Latest / Stephanomics / America’s Coming Demographic Crisis Is Bad News for Employers

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America’s Coming Demographic Crisis Is Bad News for Employers · Stephanomics

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  Speaker 1: Where a change and I can Hello Stephanomics here the
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  Speaker 1: podcast that brings you the global economy and a bit
• 0:15
  Speaker 1: of Jack Johnson. This week we're asking where did everybody go?
• 0:19
  Speaker 1: Why has the US workforce been declining for several years,
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  Speaker 1: not just since the pandemic? And will America have enough
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  Speaker 1: people left to wage that great battle for global economic
• 0:30
  Speaker 1: leadership that both President Biden and Chinese President shi Jing
• 0:34
  Speaker 1: Bing are now embarked upon. The Director of the Aspen
• 0:38
  Speaker 1: Economic Strategy Group, Melissa Khanni, has a lot to say
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  Speaker 1: about that in a few minutes. She thinks we can
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  Speaker 1: do plenty with smart machines, but the engine of ideas
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  Speaker 1: and innovation is people. In recent years, neither the US,
• 0:52
  Speaker 1: nor China, nor anyone else has been able to persuade
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  Speaker 1: women to give birth to more of them, quite the opposite.
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  Speaker 1: That's a fascinating conversation. We also find out where the
• 1:03
  Speaker 1: Harvard Star economist Raj Chetti has the data to explain
• 1:07
  Speaker 1: how the US economy somehow lost two point six million
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  Speaker 1: workers in the past three years. All to come. The
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  Speaker 1: first Bloomberg Senior writer on economic Sean Donnan, has been
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  Speaker 1: to Ohio. Okay, I'm standing by the side of the
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  Speaker 1: road here in Licking County, Ohio, and I'm looking through
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  Speaker 1: a chain link fence. There's a big no trespassing signs
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  Speaker 1: keep out SIGNUS has no drones, snow flurries in the air.
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  Speaker 1: And I'm looking through a chain link fence at some
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  Speaker 1: big grassy burns. I can just see the start of
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  Speaker 1: what is an enormous muddy expanse. And you wouldn't necessarily
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  Speaker 1: note at first sight, but that big muddy former farm field,
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  Speaker 1: it's quite literally the future of the American economy. That
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  Speaker 1: at least is what Joe Biden is betting on. Thanks
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  Speaker 1: to what's billed as the Chips Act that he signed
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  Speaker 1: into law last year, the US is investing some fifty
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  Speaker 1: billion dollars in new semiconductor plans. And that muddy field
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  Speaker 1: in Licking County outside Columbus is the future home of
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  Speaker 1: a twenty billion dollar Intel project that will take some
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  Speaker 1: seven thousand people to build and house another three thousand
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  Speaker 1: workers when it's done. The future of the chick industry
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  Speaker 1: is going to be made in America, made in America.
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  Speaker 1: But there's another big question hanging over that goal. Does
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  Speaker 1: America have the people needed to meet it? Katherine hunt
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  Speaker 1: Ryan is president of Manufacturing and Technology at contractor Becktel.
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  Speaker 1: She's the person in charge of finding the people needed
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  Speaker 1: to build that Intel plant, and she says finding seven
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  Speaker 1: thousand skilled construction workers is going to be drawing people
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  Speaker 1: from around the country to Central Ohio. That is significantly
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  Speaker 1: outstripping the supply of labor in the local areas. It
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  Speaker 1: will be pulling on people certainly in the region and
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  Speaker 1: across the country in order to make that work, to
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  Speaker 1: make sure it has the three thousand workers it needs
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  Speaker 1: once the plant is built. Intel is investing a hundred
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  Speaker 1: million dollars of its own money in universities and to
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  Speaker 1: your technical colleges. It's also looking out of the world
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  Speaker 1: in which demand for semiconductor plants and the workers in
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  Speaker 1: them is booming. That has created a competition for talent.
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  Speaker 1: It's unlike any scene in decades, says Gabby Cruz Thompson,
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  Speaker 1: the Intel executive in charge of collaborating with universities to
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  Speaker 1: build that workforce. I I think we haven't seen anything
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  Speaker 1: like this, this volume of interest, at this level of interest. Ever,
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  Speaker 1: like many industrialized economies, the US is in the midst
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  Speaker 1: of a big demographic shift as baby Boomers, that generation
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  Speaker 1: born in the wake of the Second World War leave
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  Speaker 1: the workforce. That exit, which accelerated during the pandemic, is
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  Speaker 1: colliding with a dip in a number of young people
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  Speaker 1: entering the workforce. Then there's the effects of both the
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  Speaker 1: more than a million people lost during the pandemic and
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  Speaker 1: cuts an immigration in recent years. The US is working
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  Speaker 1: age population has in recent years been growing at its
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  Speaker 1: slowest rate since nineteen sixty, and in at least twenty
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  Speaker 1: four states, including Ohio, the total population actually declined last year.
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  Speaker 1: There were five hundred thousand fewer babies born in America
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  Speaker 1: last year than there were in two thousand and five.
