It has been two decades since the U.S. enjoyed sustained economic growth above 3 percent, and it turns out that a rising tide really does lift all boats.
The New York Times reports:
The least educated American workers, who took the hardest hit in the Great Recession, were also among the slowest to harvest the gains of the recovery. Now they are a striking symbol of a strong economy.
The unemployment rate for those without a high school diploma fell to 5.1 percent in July, the Labor Department reported Friday, the lowest since the government began collecting data on such workers in 1992. At the economy’s nadir in the summer of 2009, the unemployment rate for high school dropouts hit 15.6 percent, more than three times the peak unemployment rate for college graduates. …
‘As economists, we worried these workers would be shut out forever,’ she said. ‘But the long duration of the recovery has pulled them back in. As the economy adds more jobs, employers have had to dig a little deeper.’
This may be good news for unskilled workers, though I can assure that it is not the greatest news for employers, because by the time we get down to the last five percent of the dropouts, we’re talking about the dregs of the labor market. Some workers have such low skills and poor work habits that it is very hard to integrate them into a productive enterprise, and you have to be pretty desperate to want to try. Here’s the sort of thing we’re talking about.
Until recently at Steel Ceilings in Johnstown, Ohio, the company’s president, Rick Sandor, insisted on a couple of years’ experience in metal fabrication before considering applicants. But he’s had a harder time lately finding workers for his company, where shifts run from 5 a.m. to 2 p.m. and temporary positions start at $14 per hour.
He now settles for candidates who show mechanical skills, like carpentry or heating and cooling repair. Mr. Sandor is willing to waive the requirement for a high school diploma as well and has even hired applicants with what he terms ‘minor’ prison sentences. ‘If a person was truly trying to get their life back together, we thought it would be helpful to offer them a job,’ he said.
Incidentally, this also gives the lie to the conventional wisdom about widespread automation causing “technological unemployment” — the idea that people with lower skills can’t find work because robots have taken over their jobs. Where are the robots now?
This was always wrong because of the deeper truth behind the maxim that a rising tide lifts all boats. The economic principle behind this is Say’s Law of Markets, which holds that supply constitutes demand. In this case, the total supply of wealth created by the economy’s productive enterprises constitutes the demand for labor. As production grows, the demand for labor increases.
Hence the phenomenon of a rising tide — in this case, economic growth varying around 3 percent (estimated at 4.1 percent in the second quarter of 2018) — lifting up those on the bottom of the labor market, who were hit hardest by the Great Recession.
How much of this can President Trump take credit for? Certainly, he has benefited from the economy’s recovery from the financial crisis, which was already complete before he came into office. But under President Obama, the economy “recovered” to relatively slow growth. There is a good case to be made that under Trump, growth has been accelerated by the tax cuts pushed through Congress and his deregulatory efforts, which have so far had a big enough impact to offset the damage from his trade war. It’s not as good as Reagan’s “morning again in America,” which saw five straight quarters of growth above 7 percent, but it’s better than anything we’ve seen in a long time.
One of the rules of politics is that presidents tend to get credit for the economy, whether they deserve it or not. So we are seeing somewhat higher approval ratings for Republicans among minority voters, including Hispanic voters, than you might expect given the message the president likes to send on how he feels personally about Hispanic immigrants. Sometimes low unemployment and a lot of economic opportunities speak louder than anything else, so one of the boats that might get lifted by economic growth is Donald Trump’s. Unless, of course, it springs too many leaks from scandals involving all of the terrible, no good lawyers and advisors that Trump hired.
Politics aside, there is a larger lesson here. The main reason we haven’t had strong economic growth for so long is that so many politicians don’t really want it, or at least they don’t want it as much as they want something else — regulations, welfare spending, “fair trade,” or a crusade against “inequality.” But the periods when we do have strong growth serve to remind us just how many problems it solves, just how many boats it lifts — and just how much we need it.