Cecilia Elena Rouse, dean and Lawrence and Shirley Katzman and Lewis and Anna Ernst professor in the economics of education at Princeton University's Woodrow Wilson School of Public and International Affairs, discusses U.S. economic security and the future of the American workforce.
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Dean and Lawrence and Shirley Katzman and Lewis and Anna Ernst Professor in the Economics of Education, Woodrow Wilson School of Public and International Affairs, Princeton University
FASKIANOS: Good afternoon from New York and welcome to the CFR Academic Conference Call Series. I’m Irina Faskianos, vice president for the National Program and Outreach here at CFR.
Today’s call is on the record, and the audio file and transcript will be available at CFR.org/Campus if you would like to share it with your colleagues.
We are delighted to have Cecilia Rouse with us today to talk about the future of the American workforce. She is the dean of Princeton University’s Woodrow Wilson School of Public and International Affairs, the Lawrence and Shirley Katzman and Lewis and (Anna) Ernst Professor in the Economics of Education, and professor of economics and public affairs. She’s the founding director of the Princeton University Education Research Section, a member of the National Academy of Education, and a research associate at the National Bureau of Economic Research. She was an editor of the Journal of Labor Economics and is currently a senior editor of The Future of Children. She served in the White House at the National Economic Council, as well as served as a member of the President’s Council of Economic Advisers. She also served on the CFR-Sponsored Independent Task Force on “The Work Ahead: Machines, Skills, and U.S. Leadership in the 21st Century,” and is a member of our Board of Directors.
Dr. Rouse, thank you very much for being with us today. We really appreciate it.
From your work on this CFR task force, can you give us a little bit of an overview of the findings and recommendations on the workforce and its future?
ROUSE: Sure, I’d be delighted to. And thank you all for joining me today. I look forward to our discussion.
So just as a—as a brief introduction, this work was motivated out of a very deep concern that the pace of change in the U.S. labor market was—has been very rapid; and that was placing a lot of stress on individuals, on their families; and that one could see this playing out in terms of the polarization in our politics, you know, one might argue the increase in the opioid—the opioid crisis; but that if we didn’t really come to grips with the speed of technological change and globalization as well—but the task force was primarily focused on technological change—that this was not going to end well for us. We put it that way.
So the task force believed that at the—or, you know, what we discussed was at the core there were two phenomena. One is the rapid pace of technological change, which is basically that machines and computers are replacing workers, especially those workers who work on jobs that require rather routine tasks. I think some of us who have jobs that aren’t quite as routine are getting worried that eventually our jobs will be at risk as well, and I think everybody recognizes that with advances in artificial intelligence the possibilities for what we can do with technology will encroach on and touch on almost every job in our country.
And the fact that the relationship between employers and employees has been changing fundamentally. And by that what we were referring to was that it used to be that workers—and this is a little bit of a gross generalization—but there was—workers would have more of a lifetime job. So it’s always been the case that workers in their twenties would go from job to job as they were learning more about their own skills, their own preferences, and what the right match with the right occupation, with the right career, with the right employer might be. But then starting around age thirty or so, workers would settle into what would become essentially a lifetime job. That means that they would work full-time, full-year with an employer, start at the bottom and work their way up, and spend their career with this one employer.
Over the past fifteen, twenty years what we’ve been seeing is that, yes, it—workers in their twenties still go from job to job, and maybe that’s even increased some, but what has become really different and what has become more of a concern is that even into their thirties the job tenure has been getting shorter—meaning the amount of time that a worker works for one employer has been getting shorter—such that the idea of a lifetime job is disappearing and that workers today can expect to work for multiple employers. The reason that matters is because we have bundled economic security and many of our benefits with employment, and I’ll come back to that as a minute—in a minute.
So what this means is that employment no longer guarantees economic security, nor does it mean opportunity for far too many Americans. And, as I just mentioned, our safety net—meaning your retirement benefits, importantly, and increasingly being discussed health insurance benefits, but even sick leave, vacation, unemployment benefits are all tied to having a job. And yet, those are all events that are going to happen for most people. Everybody gets sick. And when it’s—you’re sick without sick leave, it can be devastating for you and your family.