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  Speaker 1: That's when most of this year's high school graduates were born,
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  Speaker 1: which means that barring a major change in birth rates
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  Speaker 1: or immigration policy, there will be far fewer high school
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  Speaker 1: graduates available eighteen years from now. Gabby Cruz Thompson from
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  Speaker 1: Intel argues that automation and other technologies will help fill
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  Speaker 1: the gap in the long term. I think it gets challenging,
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  Speaker 1: but I also we learn to leverage advances in technology.
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  Speaker 1: Right the advent of artificial intelligence. The workforce that we
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  Speaker 1: need to educate needs to be a workforce that learns
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  Speaker 1: to forever learn. Fab has less people today than it
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  Speaker 1: did twenty years ago. In the short term, though, Intel
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  Speaker 1: is investing heavily in institutions like Central Ohio Technical College
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  Speaker 1: in nearby Newark, Ohio. The goal is to build that
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  Speaker 1: workforce there, and particularly the seventy of workers who won't
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  Speaker 1: need a four year degree to do their job at Intel.
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  Speaker 1: John Barry, the college's president, says helping Intel fill the
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  Speaker 1: vacancies it will have for those technicians on the factory
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  Speaker 1: floor is not going to be easy. The college is
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  Speaker 1: rapidly expanding its technology program, but that currently has just
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  Speaker 1: a hundred and fifty or so students in it. Most
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  Speaker 1: of our students are part time, so even if you're
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  Speaker 1: going through a two year degree cycle, rarely does that
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  Speaker 1: happen in two years. That reality has led Intel in
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  Speaker 1: the college to work on a one year certificate that
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  Speaker 1: will help some students with experience in other industries qualify quicker.
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  Speaker 1: But the college also isn't just facing rising demand for
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  Speaker 1: qualified chip technicians. The healthcare industry wants more nurses and radiologists,
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  Speaker 1: municipalities need more police officers and firefighters, And then there's
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  Speaker 1: the other manufacturers who want young workers able to operate robots.
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  Speaker 1: All in a world in which the college and manufacturers
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  Speaker 1: are competing with easy, low end service jobs that are
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  Speaker 1: often paying equivalent wages. Today's world order is bizar. There
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  Speaker 1: is just no other way to describe it. Because in
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  Speaker 1: today's market, you think about this, I can go and
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  Speaker 1: get a job at literally the drop of a hat,
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  Speaker 1: and it's probably going to pay me eighteen to twenty
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  Speaker 1: an hour to do things that used to pay a ten.
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  Speaker 1: Catherine hunt Ryan, a contractor Becktel, says roughly thirty percent
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  Speaker 1: of the seven thousand construction workers on the Intel site
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  Speaker 1: will be apprentices. At least fort initially are likely to
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  Speaker 1: be so called travelers from either elsewhere in Ohio or
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  Speaker 1: out of state. Altogether, to lure those workers who are
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  Speaker 1: also in demand and many other places where chip plants
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  Speaker 1: and electric vehicle or battery factories are going up, Becktel
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  Speaker 1: will be offering competitive wages. It also will be offering
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  Speaker 1: benefits like on site or nearby medical and dental care,
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  Speaker 1: and comfortable lounges for workers to take breaks. It's all
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  Speaker 1: with an eye on the long term and a fight
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  Speaker 1: for people that is only likely to get more intense
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  Speaker 1: in the years to come. Forcing entertaining crop professionals is
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  Speaker 1: the long pole and attention. It is a significant challenge
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  Speaker 1: right now is not going to be solved through one program.
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  Speaker 1: For Bloomberg News, I'm Sean Donnin. I'd like to pull
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  Speaker 1: out some of the broader lessons of that piece now
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  Speaker 1: with the director of the Aspen Economic Strategy Group, Melissa Khanni,
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  Speaker 1: who has written about America's people problem in the group's
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  Speaker 1: new publication, Economic Policy in a More Uncertain World. Now, Melissa,
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  Speaker 1: thanks very much for joining us. We're not only focused
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  Speaker 1: on demographics, and I know that that book on economic
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  Speaker 1: policy is talking quite broadly about the US and its
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  Speaker 1: economic challenges, but I think it would be good to
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  Speaker 1: start there. You know, what is the demographic challenge that
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  Speaker 1: the US is facing right now? The need for a
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  Speaker 1: robust workforce comes down to not just needing a large
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  Speaker 1: share of working age adults working, but it also comes
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  Speaker 1: down to needing a large number of working age adults.
