Speaker 1: Where a change and I can Hello Stephanomics here the
Speaker 1: podcast that brings you the global economy and a bit
Speaker 1: of Jack Johnson. This week we're asking where did everybody go?
Speaker 1: Why has the US workforce been declining for several years,
Speaker 1: not just since the pandemic? And will America have enough
Speaker 1: people left to wage that great battle for global economic
Speaker 1: leadership that both President Biden and Chinese President shi Jing
Speaker 1: Bing are now embarked upon. The Director of the Aspen
Speaker 1: Economic Strategy Group, Melissa Khanni, has a lot to say
Speaker 1: about that in a few minutes. She thinks we can
Speaker 1: do plenty with smart machines, but the engine of ideas
Speaker 1: and innovation is people. In recent years, neither the US,
Speaker 1: nor China, nor anyone else has been able to persuade
Speaker 1: women to give birth to more of them, quite the opposite.
Speaker 1: That's a fascinating conversation. We also find out where the
Speaker 1: Harvard Star economist Raj Chetti has the data to explain
Speaker 1: how the US economy somehow lost two point six million
Speaker 1: workers in the past three years. All to come. The
Speaker 1: first Bloomberg Senior writer on economic Sean Donnan, has been
Speaker 1: to Ohio. Okay, I'm standing by the side of the
Speaker 1: road here in Licking County, Ohio, and I'm looking through
Speaker 1: a chain link fence. There's a big no trespassing signs
Speaker 1: keep out SIGNUS has no drones, snow flurries in the air.
Speaker 1: And I'm looking through a chain link fence at some
Speaker 1: big grassy burns. I can just see the start of
Speaker 1: what is an enormous muddy expanse. And you wouldn't necessarily
Speaker 1: note at first sight, but that big muddy former farm field,
Speaker 1: it's quite literally the future of the American economy. That
Speaker 1: at least is what Joe Biden is betting on. Thanks
Speaker 1: to what's billed as the Chips Act that he signed
Speaker 1: into law last year, the US is investing some fifty
Speaker 1: billion dollars in new semiconductor plans. And that muddy field
Speaker 1: in Licking County outside Columbus is the future home of
Speaker 1: a twenty billion dollar Intel project that will take some
Speaker 1: seven thousand people to build and house another three thousand
Speaker 1: workers when it's done. The future of the chick industry
Speaker 1: is going to be made in America, made in America.
Speaker 1: But there's another big question hanging over that goal. Does
Speaker 1: America have the people needed to meet it? Katherine hunt
Speaker 1: Ryan is president of Manufacturing and Technology at contractor Becktel.
Speaker 1: She's the person in charge of finding the people needed
Speaker 1: to build that Intel plant, and she says finding seven
Speaker 1: thousand skilled construction workers is going to be drawing people
Speaker 1: from around the country to Central Ohio. That is significantly
Speaker 1: outstripping the supply of labor in the local areas. It
Speaker 1: will be pulling on people certainly in the region and
Speaker 1: across the country in order to make that work, to
Speaker 1: make sure it has the three thousand workers it needs
Speaker 1: once the plant is built. Intel is investing a hundred
Speaker 1: million dollars of its own money in universities and to
Speaker 1: your technical colleges. It's also looking out of the world
Speaker 1: in which demand for semiconductor plants and the workers in
Speaker 1: them is booming. That has created a competition for talent.
Speaker 1: It's unlike any scene in decades, says Gabby Cruz Thompson,
Speaker 1: the Intel executive in charge of collaborating with universities to
Speaker 1: build that workforce. I I think we haven't seen anything
Speaker 1: like this, this volume of interest, at this level of interest. Ever,
Speaker 1: like many industrialized economies, the US is in the midst
Speaker 1: of a big demographic shift as baby Boomers, that generation
Speaker 1: born in the wake of the Second World War leave
Speaker 1: the workforce. That exit, which accelerated during the pandemic, is
Speaker 1: colliding with a dip in a number of young people
Speaker 1: entering the workforce. Then there's the effects of both the
Speaker 1: more than a million people lost during the pandemic and
Speaker 1: cuts an immigration in recent years. The US is working
Speaker 1: age population has in recent years been growing at its
Speaker 1: slowest rate since nineteen sixty, and in at least twenty
Speaker 1: four states, including Ohio, the total population actually declined last year.
Speaker 1: There were five hundred thousand fewer babies born in America
Speaker 1: last year than there were in two thousand and five.