So what we have in this country is, yes, we’ve got the well-documented increasing wage and income inequality, but when you add in—measures of savings and prior accumulations, and the wealth inequality is getting worse—but when you add in these employment benefits, inequality is even greater. So we have increasingly a society of haves and have-nots.
So what the task force did is we didn’t have grandiose visions that we can—we were going to, sitting around the table, solve this problem. This is nearly an existential crisis when it comes to the U.S. But what we sought to do was identity some of the key issues, to first of all come to an understanding of what we thought the major findings are about our labor market, and what are some of the key directions for action. And we very much recognized that this problem is large. It’s all-encompassing, which means that it’s going to require action from actors of all sectors of our society. We need governments at all levels—federal, state, and local. We need businesses, educators, other institutions to step up, help us develop ways to adapt to these challenges.
Yes, we identified some specific ideas. But really, what we thought we were providing was a foundation, a direction, a sense of urgency around these issues. And our culminating recommendation, which—about which there was much debate, is a national commission. The reason why I was saying that there was much debate is because that can sound like it’s a bit of a letdown—oh my gosh, at the end of all this work, you just have a commission—but it really recognizes that this is an important priority and that we will not solve it overnight. There must be a sustained focus on this problem. We have to be willing to be bold, to take some risks, to make—to make—to make mistakes, to try things that may not work, but that it’s imperative that we act.
So let me just quickly go through our seven major findings and then some of our recommendations just at a broad level before I turn—open it up for questions.
So the seven major findings were, first, that accelerating technological change will have a profound effect on our labor market. The most dramatic estimate is that half of all jobs could be replaced by automation. I think the task force members all agreed that that was probably the upper bound on what we might see, but nonetheless we can expect that automation will have—will influence almost all jobs. The Council of Economic Advisers actually estimated that eighty percent of the jobs that pay less than $28 an hour will be replaced with automation. So what that really highlights is that the increasing technological change is not being equally distributed across our workforce, but rather it’s low-income workers that are most at risk.
We also found that we must embrace technological change because that is part of the foundation for growth. Our economy has never been stagnant. We have evolved always. We were an agricultural economy; we moved to service. We were in—we had industrial in between. And so we have always evolved, and we need to embrace that evolution, but that we—it’s important that we be open to ways of addressing it, and also recognizing that trade and immigration are going to be vital to maintaining our technological leadership, so if we’re going to stay ahead there.
We also found that strong economic growth that leads to full employment, which is essentially where we are now, although it has been—has traditionally been the way in which we raise wages for all Americans. I think what we’re seeing today is that we’ve got—we’re pretty much back to full employment. We haven’t yet seen the robust wage growth. This is a bit beyond the task force because I think we were still hoping to see some wage growth, but it’s a question that many economists have been wrestling with: Why aren’t we seeing more robust wage growth, given that, at least when it comes to employment, the economy is quite healthy?
We found that it was a lack of accessible educational opportunities—that we would need more educational opportunities, especially those that are very clearly linked to the labor market, and that with increased accessible opportunities it would help more Americans have more—you know, benefit more from their educational investment, shall we say.
We also found that our efforts to help displaced workers are woefully inadequate. We’ve got an unemployment insurance system which is really designed to help workers go from one job to the next job, so it’s not designed for workers who are displaced because their industry—because of sectoral changes, so that their industry is just in decline and it’s just not a matter of going from one coal mining company to another coal mining company, but you’ve got to find a completely different occupation altogether. So our unemployment system was not designed for that.
Similarly, our other—our other policies and programs to help displaced workers are very narrowly targeted on workers whose jobs have been displaced due to trade. So this means that workers whose jobs have been displaced due to technological change are not necessarily covered.