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  Speaker 1: And the problem that the US is facing is that
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  Speaker 1: birth rates have been declineing for a sustained amount of
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  Speaker 1: time now in the US, well over a decade, such
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  Speaker 1: that we now find ourselves well below replacement level fertility
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  Speaker 1: for many decades. Women in the U s we're having
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  Speaker 1: more than two children on average per woman, and now
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  Speaker 1: that number is down to one point six six And
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  Speaker 1: so barring a large reversal in the decline in US
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  Speaker 1: birth rates or barring a large increase in the rate
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  Speaker 1: of immigration, in not too many years, the US working
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  Speaker 1: age population is going to start shrinking and whilst driving
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  Speaker 1: that slowing of the birth rate. So this is the
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  Speaker 1: big question, and it's actually harder to answer than we
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  Speaker 1: might think. Looking at a lot of the sort of
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  Speaker 1: explanations that are commonly thrown around. Childcare has become too expensive,
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  Speaker 1: people have too much student debt, religiosity is declining. We
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  Speaker 1: don't see any data support for the those sort of
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  Speaker 1: common explanations, and rather what we see is just a
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  Speaker 1: widespread decline across almost all groups of women across the country,
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  Speaker 1: across education level of recent ethnic groups. And so it
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  Speaker 1: just seems more like something universal such that young adults
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  Speaker 1: today are choosing to have fewer children than young adults
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  Speaker 1: in the recent past. And it could be some combination
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  Speaker 1: of widespread perceptions about sort of how costly it is
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  Speaker 1: to have kids in terms of how much other stuff
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  Speaker 1: you have to give up, how much of your own
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  Speaker 1: like freedom, you have to give up, how hard it
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  Speaker 1: is to combine raising kids and having a career, something
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  Speaker 1: that's sort of been a slow universal change across women
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  Speaker 1: in the US in such a way that now women
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  Speaker 1: in the US are finally reaching up to women in
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  Speaker 1: other high income countries who stopped having you know, two
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  Speaker 1: kids on average for person a couple of decades ago. Well,
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  Speaker 1: it's interesting is that the red birth rate is also
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  Speaker 1: coming with something that's been talked about a lot, especially
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  Speaker 1: since the pandemic, which has reduced labor force participation. America
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  Speaker 1: used to be much better than other countries on getting
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  Speaker 1: women into the workforce, but we seem to be less
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  Speaker 1: good at that now. So it's sort of odd in
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  Speaker 1: a way that women are we were not. We haven't
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  Speaker 1: seen continued growth and women in the workforce, but they're
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  Speaker 1: also not having kids. So if this is really interesting,
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  Speaker 1: So if you look across high income countries, sometime between
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  Speaker 1: nineteen eighty and the relationship between fertility overall fertility and
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  Speaker 1: female labor force participation rates flipped. So it used to
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  Speaker 1: be in countries that had higher rates of fertility, they
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  Speaker 1: had lower rates of female labor force participation in general.
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  Speaker 1: Like those two things were sort of substituting things that
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  Speaker 1: women could do. But if you work, working, you were
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  Speaker 1: having babies. Yeah, right right, And now what we see
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  Speaker 1: again across high income countries is basically like in all countries,
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  Speaker 1: about of women work, but the fertility rate ranges wide,
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  Speaker 1: like ranges a lot, and so it's you know, let's
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  Speaker 1: take Scandinavia. Scandinavia was always a place where it was
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  Speaker 1: perceived as being easier for women to combine work and
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  Speaker 1: having kids. There was more egalitarian sharing of household responsibilities.
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  Speaker 1: There's obviously a really um comprehensive welfare stage, there's generous
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  Speaker 1: leave policies, and women there were having, you know, at
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  Speaker 1: high rates of work participation and also high rates of fertility.
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  Speaker 1: Even in those countries. Now, uh, fertility is way down.
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  Speaker 1: So so fertility in Finland and Norway is far below
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  Speaker 1: what it is in the US. UH. And the thinking
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  Speaker 1: that we had to make it easier for women to
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  Speaker 1: combine work and having a family and that would keep
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  Speaker 1: fertility rates um elevated, that's all seemed to have come unhinged.
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  Speaker 1: Are there any proven ways in the rest of the
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  Speaker 1: world for for increasing birth rates. No, and so we
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  Speaker 1: can learn a lot from other countries, and that because
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  Speaker 1: in other high income countries their fertility rate really fell
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  Speaker 1: below replacement level in the eighties and nineties, a lot
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  Speaker 1: of those countries have been experimenting with two types of
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  Speaker 1: what's called them pro natalist policies. So one is like
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  Speaker 1: baby bonuses and tax credits, explicit government checks being sent
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  Speaker 1: to people when they had babies, and and often in
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  Speaker 1: explicitly uh, you know, ways to incentivize people having births.
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  Speaker 1: The evidence on those kinds of policies is that maybe
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  Speaker 1: some of them lead to an increase in births, small
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  Speaker 1: to modest in the short run, but none of them
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  Speaker 1: seem to have had a sustained effect increasing birth rates.
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  Speaker 1: The other types of policies are things like expanding parent
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  Speaker 1: to leave, having more childcare, etcetera. There the evidence seems
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  Speaker 1: to suggest that there's not much of a link between um,
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  Speaker 1: longer paid leaves, and fertility in any persistent way, a
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  Speaker 1: more of a timing effect, if anything, nothing that would
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  Speaker 1: be of the order the size that would need to
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  Speaker 1: bring us back to replacement level. Japan has basically quadrupled
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  Speaker 1: the amount of their GDP that they spend on a
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  Speaker 1: family friendly policies, childcare, early childhood education. Their fertility rate
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  Speaker 1: is still one point five, so far below replacement level,
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  Speaker 1: but it's sort of stalled out. My read of the
• 14:25
  Speaker 1: evidence makes me very skeptical that policymakers can do anything
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  Speaker 1: it's going to turn things around. Um And so so
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  Speaker 1: in my mind, that sort of leads us to think
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  Speaker 1: about what are other ways we can replenish our working
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  Speaker 1: age population or keep the level of skilled workers at
• 14:42
  Speaker 1: a high level. And I guess the sort of leading
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  Speaker 1: way you could do it is just by taking other
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  Speaker 1: countries people through immigration. Yeah, at least that buys you sometime.