Speaker 1: That's when most of this year's high school graduates were born,
Speaker 1: which means that barring a major change in birth rates
Speaker 1: or immigration policy, there will be far fewer high school
Speaker 1: graduates available eighteen years from now. Gabby Cruz Thompson from
Speaker 1: Intel argues that automation and other technologies will help fill
Speaker 1: the gap in the long term. I think it gets challenging,
Speaker 1: but I also we learn to leverage advances in technology.
Speaker 1: Right the advent of artificial intelligence. The workforce that we
Speaker 1: need to educate needs to be a workforce that learns
Speaker 1: to forever learn. Fab has less people today than it
Speaker 1: did twenty years ago. In the short term, though, Intel
Speaker 1: is investing heavily in institutions like Central Ohio Technical College
Speaker 1: in nearby Newark, Ohio. The goal is to build that
Speaker 1: workforce there, and particularly the seventy of workers who won't
Speaker 1: need a four year degree to do their job at Intel.
Speaker 1: John Barry, the college's president, says helping Intel fill the
Speaker 1: vacancies it will have for those technicians on the factory
Speaker 1: floor is not going to be easy. The college is
Speaker 1: rapidly expanding its technology program, but that currently has just
Speaker 1: a hundred and fifty or so students in it. Most
Speaker 1: of our students are part time, so even if you're
Speaker 1: going through a two year degree cycle, rarely does that
Speaker 1: happen in two years. That reality has led Intel in
Speaker 1: the college to work on a one year certificate that
Speaker 1: will help some students with experience in other industries qualify quicker.
Speaker 1: But the college also isn't just facing rising demand for
Speaker 1: qualified chip technicians. The healthcare industry wants more nurses and radiologists,
Speaker 1: municipalities need more police officers and firefighters, And then there's
Speaker 1: the other manufacturers who want young workers able to operate robots.
Speaker 1: All in a world in which the college and manufacturers
Speaker 1: are competing with easy, low end service jobs that are
Speaker 1: often paying equivalent wages. Today's world order is bizar. There
Speaker 1: is just no other way to describe it. Because in
Speaker 1: today's market, you think about this, I can go and
Speaker 1: get a job at literally the drop of a hat,
Speaker 1: and it's probably going to pay me eighteen to twenty
Speaker 1: an hour to do things that used to pay a ten.
Speaker 1: Catherine hunt Ryan, a contractor Becktel, says roughly thirty percent
Speaker 1: of the seven thousand construction workers on the Intel site
Speaker 1: will be apprentices. At least fort initially are likely to
Speaker 1: be so called travelers from either elsewhere in Ohio or
Speaker 1: out of state. Altogether, to lure those workers who are
Speaker 1: also in demand and many other places where chip plants
Speaker 1: and electric vehicle or battery factories are going up, Becktel
Speaker 1: will be offering competitive wages. It also will be offering
Speaker 1: benefits like on site or nearby medical and dental care,
Speaker 1: and comfortable lounges for workers to take breaks. It's all
Speaker 1: with an eye on the long term and a fight
Speaker 1: for people that is only likely to get more intense
Speaker 1: in the years to come. Forcing entertaining crop professionals is
Speaker 1: the long pole and attention. It is a significant challenge
Speaker 1: right now is not going to be solved through one program.
Speaker 1: For Bloomberg News, I'm Sean Donnin. I'd like to pull
Speaker 1: out some of the broader lessons of that piece now
Speaker 1: with the director of the Aspen Economic Strategy Group, Melissa Khanni,
Speaker 1: who has written about America's people problem in the group's
Speaker 1: new publication, Economic Policy in a More Uncertain World. Now, Melissa,
Speaker 1: thanks very much for joining us. We're not only focused
Speaker 1: on demographics, and I know that that book on economic
Speaker 1: policy is talking quite broadly about the US and its
Speaker 1: economic challenges, but I think it would be good to
Speaker 1: start there. You know, what is the demographic challenge that
Speaker 1: the US is facing right now? The need for a
Speaker 1: robust workforce comes down to not just needing a large
Speaker 1: share of working age adults working, but it also comes
Speaker 1: down to needing a large number of working age adults.