As a result, what we’re seeing is that, you know, we have parts of the country where there’s very little economic activity and where there are, you know, many people who are—have been without work for so long they’re not even in the labor market anymore. And we see that many workers have rolled onto Social Security disability insurance because that becomes, in a sense, a safety net for people who have worked and may have, you know, back injuries and other injuries as a result of the hard work that they’ve done over many years, but which if there were a good job in their area they would nonetheless find it worthwhile to get the work. But given that the work is not really available and they don’t see it in sight, they roll onto our Social Security disability insurance rolls. And once you’re on, workers tend not to get off because if they get off it’s hard to get back on again.
We also see that too many jobs are going unfilled. Some of this is due to restrictions in our own labor market, such as doing—such as credentialing, such as occupational licenses. We’ve seen a decrease in mobility for various reasons, which we can go into, housing crisis. I also think that even the rise of two working families makes it very difficult. If one—if one partner loses a job and needs to find another job, the family may not find it worthwhile to move because they want to at least maintain the one job that they have. And so that decreased mobility means that we have some sectors of the—some areas in our country where there’s much economic activity and other areas where there’s not, and it’s just harder for the workers who are where there’s not a lot to move to where there is—are more job opportunities.
And finally, an aspect which I personally think is very profound. You can—if you read the report—I know it’s long, but if you read the report I think you’ll see some suggestions—others kind of believe this as well, but I think it’s easy to undervalue—is that our current workplace benefits—and as I mentioned before, sick leave, retirement, health insurance—are really too often available to only full-time, full-year employees, and they have not been adapted to our changing workforce. About sixteen percent of our workforce are in what we call alternative work arrangements, meaning they’re independent contractors, freelancers, temporary employees. The work in the gig economy, such as for Lyft. And many of these workers don’t have access to employment benefits.
Another group of workers, about 7.5 million workers, hold more than one job. So many of these jobs are part-time. Often part-time workers also don’t have access to these benefits.
And that’s because in the rise of the development of these kinds of benefits in the 1940s it was tied to employment. And so we’ve got to find a way to either decouple the provision of these benefits from employment, as you see in many countries where it’s more centralized, or we have to find a way to make them more portable/expandable so that workers, even if they are working part-time, can get benefits from, say, more than one employer, that they can get access to them. So that’s a big source of conversation. I think that—in my view that goes a little bit to the existential question for the U.S. about how we provide these kind of benefits.
And so the recommendations were guided by three principles. One, we believe that the—any approach we take—and there’s not going to be just one approach, but all of the things that we try need to be flexible, that there’s not going to be one size fits all across the country, across sectors, you know, across different kinds of workers. So we need to be flexible.
We need to be—they need to be transparent. And by that we’re largely meaning that we should be using data to the—to the greatest extent possible, whether it’s to better understand what the opportunities are in a local area to match employers and potential workers, and to use data to understand what’s working and what’s not working so that we don’t spin our wheels, you know, following a policy which is really not helping that many workers, but we can pivot and learn how we can improve and try new things.
And finally, we have to recognize it will take resources to address the challenge. And so almost all of—many of the proposals require resources, and that as a country we need to come to terms with that because that will be important.
So our recommendations are the—among the following—these are the big buckets—that government should adopt an explicit goal of creating better jobs and career paths for Americans. And by that we’re really saying this needs to be a major focus for this country at all levels of government, and that if that is part of the goal then we can start to design our policies in a very strategic, mindful way.
That we—the U.S. should remain a leader in technology and innovation. And so that means that we need to do aggressive intellectual property protection. We should be trying to raise labor standards around the world so that we’re not having a race to the bottom, that we insist on labor standards in our trade agreements. That’s just a couple of ideas there.
That government should implement policies aimed at maintaining strong growth and demand for labor, including encouraging ways and finding ways to encourage employers to have high-road workplaces. And by that we mean these are employers that are offering their employees decent pay, they’re helping their workers invest in training or what we economists call human capital in terms of scheduling their work so that they’re respecting the complex lives of their workers, and that they’re paying benefits. And that there is some evidence that employers that follow these high-road workplace practices have employees that are actually more productive, they have—they stay with the employer for longer, and the—and the employees are better off.
