By William Reinsch
I’ve said before that the current administration provides a target-rich environment for discussing trade issues, but every once in a while a moment comes along where there is a gap in the news. As I write this we are between NAFTA rounds, the China 301 is in the information gathering phase, and the 232s are still in limbo ( or purgatory, depending on your point of view ). Many years ago when I was a summer camp counselor, when it rained we would spin the weather to the campers by telling them it gave us an opportunity to do all the fun, exciting things we couldn’t do on bright, sun-shiny days. So, in the same way this week is an opportunity to look at something that is important but not on the front page. ( You may not buy that any more than the campers did, but I’m going with it anyway.)
An issue I’ve commented on before, just as many others have, is the apparent phenomenon that there are lots of people complaining they can’t find jobs at the same time companies are complaining they can’t find anybody to fill their job vacancies. This is an important disconnect that has both economic and political consequences. It is in everybody’s economic interest to narrow the gap, fill the jobs and put back to work people who say they want to go back to work. It matters politically because this is also the part of the population that is substantially anti-trade and anti-immigration, blaming imports and foreigners for their unemployment. If we can plug them back into the economy, those attitudes might change, which would be healthier for everybody.
There has been a lot of discussion about the causes of this disconnect, ranging from trade and immigrants to greedy corporations to the opioid crisis to a range of factors that institutionalize poverty and hopelessness to lack of mobility. It is way beyond my capability to sort all that out, but an interesting proposal was recently made with respect to the mobility issue that deserves some discussion.
Americans are not moving around as much as they used to. Our country was built on migration. Long before Horace Greeley told his readers to “Go West,” people were doing precisely that, initially crossing the Appalachians and then fanning out into the Mississippi and Ohio Rivers valleys and far beyond. Government policy, like the Homestead Act, facilitated that, and for 200 years moving to improve one’s chances in life was a quintessential American experience.
Lately, we seem to have lost that, for a lot of reasons. (See my previous column for an explanation.) Mihir Desai, a professor at both Harvard Business School and Harvard Law School, takes on this development not by trying to explain it but by trying to encourage it with a simple concept: if the jobs aren’t coming to the unemployed, why don’t we try to get the unemployed to go to the jobs? He would do that via a $15,000 relocation tax credit triggered by a move of more than 200 miles but not contingent on the individual either already having or immediately finding a job. ( There would also be income and age caps to focus the benefit on the key working part of our population. )
Prof. Desai contrasts this with other policies, particularly popular at the state level, to try to bring jobs to specific areas through subsidies, such as the recent announcement of the Foxconn plant in Wisconsin, at a far higher per job cost.
“The absurdity of tax incentives to “create jobs” reached new heights last month with Wisconsin’s deal to lure iPhone assembler Foxconn Technology Group — which will reportedly cost taxpayers more than $100,000 per job. By promising to bring employment to depressed areas, politicians have convinced Americans that they have a right to a job where they live, and not that they should live where the jobs are.”
On the question of whether or not it will work, he is refreshingly candid — we won’t know unless we try. As with most incentives, clever people will probably discover ways to game the system, but even so it is hard to envision them, or our economy, being worse off than if we had done nothing. And that, in itself, is also a reminder of something that used to be quintessentially American — the willingness to experiment, to try and fail, and then to start over and try again.
We are faced with what seems to be an intractable problem — the persistence of apparently able-bodied people, often clustered together in distressed communities, who are not working — and we seem to have run out of creative solutions. Now we have one, and it’s certainly worth a try.
William Reinsch is a Distinguished Fellow with the Stimson Center, where he works principally with the Center’s Trade21 initiative.