Investing in People to Grow the Economy
Recent economic data shows that growth in the U.S. slowed dramatically in the third quarter. After growing at a torrid 6% in the first part of the year, GDP downshifted to just above 2%. This summer slowdown has been attributed to supply chain bottlenecks, the surge in the Covid delta variant, and labor shortages brought on by the Great Resignation.
On the positive side, the latest jobs report from the Department of Labor shows that hiring is gaining speed, with more than half a million jobs added in October. While labor force participation is above the pandemic low, it’s still far below pre-pandemic levels, with Black women and Latino men among the groups that had a drop in participation.
The slowing in overall growth is evidence that economic prospects for all of us can be impacted by changes in almost any portion of a complicated modern economy that few of us fully understand or control. Federal and state governments are undertaking a variety of initiatives to address key issues, such as working with private industry and other countries to break through supply chain bottlenecks, and continuing to increase vaccination rates to reduce the economic impacts of COVID-19.
We all hope the recent jobs report indicates that these and other programs are having the desired effect and that rapid growth returns. Even if growth accelerates, and certainly if it does not, the alternating state of the economy this year might make us curious to know what other systemic changes could lead to better long-term outcomes. Fortunately, there are a few levers that can improve economic outcomes for everyone. Surprisingly, these levers are as social as they are economic. As we search for solutions, here are examples that may provide food for thought….
A study by Moody’s Analytics found that increasing college completion rates can have a beneficial impact not on only the graduates themselves but on the economy at large. Unfortunately, only about 60% of students at four-year colleges complete their degree within six years. However, as the education level of the workforce rises, unemployment goes down, and incomes and output go up. Eventually, the economy is more productive, and employment and GDP are larger. Economic growth could be as much as 2% higher, according to Moody’s. Therefore, getting more students to finish college is a goal with multiple payoffs.
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Next, striving for wealth and income equity would also boost our economy. McKinsey found that closing the racial wealth gap would have a positive impact not only on Black individuals and communities, but on the economy as a whole. The firm estimated that the racial wealth gap’s dampening effect on consumption and investment will cost the U.S. economy between $1 trillion and $1.5 trillion through 2028. Other studies have found that if women received equal pay with comparable men, poverty for working women would be reduced by half and the economy would add hundreds of billions in wages and salary income to the economy.
Finally, Moody’s Analytics recently reported that increasing racial integration in society would make our economy stronger. Long-term economic growth is significantly enhanced in communities that are more integrated. Researchers at the Urban Institute have connected racial segregation to less educational resources, lower educational attainment, and thus reduced incomes of Black families. Similarly, the research institute New America has focused on the links between segregation, access to credit, and economic performance. According to last month’s report from Moody’s Analytics, “If communities across the country were to more fully integrate racially so that they were comparable to the nation’s most integrated communities, we estimate that the nation’s real GDP growth over the next decade would increase from 2.4% to 2.7% per annum.” It’s no wonder they say this would be an economic game changer.
In short, to grow the economy for everyone, we must invest in people and build a more equitable society by improving education levels, reducing unemployment and increasing wages for lower-paid workers.
The potential benefits are clear, broad and long-lasting.
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Sales Manager at TNB Doors INC.
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Ultrasound Technologist at Arthritis & Rheumatism Associates PC
3 年Not if they look like cardboard men
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3 年While the importance of a college education can not be ignored we must not remain blind to our past errors. For decades our education systems have ridiculed, demonized, and devalued the trades. Simultaneously Hollywood and marketing firms have done a very good job of promoting lifestyles that are not obtainable nor sustainable for most individuals. In doing so they have destroyed American family values and repainted the picture of what true success looks like. The economy will be stronger and more stable when we put equal amounts of effort into promoting both a college education and skilled trades training. While also reeducating our children about what true success looks like. It is not the size of our bank account or the material possessions that should define us but instead it should be the strength of our character.
Mothers Against Gun Violence
3 年The failure of econmic growth is due to politicans' greed. Regardless of your political view; We need to vote many of our congressional leaders out and fairly reset the electorial map to eliminate these pompous, elitist, self-absorbed taxpayer salary paid (welfare politicians) out of office and start anew. And I did not touch the subject of their campaign contributions. We may need to eliminate the supreme court justice life long appointment. Especially if they continue to appear to participate in partisan political rulings instead of exercising the law. We all agree that we want a true democracy.
Investment Banker - Raising Capital / Revolutionizing Business Operations. Author & Founder / President of Biltmore Savings Consultants ??????
3 年So working to increase education, equity in pay, diversity and inclusion in communities, will be good for the collective USA? Hmm ??- this has been proven in business, so makes complete sense Roger W. Ferguson, Jr. Thanks for sharing. Hope all is well.