Speaker 1: And the problem that the US is facing is that
Speaker 1: birth rates have been declineing for a sustained amount of
Speaker 1: time now in the US, well over a decade, such
Speaker 1: that we now find ourselves well below replacement level fertility
Speaker 1: for many decades. Women in the U s we're having
Speaker 1: more than two children on average per woman, and now
Speaker 1: that number is down to one point six six And
Speaker 1: so barring a large reversal in the decline in US
Speaker 1: birth rates or barring a large increase in the rate
Speaker 1: of immigration, in not too many years, the US working
Speaker 1: age population is going to start shrinking and whilst driving
Speaker 1: that slowing of the birth rate. So this is the
Speaker 1: big question, and it's actually harder to answer than we
Speaker 1: might think. Looking at a lot of the sort of
Speaker 1: explanations that are commonly thrown around. Childcare has become too expensive,
Speaker 1: people have too much student debt, religiosity is declining. We
Speaker 1: don't see any data support for the those sort of
Speaker 1: common explanations, and rather what we see is just a
Speaker 1: widespread decline across almost all groups of women across the country,
Speaker 1: across education level of recent ethnic groups. And so it
Speaker 1: just seems more like something universal such that young adults
Speaker 1: today are choosing to have fewer children than young adults
Speaker 1: in the recent past. And it could be some combination
Speaker 1: of widespread perceptions about sort of how costly it is
Speaker 1: to have kids in terms of how much other stuff
Speaker 1: you have to give up, how much of your own
Speaker 1: like freedom, you have to give up, how hard it
Speaker 1: is to combine raising kids and having a career, something
Speaker 1: that's sort of been a slow universal change across women
Speaker 1: in the US in such a way that now women
Speaker 1: in the US are finally reaching up to women in
Speaker 1: other high income countries who stopped having you know, two
Speaker 1: kids on average for person a couple of decades ago. Well,
Speaker 1: it's interesting is that the red birth rate is also
Speaker 1: coming with something that's been talked about a lot, especially
Speaker 1: since the pandemic, which has reduced labor force participation. America
Speaker 1: used to be much better than other countries on getting
Speaker 1: women into the workforce, but we seem to be less
Speaker 1: good at that now. So it's sort of odd in
Speaker 1: a way that women are we were not. We haven't
Speaker 1: seen continued growth and women in the workforce, but they're
Speaker 1: also not having kids. So if this is really interesting,
Speaker 1: So if you look across high income countries, sometime between
Speaker 1: nineteen eighty and the relationship between fertility overall fertility and
Speaker 1: female labor force participation rates flipped. So it used to
Speaker 1: be in countries that had higher rates of fertility, they
Speaker 1: had lower rates of female labor force participation in general.
Speaker 1: Like those two things were sort of substituting things that
Speaker 1: women could do. But if you work, working, you were
Speaker 1: having babies. Yeah, right right, And now what we see
Speaker 1: again across high income countries is basically like in all countries,
Speaker 1: about of women work, but the fertility rate ranges wide,
Speaker 1: like ranges a lot, and so it's you know, let's
Speaker 1: take Scandinavia. Scandinavia was always a place where it was
Speaker 1: perceived as being easier for women to combine work and
Speaker 1: having kids. There was more egalitarian sharing of household responsibilities.
Speaker 1: There's obviously a really um comprehensive welfare stage, there's generous
Speaker 1: leave policies, and women there were having, you know, at
Speaker 1: high rates of work participation and also high rates of fertility.
Speaker 1: Even in those countries. Now, uh, fertility is way down.
Speaker 1: So so fertility in Finland and Norway is far below
Speaker 1: what it is in the US. UH. And the thinking
Speaker 1: that we had to make it easier for women to
Speaker 1: combine work and having a family and that would keep
Speaker 1: fertility rates um elevated, that's all seemed to have come unhinged.
Speaker 1: Are there any proven ways in the rest of the
Speaker 1: world for for increasing birth rates. No, and so we
Speaker 1: can learn a lot from other countries, and that because
Speaker 1: in other high income countries their fertility rate really fell
Speaker 1: below replacement level in the eighties and nineties, a lot
Speaker 1: of those countries have been experimenting with two types of
Speaker 1: what's called them pro natalist policies. So one is like
Speaker 1: baby bonuses and tax credits, explicit government checks being sent
Speaker 1: to people when they had babies, and and often in
Speaker 1: explicitly uh, you know, ways to incentivize people having births.
Speaker 1: The evidence on those kinds of policies is that maybe
Speaker 1: some of them lead to an increase in births, small
Speaker 1: to modest in the short run, but none of them
Speaker 1: seem to have had a sustained effect increasing birth rates.
