Faster Growth? Two Things Trump Supporters Won’t Like

Photo
Matt Grigsby, an engineer at Uber’s self-driving startup Otto, during a highway demonstration in San Francisco in August. Self-driving trucks would lift productivity — and put people out of work.CreditTony Avelar/Associated Press
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.
But if the economy quickly became more productive, it would, at least in the short run, also risk the livelihoods of some of the very working-class people whom Mr. Trump pledges to help. And the surest way to increase the number of hours worked is to allow more immigration, which would be directly at odds with Mr. Trump’s get-tough stance on that topic.
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In other words, if an era of faster growth is really going to arrive, it will probably involve some changes that Mr. Trump’s supporters very much don’t want to happen.

The productivity paradox

Low productivity growth has been one of the chronic problems of the economy in the last decade, and an important contributor to the low growth rate, even if economists aren’t entirely sure why it’s happening. If we want living standards to rise over time, we need productivity to rise.
But the connection between productivity gains and higher incomes can take time to play out. Often it means short-term disruption — job loss — for workers whose jobs are rendered unnecessary.
And that has been especially true for the last few decades, and for people at the middle and lower end of the pay spectrum. As my colleague Claire Cain Miller wrote, some 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.
But it would be daunting for any of those drivers who can’t find a job with similar pay, especially during some lag period. The experience with manufacturing does not give much reason for optimism that less-educated workers will have success finding lucrative jobs after a productivity-enhancing innovation the way economics textbooks might predict.
It’s possible that the next wave of productivity gains could come from industries that affect white-collar professionals more than the blue-collar workers who form the core of Mr. Trump’s coalition. Think of artificial intelligence software that could one day replace doctors in diagnosing diseases (or at least make them able to serve more patients at once).
If that happens, the question will be whether those displaced workers can adapt any better than the steelworkers of 30 years ago — and if not, how to deal with masses of white-collar workers who are as disconnected from the modern economy as their blue-collar counterparts seem to be.

Need a labor force boost? Look to immigrants

More people can make more stuff. That is the simple, brutal math behind G.D.P., and it’s the other central challenge of reconciling Mr. Trump’s economic growth ambitions with his other policy priorities. By extension, the more people there are in the United States with the desire to work, the higher the nation’s economic output will be.
One major factor in the sluggish growth of the last few years is that the United States labor force isn’t growing the way it used to. The peak of the baby boom is nearing retirement age. And unlike in the second half of the 20th century, the proportion of women who work is stable, not rising.
A straightforward way of increasing the labor force would be to increase the number of immigrants, especially those with advanced skills, whose economic output is the highest.
Here’s some fun with labor force math. There are about one million legal immigrants per year. If you doubled the rate of legal immigration and ensured that 75 percent of those extra million people would join the labor force, it would mean a boost to the labor force of 750,000 people per year over current levels.
The Congressional Budget Office currently projects that the labor force will grow by 0.5 percent a year over the coming decade. But if you add in those extra people under this hypothetical, that rate would rise to 1 percent.
It would put a president a good bit closer to achieving an ambitious economic growth goal, all else being equal.
Of course, Mr. Trump has made hostility to immigration a hallmark of his campaign, and there seems to be little appetite for any major expansions of immigration in Congress or in public opinion, let alone a doubling.
Mr. Trump has argued that there is a vast untapped pool of American workers who are not in the labor force at all, and there is truth to that. But the pool may not be as large — or have as much potential to improve growth — as he suggests.
The Economic Policy Institute, for example, calculates that these “missing workers” — prime-age people who are neither working nor looking for work but would be in a fully healthy economy — number about 2.3 million people. If they were successfully pulled into the job market over the next decade, they would provide only about an 0.15 percentage point annual boost.
In other words, unless Mr. Trump wants to entertain immigration policies that are contrary to his campaign messages, demographics will be a major headwind making his growth promises all but impossible to achieve.
Perhaps there is a broader lesson in all of this. Life is full of trade-offs. And so is economic policy.
P.C: http://www.nytimes.com/2016/12/28/upshot/faster-growth-two-things-trump-supporters-wont-like.html

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