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  Speaker 1: Right at some point, like a lot of these host countries,
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  Speaker 1: their fertility rates are falling as well. Um. Again certainly
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  Speaker 1: in high income countries. Um. But yes, so immigration is
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  Speaker 1: the obvious way to bring in working age people right away. Um,
• 15:11
  Speaker 1: and you know, even targeted, so you're bringing in skilled
• 15:14
  Speaker 1: working age people right away. But we know how complicated
• 15:18
  Speaker 1: the issue of immigration is in the US, and so
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  Speaker 1: even while there might be obvious ways we could reform
• 15:24
  Speaker 1: our immigration system so that we let in more people
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  Speaker 1: and we let in more skilled workers. That seems to
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  Speaker 1: be a very politically difficult thing to do in the US.
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  Speaker 1: But just to give us a sense of the numbers,
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  Speaker 1: and you may not have these on the top of
• 15:36
  Speaker 1: your head, but I mean, there was a there's been
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  Speaker 1: a long period where a good chunk of US labor
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  Speaker 1: force growth was coming from immigration, um and certainly quite
• 15:47
  Speaker 1: a lot of the birth rate was coming from sort
• 15:49
  Speaker 1: of relatively recent immigrants. How is that shifted? How is
• 15:52
  Speaker 1: the immigration flows doing right now for the US or
• 15:55
  Speaker 1: the last few years compared to that previous period. So
• 15:59
  Speaker 1: the annual that flows of immigrants has really fallen since
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  Speaker 1: right and some of that was a shift in our administration.
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  Speaker 1: Some of that than was COVID policy, And so we
• 16:12
  Speaker 1: had over a million immigrants coming in the official numbers
• 16:17
  Speaker 1: now or it's down to two hundred and fifty thousand,
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  Speaker 1: So there's a real deficit of immigrants too. So it's
• 16:22
  Speaker 1: it's really this combination of a reduction in immigration, a
• 16:27
  Speaker 1: reduction in birth rates and arising death rate because the
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  Speaker 1: population is aging, has led to US population growth being
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  Speaker 1: at its lowest level in recent history. I guess we
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  Speaker 1: should remember because as we are partly thinking about sort
• 16:41
  Speaker 1: of competition between countries. The US is still relatively well
• 16:45
  Speaker 1: off compared to China, which we saw just in the
• 16:48
  Speaker 1: last week has its overall population shrinking, which is is
• 16:54
  Speaker 1: different is in contrast to many other countries, they've had
• 16:58
  Speaker 1: a really extreme a graphic shift. And it's sort of
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  Speaker 1: fascinating when you think about how for how long China
• 17:05
  Speaker 1: had a one child policy, and then you know explicit
• 17:09
  Speaker 1: policy goals of keeping fertility rates low, family size small,
• 17:13
  Speaker 1: and now they're trying to implement all sorts of policies
• 17:16
  Speaker 1: and subsidies to increase the rate um and and it
• 17:21
  Speaker 1: turns out it's not so easy to turn back on
• 17:23
  Speaker 1: right now. That yeah, and I guess your your point
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  Speaker 1: from before about we've learned from other countries trying and failing.
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  Speaker 1: You know, if this famously authoritarian command control country has
• 17:32
  Speaker 1: still not been able to this is one thing that
• 17:34
  Speaker 1: they can't force people to do, even with quite significant measures.
• 17:37
  Speaker 1: That is, that is not a bit discouraging for those
• 17:41
  Speaker 1: who are trying to devise these policies. So I just
• 17:44
  Speaker 1: want to shift a little bit because I know also
• 17:47
  Speaker 1: that the book that the Strategy Group produced was thinking
• 17:51
  Speaker 1: about not just this challenge that the US economy faces,
• 17:56
  Speaker 1: but the challenge of sort of maintaining innovation um and
• 18:01
  Speaker 1: also helping people through the sort of technological transition as
• 18:06
  Speaker 1: we have AI and all these things. So I want
• 18:08
  Speaker 1: to get onto a little bit of that. I mean,
• 18:10
  Speaker 1: because it's not just how many people you have. It
• 18:12
  Speaker 1: is also about what they're doing and the efficiency they
• 18:15
  Speaker 1: have and how they do it. How should we think
• 18:18
  Speaker 1: about productivity and innovation in this context? If we've got
• 18:21
  Speaker 1: few fewer people, we surely should be focused on getting
• 18:24
  Speaker 1: more out of them. I should say, I generally like
• 18:27
  Speaker 1: to be a half glassful and an optimistic person. But
• 18:30
  Speaker 1: I'm going to bile on here. So we've got this
• 18:33
  Speaker 1: demographic headwins um, and on top of that, we've had,
• 18:36
  Speaker 1: now for many decades, a decline in you know, prime
• 18:41
  Speaker 1: age mail employment. And then on top of that, as
• 18:45
  Speaker 1: you're alluding to, we've had a decline in productivity, growth
• 18:49
  Speaker 1: and business dynamism in the US. So what do I
• 18:52
  Speaker 1: mean by that? We have fewer firm entries and exits,
• 18:56
  Speaker 1: we have fewer young firms as a proportion economic activity.
• 19:02
  Speaker 1: We have a greater dispersion in productivity, you know, across firms.