Speaker 1: The other types of policies are things like expanding parent
Speaker 1: to leave, having more childcare, etcetera. There the evidence seems
Speaker 1: to suggest that there's not much of a link between um,
Speaker 1: longer paid leaves, and fertility in any persistent way, a
Speaker 1: more of a timing effect, if anything, nothing that would
Speaker 1: be of the order the size that would need to
Speaker 1: bring us back to replacement level. Japan has basically quadrupled
Speaker 1: the amount of their GDP that they spend on a
Speaker 1: family friendly policies, childcare, early childhood education. Their fertility rate
Speaker 1: is still one point five, so far below replacement level,
Speaker 1: but it's sort of stalled out. My read of the
Speaker 1: evidence makes me very skeptical that policymakers can do anything
Speaker 1: it's going to turn things around. Um And so so
Speaker 1: in my mind, that sort of leads us to think
Speaker 1: about what are other ways we can replenish our working
Speaker 1: age population or keep the level of skilled workers at
Speaker 1: a high level. And I guess the sort of leading
Speaker 1: way you could do it is just by taking other
Speaker 1: countries people through immigration. Yeah, at least that buys you sometime.
Speaker 1: Right at some point, like a lot of these host countries,
Speaker 1: their fertility rates are falling as well. Um. Again certainly
Speaker 1: in high income countries. Um. But yes, so immigration is
Speaker 1: the obvious way to bring in working age people right away. Um,
Speaker 1: and you know, even targeted, so you're bringing in skilled
Speaker 1: working age people right away. But we know how complicated
Speaker 1: the issue of immigration is in the US, and so
Speaker 1: even while there might be obvious ways we could reform
Speaker 1: our immigration system so that we let in more people
Speaker 1: and we let in more skilled workers. That seems to
Speaker 1: be a very politically difficult thing to do in the US.
Speaker 1: But just to give us a sense of the numbers,
Speaker 1: and you may not have these on the top of
Speaker 1: your head, but I mean, there was a there's been
Speaker 1: a long period where a good chunk of US labor
Speaker 1: force growth was coming from immigration, um and certainly quite
Speaker 1: a lot of the birth rate was coming from sort
Speaker 1: of relatively recent immigrants. How is that shifted? How is
Speaker 1: the immigration flows doing right now for the US or
Speaker 1: the last few years compared to that previous period. So
Speaker 1: the annual that flows of immigrants has really fallen since
Speaker 1: right and some of that was a shift in our administration.
Speaker 1: Some of that than was COVID policy, And so we
Speaker 1: had over a million immigrants coming in the official numbers
Speaker 1: now or it's down to two hundred and fifty thousand,
Speaker 1: So there's a real deficit of immigrants too. So it's
Speaker 1: it's really this combination of a reduction in immigration, a
Speaker 1: reduction in birth rates and arising death rate because the
Speaker 1: population is aging, has led to US population growth being
Speaker 1: at its lowest level in recent history. I guess we
Speaker 1: should remember because as we are partly thinking about sort
Speaker 1: of competition between countries. The US is still relatively well
Speaker 1: off compared to China, which we saw just in the
Speaker 1: last week has its overall population shrinking, which is is
Speaker 1: different is in contrast to many other countries, they've had
Speaker 1: a really extreme a graphic shift. And it's sort of
Speaker 1: fascinating when you think about how for how long China
Speaker 1: had a one child policy, and then you know explicit
Speaker 1: policy goals of keeping fertility rates low, family size small,
Speaker 1: and now they're trying to implement all sorts of policies
Speaker 1: and subsidies to increase the rate um and and it
Speaker 1: turns out it's not so easy to turn back on
Speaker 1: right now. That yeah, and I guess your your point
Speaker 1: from before about we've learned from other countries trying and failing.
Speaker 1: You know, if this famously authoritarian command control country has
Speaker 1: still not been able to this is one thing that
Speaker 1: they can't force people to do, even with quite significant measures.
