Where is the U.S. Economy Going? Barry Bluestone Northeastern University Laborers’ International Union Hilton Hotel Anchorage, Alaska July 10, 2005

Clinton Bush

Little net job growth since 2000 … especially compared to the jobs trajectory

Clinton Bush Nearly 3 million manufacturing jobs lost

Clinton Bush … a 30 cent weekly wage Increase over 4 years

How Families are Faring Real Median Household Income has DECLINED by $1,535 since 2000 – by 3.4% Real Median Household Income has declined by 6.3% for African-American families and by 6.9% for Hispanic families The number of people in poverty has INCREASED by 4.3 million since 2000 Number of people without Health Insurance: 45 million

… but Corporations are doing very well

More than 4 years and stock market has not still recovered

… little growth in domestic investment Clinton Bush

Consumer Debt soaring

Federal Deficits soaring

Clinton Bush Federal Debt soaring

Trade Deficit Growing

Data Sources Council of Economic Advisers, “Economic Indicators” (May 2005) Council of Economic Advisers, Economic Report of the President, 2005

Globalization, Trade, and Income Inequality

Impacts of Globalization on U.S. Economy Increases standard of living through free trade.... inexpensive imports boost real incomes by lowering prices Increase standard of living through free trade leading to export earnings BUT ….. BUT ….. Contributes to income inequality Reduces standard of living through outsourcing and trade

Growing Wage Inequality

Murder on the Inequality Express Suspect 1: Technology Suspect 2: Deindustrialization Suspect 3: Deregulation Suspect 4: Declining Unionization Suspect 5: Downsizing Suspect 6: Winner-Take-All Labor Markets Suspect 7: Trade Suspect 8: Capital Mobility Suspect 9: Immigration Suspect 10: Trade Deficits

The Import Explosion – 2004 Exports: $1.147 Trillion Exports: $1.147 Trillion Imports: $1.764 Trillion Imports: $1.764 Trillion TRADE DEFICIT: $617 BILLION

Exports/Imports Goods Exports: $808 billion Goods Exports: $808 billion Service Exports: $340 billion Service Exports: $340 billion Goods Imports: $1.473 Trillion Goods Imports: $1.473 Trillion Service Imports: $291 billion Service Imports: $291 billion

2003 Imports – From Where? Western Europe21% Canada19% Mexico12% China10.2% Japan10.1% Pacific Rim (NIC) 6.9% (Korea, Indonesia, etc.) (Korea, Indonesia, etc.) Note: In 2004 China moved ahead of Mexico

China & India Trade with low wage countries with low- skilled, low productivity labor forces leads to higher real average wage in U.S. through lower prices, but exacerbates U.S. income inequality As low wage countries improve their skills and boost productivity, not only are low- skilled U.S. workers hurt, but high-skilled workers as well.... reducing overall real average wage

Historical Examples Farming moved from U.S. East to West, reducing Eastern incomes before industrialization Textile & shoe manufacturing moved from North to South, reducing Northern incomes before new Northern industries came on stream

Outsourcing Problems with outsourcing: Short-term loss in jobs Long-term loss in technology... if outsourcing involves sending new technology abroad Combination of new technology and low wages abroad can eliminate both low- skilled and high-skilled jobs... leading to slower economic growth and lower standard of living

Importance of Technology Innovation is the key to productivity growth... which in turn is the key to economic growth But, if innovation is exported so that the technological gains go to another region, then the gains from technology can be lost, resulting in a decline in economic growth

What’s Happening to our Unions?

Age Composition of Union Members in the U.S Percent of Employed Age Group Workforce Total, Age % Age % Age % Age % Age % Age %

Union Membership by Occupation in 2003 Occupation Union Membership as % of Employment Sales and related occupations4.0% Food preparation and serving related occupations4.1% Legal Occupations4.8% Computer and mathematical occupations5.2% Business and financial operations occupations6.1% Art, design, entertainment, sports, and media occupations7.5% Architecture and engineering occupations7.8% Life, physical, and social science occupations9.0% Healthcare practitioner and technical occupations12.3% Production occupations17.5% Installation, maintenance, and repair occupations18.9% Transportation and material moving occupations20.1% Construction and extraction occupations21.7% Protective service occupations36.1% Education, training, and library occupations37.7%

Trends in Federal R&D Expenditures Losing Our Competitive Edge in New Technologies

2.0% 1.0% Source: U.S. Office of Management and Budget, Historical Tables: Budget of the U.S. Government, Fiscal Year 2006 (Washington, D.C.: U.S. Government Printing Office, April 2005)

1.0% Source: U.S. Office of Management and Budget, Historical Tables: Budget of the U.S. Government, Fiscal Year 2006 (Washington, D.C.: U.S. Government Printing Office, April 2005) 0.4%

Source: U.S. Office of Management and Budget, Historical Tables: Budget of the U.S. Government, Fiscal Year 2006 (Washington, D.C.: U.S. Government Printing Office, April 2005) Reagan “Boomlet” 1.2% 0.80% 0.60%

Source: U.S. Office of Management and Budget, Historical Tables: Budget of the U.S. Government, Fiscal Year 2006 (Washington, D.C.: U.S. Government Printing Office, April 2005).75%.10%

Source: U.S. Office of Management and Budget, Historical Tables: Budget of the U.S. Government, Fiscal Year 2006 (Washington, D.C.: U.S. Government Printing Office, April 2005).12%.015% Energy Crisis 0.08%

Source: U.S. Office of Management and Budget, Historical Tables: Budget of the U.S. Government, Fiscal Year 2006 (Washington, D.C.: U.S. Government Printing Office, April 2005).04%.012%.02%

Source: U.S. Office of Management and Budget, Historical Tables: Budget of the U.S. Government, Fiscal Year 2006 (Washington, D.C.: U.S. Government Printing Office, April 2005).050%.015%.028%

Source: U.S. Office of Management and Budget, Historical Tables: Budget of the U.S. Government, Fiscal Year 2006 (Washington, D.C.: U.S. Government Printing Office, April 2005).10%.22%

Public Policy Implications Protectionism - Raise trade and outsourcing barriers Vs. Fair Trade: –Labor & Environmental Standards –Tie trade liberalization to country’s commitment to raising own wages in line with improved productivity

Sustaining Prosperity Public Investment in Basic Research Public Investment in Education Public Investment in Infrastructure

Restoring Social Equity Higher Minimum Wage Expand the EITC Labor Law Reform to Foster Unionization Fair Trade Invest in Public Schools Universal Health Care Coverage Expand Public Goods (e.g. Transportation, Day Care, Elder Care)