That the U.S.—another recommendation is that we set and meet a goal of bringing post-secondary education within the reach of all Americans, and that we should be linking that education more closely with employment outcomes. So this is by, for example, really encouraging community colleges to be working with local employers so that the employers, when they’re—when they’re looking to hire to fill a vacancy, aren’t just, you know, suddenly starting from fresh and new, but they have an institution with whom they’ve been working and they’ve developed a relationship so that they know about their alumni, about their current students. And they’ve also maybe had some conversations about the curriculum so they have confidence that the students that are graduating from the institution have the skills that the local employers need.
This means investing in programs such as apprenticeships. That’s a wonderful way for young workers to be learning on the job. So they—you know, in a—in a formal apprenticeship, typically they’re paid a little bit less because they’re still learning. But they’re on the job and they’re—sometimes there’s a formal part of the program, as well, where there’s informal learning, but they’re—but they’re there learning from those who already know.
Trying to improve career counseling in high schools. But, you know, generally the whole focus here is to ensure that our educational systems are evolving to meet the demands of the modern workplace.
We also believe that the unemployment insurance system needs to be overhauled to reflect the reality of our current economy; that is that people are moving from job to job often, that we’ve got some areas where there’s secular decline. And so we need to have more aggressive retraining of workers that have lost their jobs.
Our current unemployment system, as I mentioned, is premised on the idea that it’s really to help a worker move from job to job, and the idea is it’s not going to take very long. But what about a worker who needs more training while they’re—while they’re between jobs? Technically, in our current unemployment system it’s not allowable to be going to school why you are receiving UI because while you’re receiving UI you’re only looking for another job. So in the—in Europe there are more active labor market policies where, yes, the worker may receive some unemployment insurance benefit while they’re displaced, but they can also invest in training so they can, you know, train for a new job in a new sector or in a different part of the country.
And finally, we should—or, actually, we should also be looking to reduce the barriers for labor market mobility. This is by, like, reducing occupational licensing restrictions and other forms—in flexible hiring practices, increasing access to affordable housing, investments in infrastructure especially mass transportation. Because what often happens in the big urban areas where there is—there are more job opportunities, the housing is just too expensive for lower-income workers to live near their jobs. And yet, by the time they find affordable housing, the commute is just too long or they can’t afford the car, and we don’t really have a very viable mass transit system in many parts of the country. And so we should be looking for ways in order to improve that mobility.
And finally, we should be creating systems of portable benefits and other ways where workers—where we lessen the tie between a single employer and a worker in terms of providing benefits.
And then, as I mentioned at the outset, our final recommendation is that the president and the nation’s governors create a national commission that would carry forward this work through research, pulling together best practices, conducting public outreach on the workforce challenges, because this is a really important question and a really important problem that requires a more intense focus and that will—that we need to be focused on for years to come.
I think that gives an overall summary.
FASKIANOS: Thank you very much for your work on the task force and for sharing the findings with us. Let’s open it up to the group for questions.
OPERATOR: Thank you. At this time we will open the floor for questions.
(Gives queuing instructions.)
Our first question will come from the City University of New York.
Q: So, basically, in terms of jobs normally being the secure place where people receive their health benefits, their insurance benefits, et cetera, with that kind of being in decline now, do you see universal basic income as being a way to fulfill that role?
ROUSE: Really good question. And the task force discussed universal basic income, UBI, and ultimately decided against endorsing or recommending UBI. However, the task force, you know, we, in our discussion—and I think I have—I share this personal view myself—is that the discussion around UBI has highlighted very much the fact that the social safety net and the safety net in this country has gotten weakened, and that especially with people having to have multiple jobs and even, you know, holding multiple jobs and still making less than, you know, the poverty line for their family. So it certainly highlighted that need.
