Greg Ip of The Economist does an excellent job of presenting the elite consensus view of what is wrong with the American economy. There is a lot of truth to it, and a lot that is missing. The missing part, I would suggest, is an acknowledgment of the changing demographic composition of the population.
An increasing share of our working age population is drawn from post-1965 immigrants and their descendants — I am part of this wave myself. College-educated migrants and their children have tended to fare fairly well. Non-college-educated migrants and their children have tended to fare less well, particularly as the native-born population has upgraded its skills, albeit less quickly than would be ideal. This is not the entire story, and it’s almost certainly not most of the story. But it is a big part of the story of what is happening to the U.S. labor market.
It would be unfair to lay this all at the feet of American politicians: widening inequality and the decline of middle-class manufacturing jobs is a global phenomenon that vexes governments everywhere. Yet this does not excuse American governance for making matters worse. There are lots of things it could do to improve the ability of and incentives for American companies and workers to innovate and grow, whether it’s taxing fossil fuels, giving more green cards to foreign scientists and engineers or simplifying the tax code. These days, however, that seems a fantasy compared to more prosaic demands such as, don’t shut down the government, starve critical government agencies of funds or default on the national debt. If America is going to hold on to its technological mojo, it needs all the help it can get.
I agree with many of Ip’s prescriptions, though I’m hard-pressed to see how taxing fossil fuels will facilitate job growth and it may well stymie certain kinds of innovation that are at least as valuable as the kinds that Ip hopes to cultivate. But in describing failures of American governance, is it not a glaring omission to exclude the fact that U.S. public schools are plagued by work rules that make productivity improvements essentially impossible to achieve? And when we combine this fact with the changing demographic composition of student populations and rising rates of family disruption, does this failure of governance become even more pressing?
Notice that Ip thinks it’s very dire indeed that we “starve critical government agencies of funds” — yet he doesn’t find it worthy of note that a wide range of public sector agencies spend the funds they do receive very badly?
I obviously have a dog in this fight. As a post-1965er, born in New York city in late 1979, I am inclined to believe that the post-1965 has been and can be a boon to this country. But broken public institutions are making squandering the potential of millions of new Americans, and the brokenness isn’t primarily a function of a lack of funds.