It takes Laura Tyson and Jan Mischke quite a while to get around to “however” in their article on the prospects for increasing productivity in the U. S. economy at Project Syndicate but they get around to it ultimately:
In the US and other industrialized economies, the largest negative impact of the pandemic on jobs and incomes has been in food services, retail, hospitality, customer service, and office support. Many of these low-wage jobs could disappear altogether if pandemic-induced reductions in professional office time and business travel diminish demand for myriad services such as office cleaning, security and maintenance, transportation, and restaurant and hospitality services. Prior to the pandemic, these occupations accounted for one in four US jobs and a growing share of employment for workers without a post-secondary education.
Weak investment poses another demand-side risk to potential productivity growth. Business investment rates overall were already in long-run decline before the pandemic (hence the post-2008 productivity slowdown), and investment has since contracted further, owing to a decrease in private non-residential investment from its 2019 peak. That said, the decline in investment during the COVID-19 recession has not been as large as that of the 2007-09 financial crisis.
All of the improvements they categorize earlier in their piece require substantial amounts of business capital investment and such investment faces substantial headwinds. While a reduction in capital investment is not inevitable when business taxes increase it does seem likely and what’s more uncertainty about the requirements to pay additional taxes will itself reduce investment. Additionally, the lag between passing President Biden’s trillion dollar stimulus package and the funds actually being disbursed is substantial, another disincentive to investment. Finally, the areas in which improvements are likely and those in which the funding will be spent are not the same and boosting employment and improving productivity are in competition with one another.
It may ultimately come down to priorities. Which is more important? Improving productivity, creating better jobs, or employing people who are out of work? Doing all three at the same time is pretty darned unlikely.
The service sector, now dominant, is inherently resistant to productivity increases. How does a waiter become more productive, or a teacher? These are inherently low productivity activities. They are also low wage (except teachers) and low tax-generating activities.
Manufacturing is the only high productivity, and ever increasing productivity sector that is also a high wage, high tax generation sector.
Unless there is a radical redirection of our economy, there can not be any significant increase in productivity or wages and benefits.
Then, of course, not admitted by Tyson and Mischke, the Elites have not only captured all the economic growth of the last 40 or more years, they have clawed income away from the workers. Until that evil is addressed there is no hope of economy reform.
I completely agree with that statement but even more has happened. For example, producers have captured almost all of the economic surplus from trade. Consumers have captured relatively little. That’s true within sectors, within industries, and within companies.
I know most consumers would be astonished if they could see the margins at even discount retailers like Walmart. People only know what they want, they really don’t have any idea what their money is worth to them.
They probably never even entertain the idea.
Bob Sykes makes several observations rarely understood by people, certainly not politicians, media or pundits in general. Its mostly manufacturing that offers the opportunity for capital investment to enhance throughput, increase yield, lower cost and improve quality. Computing power had potential in services, but seemed to go haywire.
I don’t know how Dave arrives at the conclusion that producers have reaped almost all of the benefits of trade. I can’t imagine how you would even accurately measure it. I think its a bit more complicated. People who have their worker hat on are routinely harmed by mercantilist countries and trade or immigration, notably China and Mexico. And to a degree, US producers. People, when they have their consumer hat on, have benefitted greatly. Just look at consumer electronics, textiles, agriculture prices, domestic services etc etc.
There is a titanic struggle that has been going on for years. (And that I routinely point out and rail about.) Our national policies have not accommodated either an America First attitude, or allowed for sensible transitioning. Rather, its been a spasmodic lurch, with winners and losers but many left behind.
If one cares about producer capture of value, look at Big Business in bed with globalist leaning progressives and self dealing politicians, now more than ever; there you have it.
I’ve posted on this in the past including graphs, documentation, and citations. It’s actually pretty dramatic. Producers have captured something like 98% of the economic surplus from trade while consumers have captured about 2%. Translation: prices don’t go down much if at all.
Take Apple for example. The cost reduction they obtain from manufacturing in China is remarkably small. I don’t remember the exact figures but it represents less than 10% of the total retail cost of an iPhone. That hasn’t resulted in iPhones costing 10% less. They don’t cost any less—that’s not controlled by cost but by supply and demand. Demand is high so they keep their prices up.