And I think it’s also highlighted the fact that we’ve had tremendous economic growth. The first law, first year of economics, the (first best ?) says that, you know, the pie gets bigger and everybody gets—there’s nobody who’s worse off as the pie gets bigger, and everybody is hopefully a little bit better off. The second version of that is that the pie gets bigger, and that those—there are winners and losers. But the reason why it’s still a net positive for society is that the winners compensate the losers. And in my view what we’ve—what we’re experiencing in the U.S., and maybe in other countries around the world to a lesser extent, is that we actually haven’t had the winners compensating the losers. That’s why we’ve got this tremendous income inequality.
And so UBI, again, provides a mechanism by which the winners are compensating the losers, and it’s in a very—in terms of implementation, it’s quite transparent and, you know, we could imagine. The federal government knows how to cut checks. It can cut checks to everybody in the country, and we think that could be done. And then we’re sure that everybody in this country has some minimum level of income, which we all know is critical for—you know, to get by, to live, for the success of your children.
The downside of UBI is that it has a terrible work disincentive in it, and it would be very, very expensive. Which is why we—you know, people—our social policies have tended to be more targeted.
So I don’t know that we’re there yet. There are many experiments that are happening around the country, and I’m actually—as a researcher I’m quite excited about that. I think I’m actually on the advisory board of one that’s happening in New Zealand, I think it is. You can see how involved I am so far, but I have gotten a summary so far. I’m excited about those experiments. I think that the right thing for us to be doing so that we can learn from them, and maybe that is the direction we should be heading. The task force wasn’t ready to endorse it at this time, although recognizing it’s a really healthy conversation to be having.
FASKIANOS: Thank you. Next question.
OPERATOR: Thank you. Our next question will come from Rutgers University.
Q: Hi. Thanks very much for such a comprehensive presentation.
I had a question about education. You spoke a little bit about technology and the importance of keeping up with that. I wanted to know whether, without being starry-eyed, there’s any role for the humanities in this process, especially in community colleges and less prestigious universities.
ROUSE: That’s a very—I think that’s a really good question. So I am coming to you from Princeton, which is unabashedly a liberal arts institution where we very much value the humanities.
The way that I think about post-secondary education in the U.S. is it’s quite heterogenous, and I think—and I personally, I study—I’ve studied community colleges. I actually think that’s part of the strength of our post-secondary system, is it is heterogenous. So that means that for some people they are going to acquire some specific skills, and I think that’s just fine. And I think for others they are going for—maybe not to get specific skills, but to get more what we call general skills. And I do believe that there is a very important role for the humanities, certainly when we think about the liberal arts, but I even believe that there’s a role for the humanities for those who might be going to a community college for—to get a plumbing degree.
So I’m not going to suggest that this, you know, potential plumber needs to have half of his or her courses in, I don’t know, English literature. But one thing that we do know about the future of our workforce and even about the skills that employers feel they’re missing from the current workforce is—one is basic literacy, basic math skills. And I think, you know, as our world is changing and becoming more heterogenous, we’ve got more of a melting pot having to understand the other, I believe the humanities is a place where we really can start to understand our society. What were some of the original goals in putting our country together? How do we think about people who think very differently than us? And I think it’s important for all of us to develop those skills.
I will say one final point, one—and on an issue that we discussed somewhat in the task force as a peril about purely vocational education, which is that the skills that an individual may need today with the pace of technological change may not be the same skills that they need in five or ten years. And so what we need are people who are dedicated to lifelong learning. In fact, one of the recommendations is for lifelong learning savings accounts so that individuals can save and can afford to go back to school. But I also think that means developing the kinds of critical skills that allow you to learn on the job because you’re starting from a foundation where you can take in new and different information, and I think that the humanities provide a wonderful platform from which to develop those kinds of skills.
That’s my own personal view.
FASKIANOS: Thank you. Next question.
OPERATOR: Thank you. Our next question will come from the University of Texas.
Q: Thank you very much for reporting on the findings, ma’am.
I’m curious with respect to the economic trends and their implications for mobility of populations at a global level, ma’am, in view of having seen the mechanization of agriculture where the University of Texas Rio Grande Valley is situated. And that is in South Texas, ma’am.
ROUSE: I’m sorry, what—so what was your question?
