Biden’s daunting challenge on jobs
Like most incoming presidents, Joe Biden promised to do more for struggling workers and families falling behind. And like most presidents, he’ll probably have little to show for it after 4 years of trying.
New research from the Massachusetts Institute of Technology documents pernicious trends of the last 40 years that have hollowed out the middle class and depressed living standards in much of the U.S. economy. “Over the last four decades, we’ve had a lot of economic growth, but it hasn’t really reached the median worker,” David Autor, co-chair of MIT’s Work of the Future Task Force, told Yahoo Finance on Nov. 24. “It’s been very concentrated at the top, If we do that for the next four decades, it will not be a good outcome and most of us will not benefit.”
The MIT research echoes other work in identifying the broad causes of worsening wealth and income inequality. The digital revolution rewards workers with technical skills but makes lower-skilled workers easier to replace with machines. Globalization makes it far easier for producers to move work overseas. And protections for workers, such as unions and minimum wage laws, have gotten progressively weaker. The U.S. economy remains remarkably efficient and productive, but ordinary workers don’t share in those gains the way they used to.
Solutions are complicated. Other developed economies have enjoyed productivity gains similar to those in the United States during the last 40 years, with higher pay and better benefits for lower tranches of workers. In Denmark, for instance, burger flippers at McDonald’s start at about $22 per hour, with 6 weeks of paid vacation and other benefits. The government provides health care coverage. By most such measures, American workers fare worse than those in other developed nations. So it’s possible and even common in the modern economy to spread prosperity more broadly than we do in the United States.
Biden has a broad economic plan that starts with getting the coronavirus under control, so businesses can reopen safely and start hiring back laid-off workers. Beyond that, Biden wants to use government purchasing power to beef up U.S. manufacturing, while creating millions of jobs in the new green-energy economy. He’d locate many of those jobs in the same energy patches that now support oil and gas drilling jobs. New infrastructure spending would provide many additional jobs. And new subsidies for health insurance would help families better manage what is often their biggest expense.
No bipartisan agreement on addressing wealth inequality
Most of this would require Congress to pass new legislation, which leads to the same cul-de-sac the government has been stuck in for years: there is simply no political agreement on how to address America’s prosperity problem, even if economists see solutions. The federal minimum wage is a clear example. A logical policy would be to set it near its historical average, adjusting for inflation, and then allow it to change automatically every year, the way Social Security payments have an annual cost-of-living adjustment. Instead, business groups have persuaded (mostly Republican) members of Congress to keep the wage stagnant, and Congress hasn’t raised it since hiking the wage to $7.25 in 2009. Inflation has risen 23% since then, so the purchasing power of a minimum wage worker today is 23% lower than it was in 2009.