A Set of Public Policy Recommendations
Many of the most important policies we can take are straightforward, in the sense that enjoy widespread support among most (certainly not all) economists, policymakers, and business leaders alike. Consensus can seem nonexistent in today’s rancorous and partisan political climate, but there’s actually a lot of agreement on the topics of education, immigration, trade, entrepreneurship, infrastructure, and original research. Despite this agreement, though, we’re not currently doing enough of the right things in these areas:
Education. The economic history of the first machine age has been described as a race between technology and education. Because America invested heavily in education, starting with the innovation of publicly-funded primary education in the 1820s, and later adding vocational schools, high school, and college scholarships like the GI bill, the result was not only prosperity, but shared prosperity. But during the last few decades, the educational attainment level of the American workforce has stagnated while the demand for skills that complement the explosion of digital technologies has continued to expand. Moreover, the differences in educational attainment levels by income have risen. Today, we need to invest more in education--at least two years of community college rather than a high school degree should be the minimum educational goal--and we need to address the widening gap in educational opportunities by income. But it will not be enough simply to invest more in education. We need to redesign how we deliver education at all levels using the power of digital technologies. We need to reinvent education with greater emphasis on STEM disciplines and coding skills. We need to shift away from rote learning and build instead on our uniquely human strengths in areas like creativity and interpersonal interactions.
Infrastructure. World-class roads, airports, and networks are investments in the future and the foundation of strong growth. But much of our infrastructure is outdated and crumbling and we’re not making adequate investments needed for the 21st century.
Entrepreneurship. Young businesses, especially fast-growing ones, are a prime source of new jobs. Despite the boom in some areas, overall entrepreneurship in America has been on a slow steady decline for over a decade. We are convinced that entrepreneurship can be boosted by actively teaching and fostering entrepreneurship through a variety of channels and reducing burdens like certain occupational licensing rules. We need to create more freedom for innovation with spaces carved out for entrepreneurs to try things that might fail. One of the defining stories of America is the vast frontier where people could explore new approaches.
Immigration. Many of the world's most talented and ambitious people want to come to America to build their lives and careers, and the evidence is clear that immigrant founded companies have been great job creation engines. Yet our current policies in this area are far too restrictive, and our procedures are nightmarishly bureaucratic.
Trade. The US has a strong competitive advantage in high-technology goods and services. The markets for these products are growing rapidly around the world: in the future most of the growth in demand will come not from the US but from the rest of the world. Trade agreements that liberalize cross-border trade in these products will promote competition, entrepreneurship and high-skill jobs and will create net benefits for the US economy.
Basic research. Companies tend to concentrate on applied research where they can capture the rewards from their efforts. The government has a role to play in supporting basic, early-stage work where the rewards are spread more broadly. Most of today's technology marvels, from the Internet to the smart phone to the search engine, have one or more government programs somewhere back in their family tree. Despite that and despite evidence that the social return to basic R&D funding is significant, funding for basic research in America, has declined as a share of GDP.
There’s simply no excuse for not doing better on the elements of this basic policy playbook for prosperity. Improving our policies in these areas will mean faster economic growth: more demand for products and services, more new companies starting up and hiring, and faster job and wage growth for workers.
We are not saying that faster economic growth alone will solve all of the challenges facing America’s workers in this time of rapid and deep technological progress. Tax changes including higher marginal rates on top earners, expanded wage subsidies like the EITC, an increased minimum wage, and new workplace oversight such as restrictions on erratic scheduling practices should be on the table as well.
What we are saying is that faster growth will surely help workers both immediately and in the long run, and that there is a set of policy changes that will surely help boost growth. Putting them in place should be our country’s highest economic priority.