COMPUTERS, GLOBALIZATION, AND THEAMERICAN WORKER: WHICH POLICIES WILL CREATE JOBS IN THE FUTURE?

Chinhui JuhnHenry Graham Professor of Economics

University of Houston

I. SOME BAD NEWS

Trend in Civilian Employment has Reversed 5

56

06

5

1950 1960 1970 1980 1990 2000 2010

Employment to Population NBER Recessions

Civilian Employment to Population Ratio

Employment is Falling for Men, Especially Among the Less Educated

60

70

80

90

100

1970 1980 1990 2000 2010year

Less than High School High School GraduateSome College Bachelor's or more

Employment to Population Ratio for Prime Aged Males

Labor Share of National Income is Falling

And the Dynamism?

John Haltiwanger, “The U.S. Labor Market is Still Anemic Two Years After the End of Recession”

II. TWIN THREATS

• Technology• Globalization and Trade

Computers and Tasks

Routine Non-Routine

Analytical Record-keepingCalculationRepetitive customer service (e.g. bank teller)

Forming/testing hypothesesPersuading/sellingManaging others

Manual Picking and sortingRepetitive assembly

Janitorial servicesHome health careMotor vehicle operators

Autor, Levy, Murnane, Quarterly Journal of Economics, 2003, Table 1

And now there is the Google Car…

Globalization and Trade

Globalization and Trade

• Since 1990, and especially since China joined the WTO in 2000, low-wage country share in U.S. imports grew from 3% in 1991, 12% in 2007

• In a recent paper, Autor, Dorn, and Hanson (2013) estimate that import competition can explain up to one-fourth of the decline in U.S. manufacturing employment 1991-2007

• Alan Blinder estimates that close to 30% of U.S. jobs are potentially off-shoreable (World Economics, 2009)

IV. WHAT POLICIES?

• Education• Immigration

Early Childhood Programs Work

• The Perry Program in the 1960s showed that intense intervention yields high return (6-10% return per dollar cost (Heckman, et. al, 2010))

• Head Start, a large-scale public program, is also effective• Closes the test gap by about 1/3 when measured at age 5• Long-term effects on high school graduation and crime• If include reductions in crime and welfare benefits, easily pass the

cost-benefit test

• Often the impact is on non-cognitive skills such as motivation, self-esteem, locus of control

Return to Investment in (Human) Capital

V. SURPRISING BUT IMMIGRATION CAN HELP

International Migration is on the Rise

High Concentration of Skilled Immigrants in STEM

Immigrants Boost Innovation and Job Growth

• Immigrants patent at higher rate than natives (Gauthier-Loiselle and Hunt (2010))

• Raising the cap on H-1B visas boost patent activity (Kerr and Lincoln (2009))

• Immigrants are more likely to start their own businesses (Fairlie 2010)

• Forty percent of Fortune 500 companies were founded by immigrants or their children (Partnership for a New American Economy)

What about Low Skilled Immigration?

• Evidence is mixed with some finding small to no impact on natives and others finding larger effects

• Key question is whether immigrants substitute for or complement natives

• More recent work that takes account at detailed occupation level where immigrants and natives work find that immigrants complement natives (Peri and Sparber (2009)) and actually raise native wages

To Conclude…

“If you invest in the American worker, the jobs will come.”