It's Not Too Late for a Real Stimulus That Creates Jobs and Lasting Growth

It starts with infrastructure

It starts with infrastructure

615 infrastructure stimulus reuters.jpg

Reuters

The United States is now in its third straight recovery from a recession in which economic growth has revived but job growth hasn't followed at anywhere near the same pace. First 1991, then 2001, now the Great Recession -- jobless recoveries appear to be the economy's default setting, and a damaging one. Since mid-2009, gross domestic product has climbed by 3.6 percent in the United States (on a per capita basis) while employment has fallen by 1.8 percent, economists Nir Jaimovich of Duke University and Henry Siu of the University of British Columbia reported in a research paper in November. This is why more than half of Americans still believe the recession hasn't ended.

Growth without jobs is deadly. To revive the economy, policymakers need to do more than just kick-start growth. They must target job-creation specifically. They can begin by following the emerging research that specifies which sorts of jobs don't return after a recession -- basically, anything that relies on a routine task that a machine or a low-wage foreign worker could do instead. The economy sheds bank tellers and assembly-line operators when demand falls and then, afterward, makes do without them for good. The decline in "middle-skill" work depresses wages, both for the workers competing for fewer jobs and for lower-skilled workers then forced to compete against the middle-skilled workers thrown out of work.

Many economists, across the ideological spectrum, say there's only one answer to this erosion: more education for everyone. "Given the reduction in opportunities for middle-skill workers," researchers at the Federal Reserve Bank of New York wrote this fall, "it is especially important to help people build the skills necessary" for high-skill work. But that's a long-term proposition at best, and it assumes -- incorrectly, no doubt -- that every former steel-mill foreman can be re-invented as an engineer.

More immediately, policymakers need to find ways to push more people into middle-skill jobs and to find ways to create more of those jobs. This means a return to emphasizing vocational education. The United States still needs lots of new plumbers, electricians, and heating-system re-pair workers.

Government support for particular occupations or sectors -- such as President Obama favors for manufacturing -- is a version of so-called industrial policy. But governments at all levels have an even simpler place to start: Build stuff and employ more public workers. Construction foremen, cops, and firefighters, three of the largest middle-skill occupations left, have all suffered during the recovery because of reduced spending on infrastructure and public safety, especially by state governments. Liberal economists Lawrence Summers of Harvard, a former Obama adviser, and Brad DeLong of the University of California (Berkeley) argued in a recent paper that federal borrowing costs are so low that a massive stimulus program today would more than pay for itself in the long run by spurring growth and tax revenue.

"Stimulus," of course, has become an epithet in Washington after years of Republican assaults on Obama's 2009 legislation, especially now that austerity looms beyond the fiscal cliff. Still, there may be no better way to create middle-skill jobs -- and end the jobless recovery cycle -- than by spending federal billions.

Also see:

How to fix innovation

Presented by

Jim Tankersley is a correspondent (economics) for National Journal.

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