GPPReview Online’s Rob Wood recently sat down with Dr. Alice Rivlin, founding Director of the Congressional Budget Office, former Director of the White House Office of Management and Budget, former Vice Chair of the Federal Reserve Board, and current Co-Director of the Greater Washington Research Program at the Brookings Institution. We discussed Apple, agglomeration, federal investment, and what the future has in store for the American worker. This is the second part of the interview. The first part appeared on GPPReview Online on Monday, April, 9, 2012.
Georgetown Public Policy Review: I’d like to talk more about what the future has in store for the American worker. What do you see as the primary driver of economic growth in the medium- to long-term? What sector will be the primary employer – will we continue to be a primarily service-based economy?
Alice Rivlin: Yes. All developed economies are going to continue to be heavily service-based economies, and more and more so, as we can afford more services. Productivity has advanced very rapidly in manufacturing and in agriculture, so we can afford to feed ourselves with very little input of labor, and increasingly to make stuff with very limited input of labor. So, we want more and more services. That’s not bad – that’s what a rising standard of living is.
GPPR So for blue-collar workers of America’s younger generations, what are they going to be doing 20 or 30 years from now?
AR: Blue-collar work isn’t going to disappear. We’re certainly going to have construction, manufacturing. But it will get more and more high-tech. So the thing for a young worker to do is to get as much education as he or she can, and keep learning the new techniques. Because if you get stuck in a narrow specialty that goes away, you’re in trouble. That’s true intellectually as well as for blue-collar workers. Even among the college-educated and advanced degree recipients, you have to keep ahead of the game.
GPPR: Are opportunities to acquire these skills something that will be sufficiently supplied by the market, or do they need to be subsidized by the government?
AR: It’s both. Don’t count the private market out. Right now, we’re in a very slack labor market, so employers can afford to be very choosy. It’s still true that many employers can’t find people for the skilled jobs that they have – but that’s a small piece of the picture. If you went back to the very tight labor markets at the end of the ’90s, for instance, what you found was that employers couldn’t afford to be that choosy, so they had to invest a lot more in training and pay people to learn the skills. That’s less necessary for employers right now. So, tight labor markets are a really good thing for upgrading skills.
But, the public sector plays a role, too. We need more and better community colleges – I’ve been working on a community college right here in the District of Columbia. And technical training at post-high school, but not necessarily the full baccalaureate level, is very important, as is continuing training for people who already have jobs and want to get better jobs.
GPPR: One of the policies outlined in President Obama’s proposed American Jobs Act is the bridge-to-work program modeled after Georgia Works. The government would encourage businesses to hire part-time workers to perform free apprenticeships for up to eight weeks, based on the idea that some businesses will choose to bring those workers on as full-time employees at the end of the apprenticeship period. Would this program help spur hiring?
AR: The general idea is a good one. Another model is what the Germans do. They have had, over a long period, close relationships between their companies and their schools, and have had various kinds of programs that we might call internships or apprenticeships, where people are spending part time in school and part time on the job.
GPPR: I’d like to get your perspective on a couple of other policy proposals that have been floated recently. First, what do you make of the idea to create an infrastructure bank?
AR: I’m very much in favor of improving our infrastructure and investing in our infrastructure. I haven’t studied the particular proposals for the bank, but I can address the question of how we leverage public capital with private capital. You can only do that successfully if you have projects that generate income, as in toll roads. I think there’s a role for that.
GPPR: In terms of getting people back to work through infrastructure projects, we hear criticism of the idea on both the Left and the Right. Many on the Right believe that short-term infrastructure projects aren’t real jobs. Some on the Left have criticized it on the basis that infrastructure projects do not create enough jobs, given that we have machinery that can take care of most of the work for us. What’s are your thoughts?
AR: The argument for infrastructure investment is long-run growth. It’s improving our productivity. If it’s a transportation project, a lot of other economic activities benefit when you can get from one place to another faster. If it’s a broadband network, it’s transportation, but in cyberspace. So the wise use of infrastructure investment is very important for long-run productivity, and there’s a lot of evidence that we have let our infrastructure decay, that we’re behind the times on transportation and electronic communication infrastructure. That’s the reason for investing in infrastructure – not short-run creation of jobs. The critics are right that if your objective is to increase demand in the short-run, there are lots better ways of doing that than long-run investment in infrastructure. It doesn’t create as many jobs per dollar as some other things.
GPPR: So is there anything we could do at this point, at the federal level, to reduce unemployment more quickly than we have been?
AR: We certainly should extend the payroll tax cut for another year. You don’t want to extend it forever – there ought to be some way of phasing it out automatically as the economy improves. The same goes for unemployment benefits.
Lots of other productive spending is a good thing to do, but we have to do it simultaneously with efforts to control the long-run rise in debt, because that is also a big problem. And it’s perfectly feasible to do both – to do short-run demand creation and job creation, and longer-run deficit reduction. That’s what the Simpson-Bowles report advocated, that’s what Domenici-Rivlin advocated, that’s what the Joint Select Committee had a big chance to do and didn’t do.
GPPR: President Obama has talked about cutting the corporate tax rate while simultaneously closing loopholes to expand the corporate tax base. Is this a compelling policy proposal?
AR: Yes, but I wouldn’t limit it to the corporate tax. It’s important to reform both the individual income tax and the corporate tax to broaden the base so we can lower the rates and raise more revenue in the process.
GPPR: Will the national debt impact employment in the U.S. and Europe in the long-run? Will it stifle job growth?
AR: In the short-run, we should be helping the economies recover both in the United States and in Europe. My fear is that the Europeans are so focused on their long-term debt situation that they’re stifling their economy in the near-term with excessive austerity. That can be a self-defeating effort, as it probably already is in Greece – the Greek economy is declining rapidly, and it will only get worse as they increase the austerity. But both the U.S. and European countries face the problem of debt growing faster over the long-run then our economies can grow, and that is a very bad situation. The Europeans are already seeing that they can’t borrow at reasonable interest rates because they’ve been borrowing too much. Now, we’re not at that point. We’ve been very lucky because we can borrow at low interest rates seemingly endlessly. But that can’t go on forever, and our debt has risen a great deal in relation to our economy since 2008. As I said earlier, we need to be doing two things at once: getting the economy growing again, but also reducing our long-run obligations. Everybody who’s looked at this basically comes out at the same place. What you have to do about the long-run is reform the entitlement programs so they aren’t growing as fast, and reform taxes so that you’re raising more tax revenue from a better system.
GPPR: To conclude, can history shed any light on the challenges America faces in the coming century in cultivating a competitive and fully-employed workforce?
AR: We have prospered in the past in part because we’ve had a hard-working, well-trained workforce. We’ve got to keep that up, and we’ve fallen behind on the skills of our workforce – we need to get back in the game. We have also prospered in the past because we were very innovative and have facilitated the formation of new companies, and we’ve got to keep doing that. We’ve got to improve our infrastructure, and we have done that in major ways in the past, as in when we built the interstate highway system – that was a huge investment over a relatively short time, and it has certainly paid off great dividends, but we have to keep it up.
Established in 1995, the Georgetown Public Policy Review is the McCourt School of Public Policy’s nonpartisan, graduate student-run publication. Our mission is to provide an outlet for innovative new thinkers and established policymakers to offer perspectives on the politics and policies that shape our nation and our world.