Why Invest in the U. S.?

While I don’t agree with the entirety of this op-ed by Daniel Alpert in the New York Times I do have several points of agreement with it:

…many in Democratic policy and political circles have been queasy about addressing the connection between federally supplemented unemployment insurance benefits and the slowing pace of re-employment at this stage of the recovery from the pandemic. There is almost certainly a common sense connection: If you were a low-wage worker, why aggressively attempt to go back to work at a lousy, low-paying job, when you can make more money collecting unemployment benefits.

Still, Republican politicians are getting it wrong too. They are citing countless news reports that businesses are struggling to fill certain positions as both a reason to end federal unemployment benefits and as evidence that the extra benefits were too generous in the first place. They worry that the ability of some workers to stay on the sidelines of the labor market, unless employers offer wages that trump jobless benefits, could result in dangerous “wage inflation” — a potential increase in labor costs that, they believe, consumers will pay for in the form of higher priced goods and services.

That argument simply does not hold water either: Over the coming weeks and months as this aid for the jobless phases out, there will be a flood of anxious job seekers pouring into labor markets. Even if a significant share of workers are temporarily avoiding taking low-paying jobs while benefits remain generous, then there is no true “labor shortage,” as many economists and market commentators are calling it.

[…]

Now enhanced benefits are ending every day for the millions of Americans who have benefited from the Pandemic Emergency Unemployment Compensation, or PEUC, program, which extends unemployment insurance for 13 weeks to those who exhausted their conventional state and federal unemployment benefits. All extra federal supplements for the unemployed will end on Sept. 6, including the general $300 weekly benefit, as well as the Pandemic Unemployment Assistance, or PUA, program, which provides aid to those who were self-employed. (Some states are in the process of cutting them early.)

Republican-controlled states, as well as some more politically mixed states, are doing this because they presume there is a macroeconomic upside to millions of workers returning to lower-income jobs. They shouldn’t be so sure.

[…]

The majority of the jobs that aren’t back to prepandemic work force levels are very low-income jobs; they are what the U.S. Private Sector Job Quality Index, which I cocreated, calls low-quality jobs. Through March of this year, most of the private sector jobs eliminated during the pandemic that haven’t been restored are production and “nonsupervisory” jobs that offered weekly pay averaging less than $750 prepandemic. There are more than 45 million low-paying jobs like these, constituting roughly 43 percent of all production and nonsupervisory jobs in the country. This is not about a mere, unfortunate corner of the jobs market.

Twenty-three million of these jobs paid under $500 per week prepandemic: That’s $26,000 per year. Not only are the wages low: Many of these jobs offer well below 30 hours of work per week.

[…]

The chronic problem we face as we put Covid-19 in the rearview mirror is that the U.S. economy before the pandemic was incredibly dependent on an abundance of low-wage, low-hours jobs. It was a combo that yielded low prices for comfortably middle-class and wealthier customers and low labor costs for bosses, but spectacularly low incomes for tens of millions of others.

[…]

Some progressives may take me to task for admitting that emergency unemployment benefits, which served many so well, are now keeping some people from returning to their lousy, pre-crisis work. But why, as a former Obama administration economist pointed out, fight common sense or parse the data for more complex explanations? Instead, why not absorb the lesson being taught?

It’s pretty simple and one that, normally, progressives fight to have heard: businesses are paying tens of millions of workers too little money relative to the cost of living in this country.

There are any number of comments I might make but let’s leave it at two. For decades we’ve been using reducing unemployment as a policy goal and we’ve also steadfastly refused to control the number of immigrants without skills that are worth paying enough to sustain a middle class lifestyle. The possibly unintended consequence of those two policies in combination has been to maximize the number of low-paying jobs. But we’re in competition with every developing country in the world in producing cheap consumer goods and in particular it puts us into competition with China. Not only is that a contest we can’t win it’s a contest we don’t want to win. So that encourages job creation in the services sector which has been especially hard-hit during the pandemic.

We really need to do several things:

• Tighten the labor market until the wages for the remaining jobs that don’t require high levels of skills are high enough to live on.
• Stop the overemphasis on getting college educations. Not only does that produce the skills mismatch so apparent today it results in thousands of people incurring debts they will struggle to pay off.
• Encourage businesses to invest in producing goods in the U. S. Increasing productivity requires business investment by definition.

or we could impose tariffs on imported goods until it had the same effect.

To convince businesses to invest in the U. S. it’s got to be worth their while and we’ll never achieve that by raising their taxes or with an unstable, unpredictable economic climate.