Speaker 1: That is, that is not a bit discouraging for those
Speaker 1: who are trying to devise these policies. So I just
Speaker 1: want to shift a little bit because I know also
Speaker 1: that the book that the Strategy Group produced was thinking
Speaker 1: about not just this challenge that the US economy faces,
Speaker 1: but the challenge of sort of maintaining innovation um and
Speaker 1: also helping people through the sort of technological transition as
Speaker 1: we have AI and all these things. So I want
Speaker 1: to get onto a little bit of that. I mean,
Speaker 1: because it's not just how many people you have. It
Speaker 1: is also about what they're doing and the efficiency they
Speaker 1: have and how they do it. How should we think
Speaker 1: about productivity and innovation in this context? If we've got
Speaker 1: few fewer people, we surely should be focused on getting
Speaker 1: more out of them. I should say, I generally like
Speaker 1: to be a half glassful and an optimistic person. But
Speaker 1: I'm going to bile on here. So we've got this
Speaker 1: demographic headwins um, and on top of that, we've had,
Speaker 1: now for many decades, a decline in you know, prime
Speaker 1: age mail employment. And then on top of that, as
Speaker 1: you're alluding to, we've had a decline in productivity, growth
Speaker 1: and business dynamism in the US. So what do I
Speaker 1: mean by that? We have fewer firm entries and exits,
Speaker 1: we have fewer young firms as a proportion economic activity.
Speaker 1: We have a greater dispersion in productivity, you know, across firms.
Speaker 1: So it's sort of like some market sector leading firms
Speaker 1: are are bigger, and there's just fewer, smaller dynamic firms
Speaker 1: that we usually think of as growth engines. Patents and
Speaker 1: investors are inclasingly clustered in large firms. So all of
Speaker 1: this is also it's also worrying and suggests that, you know,
Speaker 1: setting aside the issue of workers, we need policies and
Speaker 1: conditions and regulatory reform that really spurs innovation among firms.
Speaker 1: So there's both the workers side and the firm side
Speaker 1: where received struggling. Do you think the administration is moving
Speaker 1: in the direction on that? I mean, there was this
Speaker 1: sort of much touted Chips Act last year, very focused
Speaker 1: on education and training for science and sort of industrial
Speaker 1: policy approach. We also had the ridiculously named Inflation Reduction Act,
Speaker 1: which is also going to try and encourage lots of
Speaker 1: investment in clean energies. I mean, do you think that
Speaker 1: the administration is kind of pushing in the right direction
Speaker 1: on some of these policies. So yeah, So I think
Speaker 1: the sort of policy agenda from the past few years
Speaker 1: has been very encouraging in the sense that we also
Speaker 1: have the Infrastructure Bill, so investments in physical infrastructure sort
Speaker 1: of an obvious way for the US to try and
Speaker 1: increase our productivity UM and now, you know, industrial policy
Speaker 1: is famously hard to get right, and innovation policy is
Speaker 1: very challenging, so that it's often that the devils and
Speaker 1: the details and those kinds of things. But an emphasis
Speaker 1: and a recognition that we need to be putting money
Speaker 1: towards building talent, investing in you know, training stem workers,
Speaker 1: all of that I think is very encouraging. This also,
Speaker 1: I should say, before are all that UM as part
Speaker 1: of the Build Back Better proposal that you know didn't
Speaker 1: get enacted, there was a lot of investment in UM
Speaker 1: in youth and families and the kinds of stuff we
Speaker 1: were talking about earlier, like early childcare, early childhood education,
Speaker 1: and I have to say, UM, even though I don't
Speaker 1: think those things will meaningfully turn around fertility rates, investments
Speaker 1: in early childhood education are a clear way for us
Speaker 1: to build up our talent pool. We just have mounds
Speaker 1: of evidence that you know that has long term effects
Speaker 1: UM and so so that was very disappointing that we
Speaker 1: weren't able to make progress on spending more money on
Speaker 1: kids because they also you know, are crucial built to
Speaker 1: our talent pool going forward. Now, okay, so I have
Speaker 1: a question for you. As an economist, I mean the
Speaker 1: devil's world that kind of make formed last week, there
Speaker 1: was quite a loss of You can imagine these people
Speaker 1: who have cited about the US talking about industrial policy
Speaker 1: and investing in key industries and and and also thinking
Speaker 1: about talent in a kind of long term way. But
Speaker 1: the big kind of negative that goes along with that
Speaker 1: is this much more nationalistic approach to policy and what
Speaker 1: you might call a zero sum approach to sort of
Speaker 1: international competition that it's you know, my gain is another
Speaker 1: country's loss, and vice versa. So how do you think
Speaker 1: about that? Because I see in your report there's a
Speaker 1: lot of the traditional economic view that openness and innovation
Speaker 1: and trade is all. I mean, openness is good for
Speaker 1: being more productive um and those investment in the strategic industries.