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  Speaker 1: So it's sort of like some market sector leading firms
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  Speaker 1: are are bigger, and there's just fewer, smaller dynamic firms
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  Speaker 1: that we usually think of as growth engines. Patents and
• 19:21
  Speaker 1: investors are inclasingly clustered in large firms. So all of
• 19:25
  Speaker 1: this is also it's also worrying and suggests that, you know,
• 19:29
  Speaker 1: setting aside the issue of workers, we need policies and
• 19:36
  Speaker 1: conditions and regulatory reform that really spurs innovation among firms.
• 19:42
  Speaker 1: So there's both the workers side and the firm side
• 19:45
  Speaker 1: where received struggling. Do you think the administration is moving
• 19:48
  Speaker 1: in the direction on that? I mean, there was this
• 19:50
  Speaker 1: sort of much touted Chips Act last year, very focused
• 19:54
  Speaker 1: on education and training for science and sort of industrial
• 20:02
  Speaker 1: policy approach. We also had the ridiculously named Inflation Reduction Act,
• 20:06
  Speaker 1: which is also going to try and encourage lots of
• 20:08
  Speaker 1: investment in clean energies. I mean, do you think that
• 20:12
  Speaker 1: the administration is kind of pushing in the right direction
• 20:15
  Speaker 1: on some of these policies. So yeah, So I think
• 20:18
  Speaker 1: the sort of policy agenda from the past few years
• 20:23
  Speaker 1: has been very encouraging in the sense that we also
• 20:26
  Speaker 1: have the Infrastructure Bill, so investments in physical infrastructure sort
• 20:31
  Speaker 1: of an obvious way for the US to try and
• 20:33
  Speaker 1: increase our productivity UM and now, you know, industrial policy
• 20:37
  Speaker 1: is famously hard to get right, and innovation policy is
• 20:41
  Speaker 1: very challenging, so that it's often that the devils and
• 20:44
  Speaker 1: the details and those kinds of things. But an emphasis
• 20:47
  Speaker 1: and a recognition that we need to be putting money
• 20:50
  Speaker 1: towards building talent, investing in you know, training stem workers,
• 20:56
  Speaker 1: all of that I think is very encouraging. This also,
• 20:58
  Speaker 1: I should say, before are all that UM as part
• 21:02
  Speaker 1: of the Build Back Better proposal that you know didn't
• 21:05
  Speaker 1: get enacted, there was a lot of investment in UM
• 21:09
  Speaker 1: in youth and families and the kinds of stuff we
• 21:12
  Speaker 1: were talking about earlier, like early childcare, early childhood education,
• 21:16
  Speaker 1: and I have to say, UM, even though I don't
• 21:19
  Speaker 1: think those things will meaningfully turn around fertility rates, investments
• 21:24
  Speaker 1: in early childhood education are a clear way for us
• 21:27
  Speaker 1: to build up our talent pool. We just have mounds
• 21:30
  Speaker 1: of evidence that you know that has long term effects
• 21:33
  Speaker 1: UM and so so that was very disappointing that we
• 21:36
  Speaker 1: weren't able to make progress on spending more money on
• 21:40
  Speaker 1: kids because they also you know, are crucial built to
• 21:43
  Speaker 1: our talent pool going forward. Now, okay, so I have
• 21:46
  Speaker 1: a question for you. As an economist, I mean the
• 21:51
  Speaker 1: devil's world that kind of make formed last week, there
• 21:53
  Speaker 1: was quite a loss of You can imagine these people
• 21:55
  Speaker 1: who have cited about the US talking about industrial policy
• 22:00
  Speaker 1: and investing in key industries and and and also thinking
• 22:04
  Speaker 1: about talent in a kind of long term way. But
• 22:07
  Speaker 1: the big kind of negative that goes along with that
• 22:10
  Speaker 1: is this much more nationalistic approach to policy and what
• 22:14
  Speaker 1: you might call a zero sum approach to sort of
• 22:18
  Speaker 1: international competition that it's you know, my gain is another
• 22:22
  Speaker 1: country's loss, and vice versa. So how do you think
• 22:25
  Speaker 1: about that? Because I see in your report there's a
• 22:27
  Speaker 1: lot of the traditional economic view that openness and innovation
• 22:30
  Speaker 1: and trade is all. I mean, openness is good for
• 22:33
  Speaker 1: being more productive um and those investment in the strategic industries.
