High healthcare costs are dooming job creation, badly needed hope, and employee engagement, says Gallup's chairman
Americans have been concerned about the rising cost of healthcare for some time, but the situation may be even more dangerous than we think. As Gallup Chairman Jim Clifton writes in The Coming Jobs War: "It is impossible for the U.S. to win the race for new good jobs while the country continues its failed strategies for healthcare. Astronomical healthcare costs end America's race to re-win the future. The United States has to fix this or it shuts off the energy switch to entrepreneurship and innovation. If this happens, everything else ceases to matter."
The wars in Afghanistan and Iraq have cost the U.S. about $200 billion a year. That's tiny compared to healthcare costs.
Part of the problem is that money spent on healthcare drains businesses of badly needed capital. But another part is that a sickly population is a sluggish population -- too sluggish to be engaged, customer-creating employees or to have hope.
In the following conversation, Clifton discusses why healthcare is costing us more than we think -- and why hope and engagement are more helpful than we know.
Gallup Business Journal: In a book full of controversial statements, you make one that will rock a few boats: that some of our most pressing problems, such as government spending and environmental degradation, don't matter as much as creating jobs. Can you expand on that?
Jim Clifton: Those things slow our economy; those things harm it tremendously. But creating good jobs is the outcome that we're going for. If GDP is growing, all those things can be dealt with. But when we're losing many more jobs than we're creating, and I mean globally, all those problems are much more difficult to solve. So no, they're not the main problem, but they are a barrier to creating good jobs.
Healthcare costs, however, are different. The costs are so high that it's a "game over" moment for America. Businesses become just a way to pay healthcare, not to grow and build great companies for employees and shareholders.
How big of a problem is healthcare for businesses and for the economy?
Clifton: Few Americans realize the size of the problem. Healthcare costs America $2.5 trillion a year. That's a problem alone. Remember, at the same time, the wars in Afghanistan and Iraq have cost the U.S. about $200 billion a year. That's tiny compared to healthcare costs. You hear people say, "If we weren't involved in two wars, we could afford healthcare costs." No we couldn't. It wouldn't make much of a difference.
But here's the bigger point about healthcare: Defense spending totals $1 trillion a year, but we're winding it down. The problem with healthcare costs is that they're accelerating: They'll grow from $2.5 trillion to $4.5 trillion within 10 years because they're growing at about 6% a year. So if we can't get that fixed, organizations won't be lean enough to grow or to do other things they need to do, like export. Healthcare costs have become the biggest problem that companies have -- or cities, counties, states, and the federal government. Nobody can afford healthcare. This is the biggest barrier to job creation that America has.
Why are healthcare costs rising so fast in America relative to other countries?
Clifton: I would say two things. First, obesity is at epidemic rates, and so are the problems it causes, like diabetes. Second, we spend enormous amounts of money with no limits or caps on our last six months of life. Seventy percent of the money we spend on healthcare in the U.S. is on things that are preventable.
What can we do to change that?
Clifton: It's got to be a cultural change; you can't legislate against obesity. But cultural changes work. We did it with smoking; we ought to be able to do it with weight. I shouldn't just blame weight, but it causes so many more problems, lifelong problems. I think companies have got to be able to demand that people have good overall health and well-being -- I think that your manager should be able to require that.
In the book, you talk about engaged workplaces. What's the value of engagement to job creation?
Clifton: When you have workforces that aren't highly engaged, they don't create more customers. In companies, customers come from workgroups that are highly spirited. Where you have high spirit, you have more customers. You never have jobs appear outside the presence of new customers. So you need highly engaged workplaces because they create more customers. If you gave me one Fortune 500 company, a really good one, and told me to pick the regional manager most likely to create new customers -- which would in turn create new jobs -- I would line them up by how spirited each region's workforce is.
What do you mean by "spirited"?
Clifton: A spirited workforce is one that is highly engaged. Gallup has found 12 elements that are important to engagement and highly predictive of performance. One element is that you get to do what you do best at work -- whatever your task is, you're using your talent. A company has to get that one right. Another one is that you need somebody at work who gets a kick out of your development, preferably your manager. You have to feel that your opinion counts. You also need a deep belief in the mission and purpose of your organization -- that the task you're completing creates a meaningful outcome. When somebody strongly agrees with these elements of engagement, then that person is what Gallup calls engaged. If every American company had 50% of its employees engaged, the United States would really win the world.
Momentum is everything. When a leader can magically create momentum, then hope follows.
But in the U.S., only 28% of employees are engaged. This means that the workforce has too many lousy employees -- we call them "actively disengaged." They come to work miserable. Then they go up and down the halls trying to make other people miserable, which is why we call them actively disengaged. When the number of actively disengaged is too high, you won't be creating new customers unless you're dropping your prices or using other business practices that will hurt your organization in the future.
At Gallup, we estimate that in the actual workforce right now, about 30 million employees are really inspired, energetic, and engaged. It looks to us like 20 million more are actively miserable. And then the 50 million in between are just kind of there. We've got to make the 30 million engaged workers turn into 50 or 60 million, and then jobs will appear -- because customers appeared. If your workforce has 10,000 people and 20% are engaged and you bump that up to 50%, you will experience customer growth. You'll have more customers than your current workforce can handle, and then you'll have to hire. That's how job creation works.
But right now, with the unemployment rate so high, is it possible to improve engagement on a national scale?
Clifton: According to our World Poll, what the whole world wants is a good job. Everywhere, from Nairobi to New York, the single most important thing to everyone is a good job. A country is lucky if it has 30% of its workers in a good job. If that number is much lower, a country will have instability, chaos, and all the bad stuff. But if that number is at 30% and it ticks down to 25%, I think that country's in trouble. If that number goes up, hope, enthusiasm, inspiration -- all are within that bump. So if you asked, "What's the moment when a country takes off?" It's that moment when the percentage of good jobs jumps from 30% to 35%.
And that gives a country hope for the future?
Clifton: Hope is the oxygen. Without it, you've got nothing. Hope is the most misunderstood, undervalued state of mind in the world.
Hope seems like such a touchy-feely greeting card subject. But you're saying it's vital to job creation?
Clifton: Oh yes. More so than ever. Within hope lies all the good stuff -- brain gain, people abiding by the law, high patriotism, job creation, and community volunteerism.
How do you create hope?
Clifton: Momentum is everything. When a leader can magically create momentum, then hope follows. So if you're a coach and you take over a team that was 0 and 10, you don't have to go 10 and 0 to create inspiration or hope; all you need to do is go 4 and 6, and then 5 and 5, and then 6 and 4. When leaders create momentum, that's where you find hope.
Momentum is a silver bullet. If President Obama somehow finds a little momentum, I think he'll win re-election. If he doesn't, then it's a guaranteed loss. It's just that simple. And he'd better hurry. The well-being of 6 million businesses right now is low. And that's not my opinion. That is from Gallup's survey of small businesses. The well-being of the whole world is low. We have three categories for well-being: suffering, struggling, and thriving. And suffering has been increasing.
Is that because of the recession?
Clifton: I'd say there are two things, the recession and political instability -- instability all over, not only in the Middle East, but also in America and Britain and India. The will of the world -- the desire of everyone in the world to have a good job -- is not being met, at least not enough.
At the end of the day, what you and I want is a job where we make some money, but also one where we feel that what we're doing has purpose and makes our life meaningful. See, we used to only look at kids and family and peace and say it was worth it. Those are still important, but now the will of the world is to have a good job. And when leaders fail to deliver on that will, they lose their constituency. Right now, the will of the world is to have a good job, and leaders have to know how to deliver that.
-- Interviewed by Jennifer Robison