Q: Yes, ma’am. If you could please express your opinion with respect to the implications that the economic trends that you have reported on may have for migration at the global level in view of the mechanization of many jobs that you reported is occurring, and what that implies for the mobility that may stem from these changes, these economic changes. And I’m requesting this information based on what I have seen here when the agriculture was mechanized in South Texas, where the university is situated, ma’am. And that is the University of Texas Rio Grande Valley.
ROUSE: So what did you see there? Were people stuck or did people move?
Q: People started moving, and what happened—in that regard, ma’am, the daughters and sons of the families that moved to seek economic opportunity essentially created greater isolation of the elderly, of the parents as they got older, and a greater need for institutionalized resources to provide for their necessities.
ROUSE: OK. So I’m actually going to—so I think what we’ve seen is, one, we actually—the data in the U.S. suggests that there’s been declining mobility overall. But nonetheless, what you’re—what you’re fundamentally highlighting, I think, is an issue that the task force did discuss, which is that in some areas you have had people—the young have moved out and—which is not really—as much as we want there to be mobility where people are moving to areas where there’s opportunity, at the same time the task force very strongly believes that, you know, governments and businesses should be trying to improve economic activity in some of the areas that have become distressed.
So, for example, the task force believes that the federal government should be re-looking at empowerment zones again. There’s actually some empirical evidence that the empowerment zones that were done in the ’90s actually had an impact on employment and other economic activity in those areas. In Canada they have visas where they—where—visas for entrepreneurs and other high-skilled immigrants from abroad where they have to come and locate in a distressed area and create a certain number of jobs in those areas.
So actually, the task force, as much as we believe that mobility should be part of the solution, also recognizes that we can’t have all of our economic activity in three or four cities; that we need to bring back activities to some other areas, but that we need to have real activity there so that young people come back or that they don’t leave in the first place.
FASKIANOS: Thank you. Next question.
OPERATOR: Thank you. Our next question will come from Washington and Lee.
Q: Hi. My name is Maria (sp), and I wanted to know how the system you propose likens and differs from that of Germany. And are there any cultural differences between us and European nations with similar systems that would cause us to have not adopted such a system already?
ROUSE: So that’s also a good question because we were looking at other countries for inspiration in many spots. As an overall—so this isn’t one system. In fact, I think we were fiercely trying to suggest that we—that there’s going to be no one size that fits all in the U.S. and, you know, we have to be cautious in what we try to learn from other countries, from other areas. What may work in Seattle may not work in Austin, Texas.
But some places where we did look for models are, for example, the Germans have a more—a more developed and successful apprenticeship program. So, you know, some of the—I’m going to speak a little bit for myself—some of what makes me nervous in some of how their—they structure their apprenticeship system is that students have to take an exam very young which determines whether they’re going to be on the university track or a more vocational track. There are some limited opportunities to switch, especially to go from the vocational track to the university track, and that makes me nervous in a country that is as diverse as ours.
That said, I think understanding and valuing vocational trades I think is important. I personally do not believe everybody needs to go to college, but I do believe everybody needs a quality education. And so I would like for those workers who would rather do a—turn to a more vocational trade—and I would want that to be a well-paid vocational trade—for that to be an honored choice for them, and for them to be able to learn how to do that. And I think apprenticeship programs are—have been shown to be very effective.
So that is one way that we did look at Germany. We said we should be looking at it. The U.S. has got apprenticeship programs done sort of our way, and we should be investing more in them.
As another example, the Swedes have something called the Job Security Council, which is something that we’ve just suggested we should be thinking about. So that’s a model where it’s a not-for-profit organization. It’s run by a board of representatives that have employers and employees. It’s financed by the employers, who pay a small contribution. And what the job of the Job Security Council is that when workers are laid off by one of the employers, the JSCs help the workers to find a new job. And so what they have done is dramatically reduced the period of time between this—between being let go and finding a new job.
And so, again, it may be that the cultural situation in Sweden means that we can’t adopt that wholesale. But I think it’s an interesting model that we should be looking at and seeing, well, what—how might we set that up here? Where in the U.S. might we want to make a pilot of it? And how might we need to adapt it in order to see whether it would work here? And then we should study it so that we know whether we think it works or not.
