Job Growth Doesn’t Automatically Create Prosperity

Joe Guzzardi
March 26, 2016
As seen in:
Baraboo News Republic
Newark Advocate
San Marcos Daily Record

Last month, the Brookings Institute published an economic analysis titled “Metro Monitor” that introduced a new barometer to measure success in the United States’ major cities that includes growth, prosperity and inclusion. In other words, a city’s overall growth and prosperity may not include all individuals, but just the most highly paid and prosperous.

Some cities, like Austin, Raleigh and Nashville, are purring along. Jobs are more plentiful, and aggregate wages are rising. Other metropolitan areas, including Washington, D.C., are in a profound, decades-old economic slump with little immediate chance for relief.

The surprise in the Brookings study isn’t that there’s so little inclusion in cities like Los Angeles and New York, which have small concentrations of massive wealth. The researchers’ unexpected finding was that even booming cities with more jobs and higher wages lag — in some cases, substantially — on inclusion.
 

What’s crucial about the Brookings report is that the presidential hopefuls, past and present, insist that growing the economy will improve the standard of living nationwide, and will include everyone — the poor, the middle class and minority Americans.

House Speaker Paul Ryan recently told the Wall Street Journal that “the best anti-poverty program is economic growth,” the so-called rising tides lifts all boats concept. Failed presidential candidates Jeb Bush and Sen. Rand Paul touted the same approach. Bush said that when the economy gets going, “so many challenges could be overcome.” Paul, appealing to the minority voter, urged African-Americans to reconsider the Republicans’ traditional platform that boosts economic growth since it would help lift them out of poverty.

Chad Shearer, a senior Brookings analyst and the report’s co-author, told the Washington Post that the study shows that “growth and prosperity alone are not enough to improve outcomes in inclusion.” Shearer pointed specifically to D.C. that has one of the highest median incomes and median wages, but also the highest disparities between whites and blacks.

Brookings’ evidence disputes Ryan and casts doubt on the often-stated theory that more immigration grows the economy and helps American workers. On inclusion, cities with extremely high immigration — Los Angeles, Chicago and Phoenix — ranked toward the bottom. Las Vegas scored 86th on growth, 100th on prosperity and 97th on inclusion

Nobel Prize-winning economist Paul Krugman explained immigration’s effect on Americans as it relates to Brookings’ prosperity factor: “Immigration reduces the wages of domestic workers who compete with immigrants. That’s just supply and demand: we’re talking about large increases in the number of low-skill workers relative to other inputs into production, so it’s inevitable that this means a fall in wages.”

Congress adds one million legal, work-authorized immigrants every year even as the evidence mounts that the policy is neither feasible nor sustainable. Curbing immigration should be a top priority in the presidential election because it would allow working Americans a larger share of the prosperity pie, and accelerate inclusion.