Speaker 1: But it seems like we're going to invest in strategic
Speaker 1: industries but become less open. So how is that going
Speaker 1: to net out? Do you think? Yeah? So, you know,
Speaker 1: I struggle a lot with this As an economist, I
Speaker 1: truly understand the need to do more to protect US
Speaker 1: workers and and help the regions that have been hard
Speaker 1: hit by previous transitions. So, for example, when we you know,
Speaker 1: in the US dramatically increased imports from China, you know,
Speaker 1: that's great for most people, Prices go way down. This
Speaker 1: is a good thing, UM, But there were certain workers
Speaker 1: and certain regions that were hard hit, and our policies
Speaker 1: didn't adequately compensate those sort of you know, I hate
Speaker 1: to use the terms winners and losers, but you know
Speaker 1: what I mean by that, UM, And so I understand
Speaker 1: where the impetus for becoming more of a closed economy
Speaker 1: comes from. UM, but that's sort of a situation where
Speaker 1: everybody will be worse off. And so instead, you know,
Speaker 1: in my in my view, which would be sort of
Speaker 1: a standard economist view, I think is we need to
Speaker 1: remain open to trade, we need to remain open to
Speaker 1: global talent, and yet we need to do more to
Speaker 1: make sure that the sort of disparate you know, impacts
Speaker 1: of those of those activities, that we take care of
Speaker 1: the people who are left behind or who need to
Speaker 1: transition to different industries, who need to you know, redevelop skills,
Speaker 1: or just have their wages supplemented, or have some income
Speaker 1: support and so you know, I don't. I certainly don't
Speaker 1: think we should be doing things that lowers global innovation,
Speaker 1: raises US prices, and sort of makes us a less
Speaker 1: dynamic economy. Um, but I'm not, you know, just blase
Speaker 1: about saying no trade is good for everybody, and importing
Speaker 1: immigrants is good for everybody, and we just have to
Speaker 1: be honest about the trade offs, and our policies need
Speaker 1: to reflect them. I guess the final question, it seems
Speaker 1: an implication of of of your work and the work
Speaker 1: of your colleagues that we should expect as we get
Speaker 1: older and as populations eventually shrink, that we will we
Speaker 1: might become poorer as well, because the productivity will be
Speaker 1: less from being a smaller economy. Is that really the case?
Speaker 1: I mean, I sort of like to think if we
Speaker 1: have all this golden age of robots, we might all
Speaker 1: have superpowers and become very productive. Yeah, it's it's certainly
Speaker 1: not Um, it's not destiny, but it's uh, it's a
Speaker 1: possibility that we should be aware of and frankly a
Speaker 1: bit worried about. And so this, you know, this idea
Speaker 1: comes from um, the economic insight that people are actually
Speaker 1: the engines of idea generation and technological and medical advances,
Speaker 1: and so there's just this idea that it's not just
Speaker 1: you know, one person creates one more thing, and so
Speaker 1: if you have one fewer person, well you have one
Speaker 1: fewer things. But it's okay because income per person's days concept.
Speaker 1: The issue is if you have fewer workers overall, there's
Speaker 1: less specialization happening, there's less idea generation, and so actually
Speaker 1: what happens is income per person shrinks and living standards shrink.
Speaker 1: Now again it doesn't have to be that way, um,
Speaker 1: but that's a possibility. And so you know, if you know,
Speaker 1: you bring up, well, maybe robots can replace people and
Speaker 1: they can make these innovations. Maybe right, Um, so we
Speaker 1: might get richer, but the robots might be running the show.
Speaker 1: That would be a bit unfortunate. Still being image there,
Speaker 1: all right, well that's a great image to leave our
Speaker 1: audience with. Melissa Carnie, Thank you very much, Thank you
Speaker 1: so much. Now, Sean talked about the long term forces
Speaker 1: which have helped produce these real time labor shortages in
Speaker 1: places like Licking County, and we're going to have more
Speaker 1: on that in a minute. Also some discussion of whether
Speaker 1: the Biden administration is doing the right things to help
Speaker 1: us work has become more productive. But first I wanted
Speaker 1: to quit update on a shorter term mystery that has
Speaker 1: made the US labor shortage a lot worse since the pandemic,
Speaker 1: and that's the mystery of the seeing two point six million,
Speaker 1: that's roughly how many more Americans will be working or
Speaker 1: looking for jobs right now if the economy's labor force
Speaker 1: participation rate was the same as it was before COVID hit.
