.’ There’s this wait-and-see approach going on, and that uncertainty [around taxes and government spending], once removed, will stimulate our economy, and this is not just the U.S., but globally, in a big way.”

Rick Helfenbein, president of Luen Thai USA: “Sectorial trade agreements, properly crafted, can benefit both the textile interests and apparel, footwear and retail companies. As an industry, our business today is over $340 billion, and we employ over 4 million people in the USA. A Trade Agreement such as the SAVE Our Industries Act for the Philippines combines the importing of U.S. fabric to the Philippines with the exporting of noncompeting items back to the USA as duty free. Such a small bill could have such a big impact on jobs. We need more legislation like the SAVE Act.”

Fraser Ross, owner of Kitson: “I don’t think the government is doing enough to help small businesses create jobs. I just don’t think they’re allowing small business to get more breaks, and we’re competing against big businesses.” Ross suggested a tax credit for companies that pay their sales tax on time. He also advocates an incentive to hire more employees and more promotion for the Los Angeles tourism industry.

Elaine Hughes, president of E.A. Hughes & Co.: “The key issue is that government has to invest in training and development of mature employees, meaning those that have to change skill sets from those related to a standard brick-and-mortar model to an e-commerce direct-to-consumer model. That training would help a lot executives transition. You can’t keep running after people working for Apple or Google. Why not retrain your own and let them evolve into the environment? Government could certainly support programs at schools such as Parsons or FIT.

“IT [information technology] is like bathwater. You fill up the tub with information and then it goes down the drain. It needs to get filled up again, because it’s changing. If you are laid off and your expertise is in technology, you have to be consistently retrained in new technology or else no one wants to hire you again. There are plenty of people out there with great IT skills but don’t get new training because they were laid off.”

Frank Castagna, principal of Castagna Realty and owner of the Americana Manhasset: “Infrastructure — a million things are needed — bridges, roads, highways. Infrastructure gets people to work, and at higher wages. We haven’t had a national focus on infrastructure since 1956 (Federal Highway Act) and Dwight Eisenhower. We need a national policy.”

Diane D’Erasmo, executive vice president, commercial banking, Northeast region, HSBC Bank USA: “Investment in infrastructure. Many of our roads, rails, airports and bridges need a lot of work to improve safety, increase capacity and update our overall infrastructure with the latest technology. This would help put people back to work and help in the movement of commerce, particularly as the world becomes more internationally connected. Such investments would have lasting benefits for the economy, not to mention improving the quality of life.”

Alex Bolen, president of Oscar de la Renta Inc.: “In our industry, there are two areas where government can help create the framework where businesses can thrive and add jobs — free trade and immigration. The government could help by leveling trade restrictions around the world. Likewise for immigration. It is very difficult for us to recruit talented people and to get them visas.”

Heath Golden, ceo of Hampshire Group: “To me, the single most important thing we need to do is focus on infrastructure. In 2002, our infrastructure quality was the fifth best in the world. Today it has fallen to the 22nd best. Even worse, the developed world spends 53 percent more of its GDP on transportation infrastructure than we do, which means our ranking will certainly get worse. Without first-rate infrastructure, we cannot compete and unemployment will keep rising. Let’s put people to work on infrastructure projects today, and the work product resulting from those jobs will pay dividends in the form of additional job creation for years to come.”

Robert Taubman, chairman, president and ceo, Taubman Centers Inc.: “Political polarization, uncertainty and thousands of regulations — this combination slows you down from making decisions and scares capital away from spending and hiring decisions. We’ve got to have a free market to create jobs.

“Government needs to be run like a business. We are spending something like 25 percent of GDP and taking in 15. How long can a business spend more than it takes in? That creates deficits, which lead to greater uncertainty, which doesn’t work” for business growth or the country. “We’ve got to start dealing with Medicare, Medicaid, programs like these,” to start closing the deficit and alleviate uncertainties.

“Education in America is woefully inadequate. Very few urban centers have really quality education. There are supposedly two million jobs for skilled workers that are unfilled because people don’t have the right skill sets in the right areas of the country. Job training, vocational skills and pure education need to be improved. The best businesses in America are always about training people.”

Emanuel Chirico, chairman and ceo of PVH Corp.: “What I’d like to see the government do is come together. I think in the U.S. there are clearly solutions, and I think compromise has become a bad word, and we need to have compromise, since we have a country that is really divided about how to go about the approach. I don’t think we can have a singular focus about how to solve a lot of these problems. We need a statesman who can step up and come up with initiatives that people can live with. And we can get the country back on track. The solutions are there. We just need the political will to get them done.”

Andrew Rosen, ceo of Theory: “I believe that there is a big opportunity to revitalize manufacturing in the USA One of the main catalysts to do that would be to eliminate or significantly reduce duty rates (currently between 16 percent and 32 percent) on fabrics being imported into the country. (This is already the case with most countries with which the U.S. has free trade agreements.) This reduction would make it advantageous for American companies to bring production currently done overseas back to the U.S.”

Richard Dickson, president and ceo of branded business at The Jones Group Inc.: “Give substantial tax incentives and various additional incentives for American branded businesses to manufacture and drive more production here in the States. Develop a program whereby small-business owners and entrepreneurs have quicker access to funding and ultimate incentives to invent and develop businesses here in the USA.”