• 22:38
  Speaker 1: But it seems like we're going to invest in strategic
• 22:41
  Speaker 1: industries but become less open. So how is that going
• 22:43
  Speaker 1: to net out? Do you think? Yeah? So, you know,
• 22:47
  Speaker 1: I struggle a lot with this As an economist, I
• 22:51
  Speaker 1: truly understand the need to do more to protect US
• 22:58
  Speaker 1: workers and and help the regions that have been hard
• 23:03
  Speaker 1: hit by previous transitions. So, for example, when we you know,
• 23:07
  Speaker 1: in the US dramatically increased imports from China, you know,
• 23:11
  Speaker 1: that's great for most people, Prices go way down. This
• 23:13
  Speaker 1: is a good thing, UM, But there were certain workers
• 23:18
  Speaker 1: and certain regions that were hard hit, and our policies
• 23:21
  Speaker 1: didn't adequately compensate those sort of you know, I hate
• 23:24
  Speaker 1: to use the terms winners and losers, but you know
• 23:26
  Speaker 1: what I mean by that, UM, And so I understand
• 23:29
  Speaker 1: where the impetus for becoming more of a closed economy
• 23:33
  Speaker 1: comes from. UM, but that's sort of a situation where
• 23:38
  Speaker 1: everybody will be worse off. And so instead, you know,
• 23:41
  Speaker 1: in my in my view, which would be sort of
• 23:43
  Speaker 1: a standard economist view, I think is we need to
• 23:46
  Speaker 1: remain open to trade, we need to remain open to
• 23:50
  Speaker 1: global talent, and yet we need to do more to
• 23:53
  Speaker 1: make sure that the sort of disparate you know, impacts
• 23:58
  Speaker 1: of those of those activities, that we take care of
• 24:02
  Speaker 1: the people who are left behind or who need to
• 24:04
  Speaker 1: transition to different industries, who need to you know, redevelop skills,
• 24:08
  Speaker 1: or just have their wages supplemented, or have some income
• 24:11
  Speaker 1: support and so you know, I don't. I certainly don't
• 24:15
  Speaker 1: think we should be doing things that lowers global innovation,
• 24:20
  Speaker 1: raises US prices, and sort of makes us a less
• 24:23
  Speaker 1: dynamic economy. Um, but I'm not, you know, just blase
• 24:30
  Speaker 1: about saying no trade is good for everybody, and importing
• 24:33
  Speaker 1: immigrants is good for everybody, and we just have to
• 24:35
  Speaker 1: be honest about the trade offs, and our policies need
• 24:38
  Speaker 1: to reflect them. I guess the final question, it seems
• 24:41
  Speaker 1: an implication of of of your work and the work
• 24:43
  Speaker 1: of your colleagues that we should expect as we get
• 24:46
  Speaker 1: older and as populations eventually shrink, that we will we
• 24:51
  Speaker 1: might become poorer as well, because the productivity will be
• 24:55
  Speaker 1: less from being a smaller economy. Is that really the case?
• 24:59
  Speaker 1: I mean, I sort of like to think if we
• 25:00
  Speaker 1: have all this golden age of robots, we might all
• 25:02
  Speaker 1: have superpowers and become very productive. Yeah, it's it's certainly
• 25:07
  Speaker 1: not Um, it's not destiny, but it's uh, it's a
• 25:11
  Speaker 1: possibility that we should be aware of and frankly a
• 25:15
  Speaker 1: bit worried about. And so this, you know, this idea
• 25:18
  Speaker 1: comes from um, the economic insight that people are actually
• 25:26
  Speaker 1: the engines of idea generation and technological and medical advances,
• 25:32
  Speaker 1: and so there's just this idea that it's not just
• 25:35
  Speaker 1: you know, one person creates one more thing, and so
• 25:38
  Speaker 1: if you have one fewer person, well you have one
• 25:40
  Speaker 1: fewer things. But it's okay because income per person's days concept.
• 25:45
  Speaker 1: The issue is if you have fewer workers overall, there's
• 25:49
  Speaker 1: less specialization happening, there's less idea generation, and so actually
• 25:55
  Speaker 1: what happens is income per person shrinks and living standards shrink.
• 26:00
  Speaker 1: Now again it doesn't have to be that way, um,
• 26:04
  Speaker 1: but that's a possibility. And so you know, if you know,
• 26:07
  Speaker 1: you bring up, well, maybe robots can replace people and
• 26:09
  Speaker 1: they can make these innovations. Maybe right, Um, so we
• 26:14
  Speaker 1: might get richer, but the robots might be running the show.
• 26:16
  Speaker 1: That would be a bit unfortunate. Still being image there,
• 26:22
  Speaker 1: all right, well that's a great image to leave our
• 26:24
  Speaker 1: audience with. Melissa Carnie, Thank you very much, Thank you
• 26:27
  Speaker 1: so much. Now, Sean talked about the long term forces
• 26:36
  Speaker 1: which have helped produce these real time labor shortages in
• 26:39
  Speaker 1: places like Licking County, and we're going to have more
• 26:42
  Speaker 1: on that in a minute. Also some discussion of whether
• 26:45
  Speaker 1: the Biden administration is doing the right things to help
• 26:47
  Speaker 1: us work has become more productive. But first I wanted
• 26:51
  Speaker 1: to quit update on a shorter term mystery that has
• 26:54
  Speaker 1: made the US labor shortage a lot worse since the pandemic,
• 26:58
  Speaker 1: and that's the mystery of the seeing two point six million,
• 27:02
  Speaker 1: that's roughly how many more Americans will be working or
• 27:05
  Speaker 1: looking for jobs right now if the economy's labor force
• 27:08
  Speaker 1: participation rate was the same as it was before COVID hit.
• 27:13
  Speaker 1: You know, it's a hugely important question for anyone wanting
• 27:15
  Speaker 1: to know what's going to happen to unemployment or inflation
• 27:18
  Speaker 1: in America in the next year. And it's also pretty
• 27:21
  Speaker 1: crucial for any business owner who is short on workers now.
