Growth, or jobs for Americans?
The New York Times has a good article on the trade-off between growth and jobs (a theme I have repeatedly discussed):
Donald J. Trump wants us to dream bigger about the economic future. We shouldn’t be content with the roughly 2 percent annual growth that has been the norm this century, he has said. And he thinks he can bring about the kind of robust growth of 4 percent or more that was commonplace in decades past.
But the closer you look at the math of economic growth, the more you see the inherent contradictions in trying to make that happen. The two strategies that would most directly help achieve that goal clash with other planks of Mr. Trump’s economic agenda.
Economic growth can happen two ways: More hours are worked, or more economic output is generated from each hour of labor.
Higher productively often leads to job loss:
[S]ome of the very innovations that have helped improve workers’ productivity are also the main culprit behind the decline of well-paying manufacturing jobs.
These advances have made the United States richer — with jobs like designing software systems and taking medical images. But that’s not much solace for former manufacturing workers who haven’t found lucrative or rewarding work in growing fields, a group that is at the core of Mr. Trump’s campaign appeals.
It’s not just manufacturing. Consider one innovation that could plausibly become a reality in the years ahead: trucks that drive themselves. Over time, that will make the United States economy more productive and raise incomes.
But if you are one of the 1.7 million long-haul truck drivers in the United States, making an average of $42,500 for a job that doesn’t require advanced education, it should be concerning. It’s plausible to imagine a majority of those jobs going away over the next decade, which will be a boon for the countless industries that rely on trucks to bring in supplies and distribute finished goods. That will raise G.D.P., the broad measure of economic growth.
The other way to raise growth is immigration. Consider this story about the opening of the world’s highest bridge:
The Beipanjiang Bridge took three years to build, cost more than $146.7 million dollars, and stretches to be 4,396 feet long. Its four-lane roadway sits nearly two thousand feet over the Beipan River, which it’s named after, to connect the Yunnan and Guizhou provinces in southwest China, People’s Daily Online reported. It surpassed the 1,837-foot-tall Sidu River Bridge for its world record title.
We know what you’re thinking: $146.7 million is cheap! And it is! After all, when the Golden Gate Bridge spanning San Francisco Bay was built in 1933 it cost $1.5 billion (in adjusted dollars), and the brand new New Bay Bridge, on the other side of town, ended up costing a whopping $6.7 billion when it was finished in 2013.
In fairness, the two Bay Area bridges are both longer and wider. Nonetheless, the Chinese bridge would have certainly cost far more than $147 million if built in the US.
The best way to rebuild our infrastructure would be to bring in Chinese construction firms and Chinese temp workers, who would live in prefab dorms while providing America with first-rate infrastructure. But we won’t do that, because American workers would complain. Hence we will not end up with first-rate infrastructure. Despite all the talk, we will fail to rebuild our infrastructure.
Unlike Canada, this country has not yet accepted that the things that would provide faster economic growth (trade, immigration and automation) are exactly the same things that threaten to take jobs away from domestic workers. This is why I believe that growth will remain low over the next 10 years, even if there are occasional spurts of above 2% growth. We say we want faster growth, but we simply do not want to do the things that would be necessary to achieve that goal.
It’s even worse in southern Europe. They say they’d like to have the sort of healthy economy that Germany has, but their governments are not willing to adopt German style economic reforms. Indeed they don’t even like it when the Germans tell them how to do it.
You’d think that people would appreciate good advice.