The International Monetary Fund on Wednesday cut its estimate for U.S. economic growth for this year from 2.4 percent to 2.2 percent, and urged several measures to reduce growing poverty in the country.
Christine Lagarde, the IMF’s managing director, said the U.S. economy was “overall, in good shape,” but she highlighted four areas of concern: declining labor-force participation, lower productivity growth, income inequality, and “very high levels” of poverty. Here’s more from her news conference:
Policies need to help lower income households – including through a higher federal minimum wage, more generous earned income tax credit, and upgraded social programs for the nonworking poor.
There is a need to deepen and improve the provision of reasonable benefits to households to give incentives for work, raise the labor supply, and to support families. This should include paid family leave to care for a child or a parent, childcare assistance, and a better disability insurance program. I would just note that the U.S. is the only country among advanced economies without paid maternity leave at the national level and U.S. female labor force participation is 12 percent lower than that for men. Sensible skills-based immigration reform could also raise the labor supply and boost productivity.
Boosting productivity growth is another policy imperative. Productivity gains must inherently be based in the private sector. But public policies can help. A better tax system, efforts toward more trade integration, better infrastructure, a stronger and more vocationally oriented education system would all support higher productivity growth.