White House economist Kevin Hassett says Congress should stay focused on countering the decline in the share of Americans in the workforce. Many Democrats agree.
APRIL 26, 2018 WASHINGTON—Ty Davenport is a man on a mission. As economic development director for Fairfield County in South Carolina, he’s traveling to places like Colorado and Germany trying to bring jobs back to a place that very much needs them.
Even though the national unemployment rate is down to 4.1 percent, pockets of the country – including his area – still face high joblessness, such as Fairfield County’s 9.5 percent. Often that’s coupled with a high number of working-age people who have become disengaged from the labor force for reasons that range from discouragement and drug addiction to skills that don’t match today’s jobs.
In South Carolina, only 58.6 percent of working-age adults are in the labor force, well below both the national level (62.7 percent) and prior levels (in 2000 it stood at 67 percent nationally and similarly in the state).
It’s a hint of the job-market challenges that linger in America, even after a long recovery from recession. Will there be enough jobs, in an era of ever-rising automation? Will less-educated workers be able to make a living wage? These questions have retained their salience for both political parties despite a plunging official US jobless rate.
President Trump tweets persistently about “jobs, jobs, jobs!” and his annual economic report in February featured a chapter largely about how to boost labor-force participation. This week came a report that Sen. Bernie Sanders, who sought the Democratic presidential nomination in 2016, will soon pitch the idea of a guaranteed job for everyone who wants or needs one.
“I think the Sanders people are right to recognize that that’s an important objective for policy,” Kevin Hassett, chairman of Mr. Trump’s Council of Economic Advisers, said Thursday, referring to the goal of a more inclusive job market.
“I’m hopeful that by the time we write the economic report of the president and release it next February, that we’ll have a significantly more optimistic forecast for labor-force participation than we had in this report,” added Mr. Hassett, speaking to reporters at a breakfast hosted by The Christian Science Monitor.
The bipartisan aspiration may sound ho-hum; who’s not for more jobs? Yet the shared focus is notable given that some economists see the job market essentially already at “full employment,” where the unemployment rate can’t fall much further without fueling inflation and risking an overheated economy.
Hassett is among economists who have opined that a still-lower unemployment is achievable. At a conference last week he said joblessness below 4 percent may be equivalent to full employment now. “I think it could be in the 3’s now,” he said, according to a Bloomberg report.
Not surprisingly, the two major political parties differ on how to boost job-market opportunity and inclusion. Where Democrats emphasize the role that public spending can play, Hassett, Trump, and other Republicans see a key role for unleashing private investment and expanding individual incentives to work.
Yet there’s also common ground: Some on both sides have voiced concern about the role that drug addiction, prison records, and inadequate education and training have played in sidelining potential workers. Ditto for the need to address localized challenges like those in Fairfield County.
“One of the big divides is not so much on what we need to do but on how we pay for it,” says Isabel Sawhill, a Brookings Institution economist who’s involved in an effort among conservative and liberal experts to find common ground on work-related policy proposals.
Participation headed back up?
Hassett, at the Monitor Breakfast, said a positive shift in workforce participation may already be under way thanks to the strong economy.
“If you look at the chart, it was basically headed straight down” in the new millennium, and particularly since the Great Recession, he said. “Now it’s actually maybe even heading up, and the chart is really quite striking. I think that’s because … the tight labor market and increasing wage growth are attracting people back into the labor force.”
Since 2015, the share of civilians age 25 to 54 who are in the labor force has risen by nearly two full percentage points, according to Labor Department data.
Speaking to people who got discouraged in the past and felt the emotional strain of rejected job applications, Hassett said, “You should try it again right now. There’s been an enormous amount of success for people reattaching to the labor force.”
Ms. Sawhill echoes the idea that a strong economy is one of the best antidotes to weak participation in the workforce.
“[But] there are some risks to stepping on the gas too hard right now, because we don’t want to have a credit bubble that creates another financial crisis,” she says.
Going for growth, not debt-reduction
Economists see the Trump tax cuts, coupled with a spending hike recently signed by the president, as a stimulus to the economy in the short run, but also as adding to a national debt burden – possibly harming long-term growth and leaving the nation in a poorer position to fight the next recession.
While Hassett agreed that deficits need to be tackled, right now neither party seems focused on fiscal discipline. As Republicans champion what they see as the growth-inducing power of tax cuts, some leading Democrats are touting economic plans that would boost spending.
Sen. Cory Booker (D) of New Jersey recently said he plans to introduce legislation for a model federal job-guarantee program in 15 high-unemployment communities and regions, as a step toward possibly going nationwide with the idea.
“Both Martin Luther King Jr. and President Franklin Roosevelt believed that every American had the right to a job, and that right has only become more important in this age of increasing income inequality, labor market concentration, and continued employment discrimination,” he said in a statement announcing his plans.
Sen. Kirsten Gillibrand of New York, another possible contender for the Democratic presidential nomination in 2020, is supporting similar ideas.
Federal job creation under such plans could focus on areas such as infrastructure and education, where investment could arguably help boost America’s future prosperity as well as provide current jobs. But critics say the job-guarantee programs would be very costly and could disrupt private-sector job markets.
Work requirements for a safety net?
Republicans, meanwhile, are stirring controversy with their own ideas to embed more work requirements into safety net programs like food stamps. The idea has the potential to appeal across ideological lines, depending on how the work requirements are designed. But coming after tax cuts that benefit the rich, a GOP proposal attaching work requirements to food stamps is drawing fierce opposition from Democrats in Congress.
The stakes surrounding the issue go beyond mere dollars in the economy.
“Work provides self-respect and a sense of well-being and makes for healthier communities,” Sawhill says. “Work is a core activity and a core value in our society. [Often] when people aren’t working other things fall apart – families, marriages, relationships with children.”
In his work for Fairfield County, Mr. Davenport is hoping that new job opportunities will arrive as a tight national job market helps him make the case to employers who are looking for a place to expand.
After the closure of a Caterpillar plant and a tire-industry factory, and cancellation of a nuclear-plant expansion, “a lot of those [unemployed] folks are still talented and educated and trained and still living in the area,” Davenport says.
He hopes new tax incentives will also help make the case. The Trump tax cuts call for the creation of “opportunity zones” where investors can gain tax relief by creating jobs – and Fairfield County expects to be a beneficiary.
“We’ve really ramped up our marketing efforts,” he says, while awaiting a meeting in Denver with a firm that he hopes will become a South Carolina job creator.