Speaker 1: You know, it's a hugely important question for anyone wanting
Speaker 1: to know what's going to happen to unemployment or inflation
Speaker 1: in America in the next year. And it's also pretty
Speaker 1: crucial for any business owner who is short on workers now.
Speaker 1: One of the most celebrated economists of his generation, Raj Chesti,
Speaker 1: has weighed in with a pretty interesting answer, and Bloomberg
Speaker 1: Wealth reporter Ben Stephnman had the story in Business Week
Speaker 1: about it. Ben, thanks for doing this late notice. I
Speaker 1: guess you should tell us quickly. First you know who
Speaker 1: rushed Chetti is and why the data he's used might
Speaker 1: be interesting in this context. Rush Jetty is a economist
Speaker 1: at Harvard. He has a research lab. They're called Opportunity
Speaker 1: Insights that he's founded with a couple of other academics,
Speaker 1: and he has really a team of people that pour
Speaker 1: through giant data sets two come to conclusions about what's
Speaker 1: happening in the economy. So he's done some great work
Speaker 1: on inequality over the years that has really got some
Speaker 1: big headlines. But when UM, when the pandemic hit, he
Speaker 1: and the rest of his team, which was dozens of people,
Speaker 1: mobilized UM and they built what they called an Economic Tracker,
Speaker 1: which used private data UM basically transaction data from private
Speaker 1: companies UM that we're willing in that moment to offer
Speaker 1: them some data feeds, and they used that to build
Speaker 1: basically it was a online tool to track what was
Speaker 1: happening in the economy down to the zip code level.
Speaker 1: And UM, this was really important in twenty if there
Speaker 1: was pandemonium in the economy, but we really didn't understand
Speaker 1: what was actually happening at the time. What we're talking
Speaker 1: about now is some new research using the same data
Speaker 1: set UM that really looks at where these missing workers
Speaker 1: are and and tries to use that private data in
Speaker 1: in another innovative way. And so where is that hole
Speaker 1: I mean I mentioned the two point six million are
Speaker 1: they what do we know about where they are in
Speaker 1: the workforce? I mean, I guess geographically, but also the
Speaker 1: kind of worker they are. When they look at their
Speaker 1: employment data, they're finding a big shortage of low income workers. UM,
Speaker 1: basically a drop in the pre pandemical low income workforce.
Speaker 1: So one in five, one in five low income workers
Speaker 1: that we have in effective before COVID has just disappeared. Yeah,
Speaker 1: and it's that is that quite that bad? Because some
Speaker 1: of those people have moved up are now making more
Speaker 1: money and are further up the income scale. But only
Speaker 1: about a third of the missing workers have been able
Speaker 1: to move up, and about two thirds are still the
Speaker 1: It just basically vanished. And um. They looked through a
Speaker 1: bunch of different scenarios and reasons why that might have happened,
Speaker 1: and they test various correlations. But the thing that was
Speaker 1: the strongest predictor of a missing a place that had
Speaker 1: a missing worker was a place that had the strongest
Speaker 1: shock in And so this goes back to Chetty's research
Speaker 1: in twenty What he found was that the low income
Speaker 1: workers that were hit the hardest by the pandemic were
Speaker 1: the ones who worked in the highest rent areas. Basically, professionals,
Speaker 1: wealthy people, affluent people change their spending patterns very rapidly.
Speaker 1: In March stopped going out and that caused this cascade
Speaker 1: of job losses and um business closures that impacted workers
Speaker 1: who worked in those neighborhoods particularly. Of course, everybody was
Speaker 1: affected across the entire economy, but if you compare the Bronx,
Speaker 1: which is a low income part of New York City,
Speaker 1: to um wealthier parts of Manhattan, Um, the difference was
Speaker 1: really stark there um in terms of the workers up
Speaker 1: in up in the Bronx were still doing okay, I
Speaker 1: mean they were, they were affected, but in wealthier neighborhoods
Speaker 1: all across the country there was this devastation among low
Speaker 1: income workers. And so basically to fast forward to or
Speaker 1: three years, what they found in this new research is
Speaker 1: that those are the places where the workers are most missing.
