SOURCE: Milken Institute

Milken Institute

October 21, 2016 09:00 ET

In an Era of Rapid Globalization, Two Ideas for Reducing Job Insecurity

In New Milken Institute Review, a Concrete Response to Anger of Working-Class Americans

LOS ANGELES, CA--(Marketwired - October 21, 2016) - In an article in the Milken Institute Review, Robert Litan of the Council on Foreign Relations flatly rejects protectionism, which he sees as a dead end in a world economy irreversibly dependent on trade for prosperity. But he offers initiatives that could make a big difference in the lives of middle-income Americans who rightly fear for their jobs. One is universal wage insurance that would replace a portion of income lost when a displaced worker takes a lower-paying job. The other: loans for job retraining in which repayment is linked to gains in income.

"It is far too easy to slip off the economic ladder and never fully recover," Litan notes. "To manage the consequences of the sorts of economic displacement that seem inevitable, we need smarter government -- not less of it."

Also in the latest Milken Institute Review, and available at MilkenReview.org:

Jason Furman, the chair of President Obama's Council of Economic Advisers, offers a rare glimpse into the difficulties of analyzing macroeconomic data and using it to predict growth, unemployment and inflation. "While we no longer must cope with the information void that policymakers faced in the 1930s, the mountain of data available creates its own problems," he writes. "Chief among them is that we can sometimes ask too much of the data while doing too little to put it in context."

Ron Haskins, the co-director of the Brookings Center on Children and Families, rebuts the conventional wisdom that partisan politics has blocked all cooperation between Congress and the Obama White House, and offers a menu for possible policy collaboration on social issues after the election. "It would be Pollyannaish to pretend that business as usual has not been unusual in Washington, or that the partisan divide hasn't taken a major toll on the quality of government," he acknowledges. But he focuses on a number of issues -- with early childhood education highest on the list -- where common ground could still be found.

Ed DeMarco, a senior fellow at the Milken Institute and the former acting director of the Federal Housing Finance Agency, concedes that a combination of inertia and interest group politics makes it very difficult to end Washington's obsession with maximizing home ownership. But he argues that the vast public resources committed to subsidizing private housing could be redirected toward building equity rather than facilitating ever-riskier borrowing.

"It's pretty clear that we've been sidetracked into policies that make the mortgage market bigger and more volatile," he writes. "It's equally clear that we've strayed far from the broader public interest -- and that the route back lies in building equity, not debt."

Ed Dolan, creator of the eponymous blog on economic literacy, takes a different tack in asking what could be done to help American workers displaced by international trade. Rather than (or in addition to) helping them out with cash or retraining, he focuses on removing impediments to going where new jobs are plentiful. ­

Among the most significant: occupational licensing restrictions designed to protect incumbents from competition, subsidies aimed at steering Americans toward owner-occupied housing that is immensely costly to turn over, forced disclosure of criminal records that make it very difficult to switch jobs.

Charles Castaldi, a former NPR correspondent in Latin America, revisits Bolivia for an update on how the country is coping with its deep ethnic divisions -- not to mention the rule of Evo Morales, the populist president who takes every opportunity to thumb his nose at the former colonial powers. "The initial take in Washington was that Evo was cut from the same strongman cloth as Hugo Chavez in Venezuela, and was sure to drive the economy (further) into ruin," Castaldi writes. "In fact, this government boasts an economic track record that is the envy of its neighbors."

Robert Looney, an economist at the Naval Postgraduate School in California, offers a post-mortem on Brazil's latest adventure in flying too close to the sun. "Brazil is a land of immense economic promise and immense disappointment," he writes. "It is also becoming an icon of the reality that shortcuts to development, especially development that is subject to the middle-income trap, are deeply problematic."

In an excerpt from The Euro and the Battle for Ideas, a new book by Markus Brunnermeier, Harold James and Jean-Pierre Landau explain the dysfunction of the Eurozone in terms of the diverging economic cultures of the member states.

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