• 27:25
  Speaker 1: One of the most celebrated economists of his generation, Raj Chesti,
• 27:29
  Speaker 1: has weighed in with a pretty interesting answer, and Bloomberg
• 27:33
  Speaker 1: Wealth reporter Ben Stephnman had the story in Business Week
• 27:36
  Speaker 1: about it. Ben, thanks for doing this late notice. I
• 27:40
  Speaker 1: guess you should tell us quickly. First you know who
• 27:43
  Speaker 1: rushed Chetti is and why the data he's used might
• 27:48
  Speaker 1: be interesting in this context. Rush Jetty is a economist
• 27:53
  Speaker 1: at Harvard. He has a research lab. They're called Opportunity
• 27:58
  Speaker 1: Insights that he's founded with a couple of other academics,
• 28:01
  Speaker 1: and he has really a team of people that pour
• 28:04
  Speaker 1: through giant data sets two come to conclusions about what's
• 28:10
  Speaker 1: happening in the economy. So he's done some great work
• 28:13
  Speaker 1: on inequality over the years that has really got some
• 28:17
  Speaker 1: big headlines. But when UM, when the pandemic hit, he
• 28:22
  Speaker 1: and the rest of his team, which was dozens of people,
• 28:25
  Speaker 1: mobilized UM and they built what they called an Economic Tracker,
• 28:29
  Speaker 1: which used private data UM basically transaction data from private
• 28:35
  Speaker 1: companies UM that we're willing in that moment to offer
• 28:40
  Speaker 1: them some data feeds, and they used that to build
• 28:43
  Speaker 1: basically it was a online tool to track what was
• 28:47
  Speaker 1: happening in the economy down to the zip code level.
• 28:51
  Speaker 1: And UM, this was really important in twenty if there
• 28:54
  Speaker 1: was pandemonium in the economy, but we really didn't understand
• 28:57
  Speaker 1: what was actually happening at the time. What we're talking
• 29:00
  Speaker 1: about now is some new research using the same data
• 29:05
  Speaker 1: set UM that really looks at where these missing workers
• 29:09
  Speaker 1: are and and tries to use that private data in
• 29:13
  Speaker 1: in another innovative way. And so where is that hole
• 29:17
  Speaker 1: I mean I mentioned the two point six million are
• 29:21
  Speaker 1: they what do we know about where they are in
• 29:24
  Speaker 1: the workforce? I mean, I guess geographically, but also the
• 29:27
  Speaker 1: kind of worker they are. When they look at their
• 29:29
  Speaker 1: employment data, they're finding a big shortage of low income workers. UM,
• 29:35
  Speaker 1: basically a drop in the pre pandemical low income workforce.
• 29:39
  Speaker 1: So one in five, one in five low income workers
• 29:42
  Speaker 1: that we have in effective before COVID has just disappeared. Yeah,
• 29:45
  Speaker 1: and it's that is that quite that bad? Because some
• 29:48
  Speaker 1: of those people have moved up are now making more
• 29:52
  Speaker 1: money and are further up the income scale. But only
• 29:55
  Speaker 1: about a third of the missing workers have been able
• 29:57
  Speaker 1: to move up, and about two thirds are still the
• 30:00
  Speaker 1: It just basically vanished. And um. They looked through a
• 30:04
  Speaker 1: bunch of different scenarios and reasons why that might have happened,
• 30:07
  Speaker 1: and they test various correlations. But the thing that was
• 30:11
  Speaker 1: the strongest predictor of a missing a place that had
• 30:15
  Speaker 1: a missing worker was a place that had the strongest
• 30:19
  Speaker 1: shock in And so this goes back to Chetty's research
• 30:24
  Speaker 1: in twenty What he found was that the low income
• 30:27
  Speaker 1: workers that were hit the hardest by the pandemic were
• 30:31
  Speaker 1: the ones who worked in the highest rent areas. Basically, professionals,
• 30:36
  Speaker 1: wealthy people, affluent people change their spending patterns very rapidly.
• 30:43
  Speaker 1: In March stopped going out and that caused this cascade
• 30:48
  Speaker 1: of job losses and um business closures that impacted workers
• 30:54
  Speaker 1: who worked in those neighborhoods particularly. Of course, everybody was
• 30:57
  Speaker 1: affected across the entire economy, but if you compare the Bronx,
• 31:01
  Speaker 1: which is a low income part of New York City,
• 31:03
  Speaker 1: to um wealthier parts of Manhattan, Um, the difference was
• 31:09
  Speaker 1: really stark there um in terms of the workers up
• 31:13
  Speaker 1: in up in the Bronx were still doing okay, I
• 31:16
  Speaker 1: mean they were, they were affected, but in wealthier neighborhoods
• 31:19
  Speaker 1: all across the country there was this devastation among low
• 31:23
  Speaker 1: income workers. And so basically to fast forward to or
• 31:26
  Speaker 1: three years, what they found in this new research is
• 31:29
  Speaker 1: that those are the places where the workers are most missing.