Brian Meck, president of FesslerUSA: “Support in attracting, hiring and training new employees would be very beneficial to us. The areas of the business that we need to grow, especially the trade-specific jobs on the sewing and manufacturing side of the business, the technical jobs — if we had some support to put together a really robust training program and be able to teach people how to sew and bring them up to an efficient level, it would be really huge and is something that we’re actively pursuing in Pennsylvania on a local level. But if there was statewide or national support for that, it would be a big benefit for us as a manufacturer.”

Meck said such a program should be a combination of government, industry and educational institutions, including some of the schools in New York, Philadelphia and North Carolina, that are focused on the technical side of the business.

“If we could get some collaboration with industry, trade, government and education, I think they could come up with the right initiative on how to get people trained and up to an efficient level as quickly as possible,” Meck added. “We’ve also got to make these jobs attractive and more enjoyable. Not a lot of people come out of school looking to go into a sewing factory, but if we could somehow change that image or find ways to make the job more rewarding, then it would be huge.”

William Lauder, chairman of Estée Lauder Cos. Inc.: “If I could advise the President to do one thing to help create jobs, I would promise all small-business employers who added at least 10 jobs for at least a year that they would receive tax credits for this incremental addition to the workforce. For large companies, I would create incentives to hiring and retaining new employees for a minimum of a year.”

Gary Wassner, president of Hilldun Corp.: “What I am experiencing is a problem matching demand to supply. There is a huge request for designers to bring production back here. What the government needs to do is subsidize the supply chain in the garment center. They need to help manufacturers modernize, and have training programs to get the skilled labor they can’t find today, such as in sewing and patternmaking. This is what is needed to meet the demand out there.”

Alan Ennis, president and ceo of Revlon Inc.: “I believe the U.S. is poised for a meaningful return to local manufacturing. Outside the U.S., rising labor rates, expensive logistics costs and substandard quality are all making certain international locations less attractive for manufacturing. The U.S. has a highly capable workforce, high quality standards, and manufacturing here would facilitate shorter lead times. I would strongly recommend that the incoming administration focus on activities and incentives to stimulate a resurgence of local manufacturing, encouraging companies to bring production, and hence jobs, back to the U.S.”

Caroline Brown, president, Carolina Herrera: “Encourage those who are able to shop. Give consumers confidence, and our industries will deliver a reason to spend. Consumer spending drives our country, our companies and in turn our ability to create new opportunities.”

John Lonski, chief economist at Moody’s Capital Markets Group: “I would say to companies, ‘Don’t be shy about perhaps offering individuals lower wages and give them an opportunity to prove themselves.’ One thing to consider is that more flexibility on the wage front could help put a lot of unemployed people back to work, especially younger workers.”

On the government side, Lonski said, “The government simply has to ease up regulations on small- to medium-size businesses. That would be an important first step. Oddly enough, as the government expands the scope of regulations, it is much more disadvantageous to small businesses, because the relative cost of complying with the regulations is much greater on those business than it is to giant corporations. In the end, giant corporations tend to do less in terms of hiring and end up with a larger share of economic activity.”

Kevin Burke, president and ceo of the American Apparel & Footwear Association: “We still have companies in the U.S. that export U.S.-made products, and we encourage that. But the bulk of our industry imports is [apparel and footwear from other countries]. Think of U.S. [branded goods] that are made in China and are exported to the EU — that creates U.S. jobs. Sourcing has become an integral part of the equation. The more countries you are in, the more people you need to employ [in the U.S.] to make certain you are doing the right thing.”

He said the U.S. apparel and footwear industry’s 4 million jobs are no longer primarily based in manufacturing but instead tied to the global supply chains, which create such U.S.-based jobs as sourcing executives, corporate social responsibility departments, environmental and labor departments and transportation jobs.

Katherine Lugar, executive vice president for public affairs at the Retail Industry Leaders Association: Lugar said the most important policy to help stimulate job growth is “having a predictable and globally competitive tax code,” and that means extending tax cuts that have either expired or will be expiring, both on the business side and also on the individual side.

On the individual side, President Obama has said he will only extend tax cuts implemented by former President George W. Bush that are set to expire at the end of the year for households making less than $250,000 a year, or $200,000 for individuals. Romney has said he will extend the tax cuts for all income levels.

On the business side, Lugar said: “We mean tackling tax reform in a way that drives down the effective rates.”

She said RILA supports the move to lower the corporate tax rate, which averages around 36 percent for retailers, to 25 percent.

Lugar also pointed to two important business tax cuts in particular that have expired and need to be extended. The Workforce Opportunity Tax Credit provides incentives for companies to hire “hard-to-employ” workers to enable recovery in economically depressed areas. Retailers have benefited from the provision, which expired in 2011, which provides jobs to American workers who might not otherwise be able to find employment.

She said another important business tax cut that needs to be extended is the accelerated leasehold depreciation, which shortens the depreciation period for retailers that remodel and upgrade their leased and owned commercial property to 15 years from the general 39-year depreciation period. That extension expired at the end of 2011.

Paul Blum, chief executive officer, Kenneth Cole Productions: “We can get better at marketing our products and content globally and create new demand from emerging markets like India, China and Eastern Europe. By doing this, we will grow our businesses and stimulate job growth across our entire organizations.”

Bud Konheim, chief executive officer of Nicole Miller: “Politicians don’t create jobs….It’s up to me and every other business owner to figure out what is it in the world that’s not out there that people need or want. It’s not easy, it’s very difficult. The government will never be a help. It will always be a hindrance. It needs to reduce the restrictions of the EPA and everything else.”

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