Speaker 1: And that suggests that something about actually losing your job in,
Speaker 1: and especially losing a low income job in, really scrambled
Speaker 1: people's lives and through them out of the workforce. Is
Speaker 1: there any sense that these people will have gone into
Speaker 1: the informal economy that they're now in the sort of
Speaker 1: being paid in cash or just do we have any
Speaker 1: sense of that where they might be. Well that these
Speaker 1: are probably the hardest people to track in the in
Speaker 1: the United States. These are people obviously at the margins
Speaker 1: of the workforce. Um. And so when I went out
Speaker 1: and did some reporting and tried to talk to people,
Speaker 1: I mean, there there were some interesting ideas, um that
Speaker 1: came back to me from business owners and from workers themselves.
Speaker 1: I Mean, one thing is that we're all three years older, um,
Speaker 1: since the pandemic happened. And you know, some of these
Speaker 1: low income jobs are really hard. For example, I talked
Speaker 1: to one person who worked in a kitchen. He he
Speaker 1: he's now fifty seven years old. He's like, he liked
Speaker 1: that restaurant job that where he was working before, but
Speaker 1: the restaurants now closed, and he doesn't trust another restaurant
Speaker 1: job to be as good and easy, especially now that
Speaker 1: he's fifty seven. That's hard work. Um. So and then
Speaker 1: the other thing that seems to have happened maybe is
Speaker 1: that in these expensive areas people have moved so um.
Speaker 1: You know, in a place like New York City, you
Speaker 1: might end up living an hour and a half by
Speaker 1: training your bus outside the city to get to your
Speaker 1: job in a place like the Upper West Side. Well,
Speaker 1: people just said, I'm not going to do that anymore.
Speaker 1: I'm going to move to North Carolina which is cheaper,
Speaker 1: or or or some other part of the country that's
Speaker 1: that's the less expensive. It's interesting that you mentioned the
Speaker 1: age element, and actually, in a bit in in a minute,
Speaker 1: we're going to get into a bit more of than
Speaker 1: the implications of an aging population before I let you go, though,
Speaker 1: I'm interested. I mean that you've come back to it
Speaker 1: various times, this this puzzle, Um, and I wondered when
Speaker 1: you came away from this research and talking to the
Speaker 1: people that you talked to on the ground, what do
Speaker 1: you think the lessons might be for the future. I mean,
Speaker 1: you know, obviously the FED is sitting there wondering whether
Speaker 1: any of these people are going to come back, and
Speaker 1: whether as a result, we might have a bit more room,
Speaker 1: um in the economy, in the labor force than it
Speaker 1: currently looks like. When you just look at that very
Speaker 1: low three point six percent unemployment rate, do you do
Speaker 1: you feel these people are going to come back or
Speaker 1: they're going to pop up in some other part of
Speaker 1: the economy. You know, I think part of the problem
Speaker 1: here is that this is a long term problem of
Speaker 1: labor force participates in the United States. UM, it's especially
Speaker 1: for low income workers. UM, childcare, affordable housing has just
Speaker 1: gotten really difficult. The most economically dynamic parts of the
Speaker 1: country are the places that where workers are needed. So, um,
Speaker 1: it's hard for people to afford to go to a job.
Speaker 1: And the reasons for that are long term. You know,
Speaker 1: there's not enough housing supply, there's not enough affordable childcare.
Speaker 1: And so this is this problem decades in the making,
Speaker 1: and it's probably going to require decades of policies that
Speaker 1: could could address that. And we basically need policies to
Speaker 1: create a labor supply increase in this country and get
Speaker 1: more for example, parents or sick people or older people
Speaker 1: comfortable getting to get getting in the workforce. And that
Speaker 1: is a battle that many countries are raging right now.
Speaker 1: Ben Stephen, and thank you very much. You're welcome. That's
Speaker 1: it for this season of Stephanomics. We're officially back in April,
Speaker 1: but I have a sneaking feeling I might have some
Speaker 1: bonus interviews for you before then, so keep an eye
Speaker 1: on this feed. And of course you can keep getting
Speaker 1: informed on economic news and views, and much else on
Speaker 1: the Bloomberg Terminal website or app. This entire series was
Speaker 1: produced by Yang Yang, Summer Sadi and Mangus Henrickson, with
Speaker 1: special thanks to Sean Donald, Ben Stevenman, Melissa Carney, and
Speaker 1: Kelly Friendly. Mike Sasso is the executive producer of Stephanomics