• 31:33
  Speaker 1: And that suggests that something about actually losing your job in,
• 31:37
  Speaker 1: and especially losing a low income job in, really scrambled
• 31:41
  Speaker 1: people's lives and through them out of the workforce. Is
• 31:44
  Speaker 1: there any sense that these people will have gone into
• 31:46
  Speaker 1: the informal economy that they're now in the sort of
• 31:48
  Speaker 1: being paid in cash or just do we have any
• 31:51
  Speaker 1: sense of that where they might be. Well that these
• 31:54
  Speaker 1: are probably the hardest people to track in the in
• 31:57
  Speaker 1: the United States. These are people obviously at the margins
• 32:00
  Speaker 1: of the workforce. Um. And so when I went out
• 32:04
  Speaker 1: and did some reporting and tried to talk to people,
• 32:06
  Speaker 1: I mean, there there were some interesting ideas, um that
• 32:11
  Speaker 1: came back to me from business owners and from workers themselves.
• 32:14
  Speaker 1: I Mean, one thing is that we're all three years older, um,
• 32:18
  Speaker 1: since the pandemic happened. And you know, some of these
• 32:22
  Speaker 1: low income jobs are really hard. For example, I talked
• 32:24
  Speaker 1: to one person who worked in a kitchen. He he
• 32:27
  Speaker 1: he's now fifty seven years old. He's like, he liked
• 32:30
  Speaker 1: that restaurant job that where he was working before, but
• 32:33
  Speaker 1: the restaurants now closed, and he doesn't trust another restaurant
• 32:36
  Speaker 1: job to be as good and easy, especially now that
• 32:39
  Speaker 1: he's fifty seven. That's hard work. Um. So and then
• 32:44
  Speaker 1: the other thing that seems to have happened maybe is
• 32:46
  Speaker 1: that in these expensive areas people have moved so um.
• 32:51
  Speaker 1: You know, in a place like New York City, you
• 32:54
  Speaker 1: might end up living an hour and a half by
• 32:56
  Speaker 1: training your bus outside the city to get to your
• 32:59
  Speaker 1: job in a place like the Upper West Side. Well,
• 33:03
  Speaker 1: people just said, I'm not going to do that anymore.
• 33:05
  Speaker 1: I'm going to move to North Carolina which is cheaper,
• 33:08
  Speaker 1: or or or some other part of the country that's
• 33:11
  Speaker 1: that's the less expensive. It's interesting that you mentioned the
• 33:13
  Speaker 1: age element, and actually, in a bit in in a minute,
• 33:16
  Speaker 1: we're going to get into a bit more of than
• 33:17
  Speaker 1: the implications of an aging population before I let you go, though,
• 33:20
  Speaker 1: I'm interested. I mean that you've come back to it
• 33:22
  Speaker 1: various times, this this puzzle, Um, and I wondered when
• 33:27
  Speaker 1: you came away from this research and talking to the
• 33:30
  Speaker 1: people that you talked to on the ground, what do
• 33:32
  Speaker 1: you think the lessons might be for the future. I mean,
• 33:34
  Speaker 1: you know, obviously the FED is sitting there wondering whether
• 33:36
  Speaker 1: any of these people are going to come back, and
• 33:38
  Speaker 1: whether as a result, we might have a bit more room,
• 33:42
  Speaker 1: um in the economy, in the labor force than it
• 33:44
  Speaker 1: currently looks like. When you just look at that very
• 33:46
  Speaker 1: low three point six percent unemployment rate, do you do
• 33:50
  Speaker 1: you feel these people are going to come back or
• 33:51
  Speaker 1: they're going to pop up in some other part of
• 33:53
  Speaker 1: the economy. You know, I think part of the problem
• 33:56
  Speaker 1: here is that this is a long term problem of
• 33:59
  Speaker 1: labor force participates in the United States. UM, it's especially
• 34:04
  Speaker 1: for low income workers. UM, childcare, affordable housing has just
• 34:10
  Speaker 1: gotten really difficult. The most economically dynamic parts of the
• 34:13
  Speaker 1: country are the places that where workers are needed. So, um,
• 34:17
  Speaker 1: it's hard for people to afford to go to a job.
• 34:21
  Speaker 1: And the reasons for that are long term. You know,
• 34:23
  Speaker 1: there's not enough housing supply, there's not enough affordable childcare.
• 34:28
  Speaker 1: And so this is this problem decades in the making,
• 34:30
  Speaker 1: and it's probably going to require decades of policies that
• 34:34
  Speaker 1: could could address that. And we basically need policies to
• 34:37
  Speaker 1: create a labor supply increase in this country and get
• 34:41
  Speaker 1: more for example, parents or sick people or older people
• 34:45
  Speaker 1: comfortable getting to get getting in the workforce. And that
• 34:48
  Speaker 1: is a battle that many countries are raging right now.
• 34:50
  Speaker 1: Ben Stephen, and thank you very much. You're welcome. That's
• 35:01
  Speaker 1: it for this season of Stephanomics. We're officially back in April,
• 35:05
  Speaker 1: but I have a sneaking feeling I might have some
• 35:07
  Speaker 1: bonus interviews for you before then, so keep an eye
• 35:10
  Speaker 1: on this feed. And of course you can keep getting
• 35:12
  Speaker 1: informed on economic news and views, and much else on
• 35:16
  Speaker 1: the Bloomberg Terminal website or app. This entire series was
• 35:20
  Speaker 1: produced by Yang Yang, Summer Sadi and Mangus Henrickson, with
• 35:24
  Speaker 1: special thanks to Sean Donald, Ben Stevenman, Melissa Carney, and
• 35:28
  Speaker 1: Kelly Friendly. Mike Sasso is the executive producer of Stephanomics