So we certainly were looking at other countries for inspiration because I don’t think we have a monopoly on the great ideas.
FASKIANOS: Thank you. Next question.
OPERATOR: Thank you. Our next question will come from Kenyon College.
Q: Hi. So the areas in the U.S. that have been hit the hardest by globalization, and thus are in the greatest need of the proposed reforms, are the same areas that helped propel Trump into office and thus endorse what appears to be an alternative approach to one you recommend, one that involves stepping back from globalization and taking on more protectionist policies. So I’m wondering what obstacles this presents to your—to the implementation of your proposal and in what ways you can convince these voters that the policies that you recommend are in their interest.
ROUSE: Well, you raise a very good point. (Laughs.)
So fundamentally we believe, again—I’m going to say it for the twelfth time—that not one size fits all. So we completely recognize that, you know, increasing trade may be a more viable strategy for firms in, you know, California than maybe in Kentucky. But, you know, I think that many of us on the task force would argue even in Kentucky in the long run they may be better off with more trade than they may understand right now.
But the important part about there being governors and representatives from around the country and for this to be state and local governments is so that, you know, it’s not just some, you know, professor from Princeton who’s opining on what folks in Kentucky should do; it will be people from Kentucky saying maybe we want to be protectionist in the short run while we do—while we build up our educational system or while we try to invest in some local—some local activity through some other mechanism—you know, I don’t know whether that’s, you know, enterprise zones or some other incentive to have companies come and locate back. So maybe that’s what they—that’s what they believe is the best thing for them to be trying. I would hope, as I would hope for anybody who’s trying any of these different ideas, is that they would study it and try to make a determination as to whether it’s actually been effective.
I guess I also believe that fundamentally, yes, they have—they believe protectionism is the right way to address the problem. I think the problem is—we’re all worried about the same problem. And so I think we should—you know, we should give it a try. So if they want to—if they want to pick a different part of this portfolio to work on first, I don’t begrudge them that. But I would hope that they would study it and also be open to new—to going in a different direction if it doesn’t work out. And I could be wrong. They could be wrong. Right? I don’t want to pretend I have a crystal ball and know exactly the right answer either.
FASKIANOS: Thank you. Next question.
OPERATOR: Thank you.
(Gives queuing instructions.)
Our next question will come from Fordham University.
Q: Hi. Thank you for taking my question here.
At its height, the United States Post Office employed about eight hundred thousand people with benefits. Now, while our population continues to increase, their employment rolls are down to about four hundred thousand. What industry or industries here in the United States have the potential to create four hundred thousand jobs? Technology has not proven to be a big employer. And as we move to AI, it’s less and less opportunities there. So did the committee talk about industries, sectors? I mean, publishing is in a downward spiral, for example. Where is the potential for strong positions?
ROUSE: You know, that’s a really fair question. I’m going to give you my own personal view on this, which is that if I had a crystal ball I wouldn’t be in my current job. I’d be out making a lot of money exercising—(laughs)—what I knew was going to be the future. And I think it’s for that reason the task force, which was a rather diverse group of individuals, wasn’t going to try to opine on winners and losers.
But you’re identifying exactly the challenge that—why we believe this is so urgent. I think that there is a fundamental belief/hope/prayer that historically the U.S. economy has been quite resilient. Yes, we see that with automation some jobs disappear, but new jobs come up. So, for example, the job of a web developer was not even, you know, a coded or recognized occupation fifteen years ago, and now it’s one of the better-paid occupations and, you know, a growing one in this country. So that while there is evolution and while we’re going through transition, you know, I think we fundamentally believe that with some—that the economy is resilient and there are different types of jobs.
I think one footnote to that, or maybe it’s even—it’s more than a footnote, is that with technology what we have seen develop as new jobs is that they’re not really well-paid jobs. So one may find one way to spend one’s time, whether it’s as an Uber driver or doing something else in the gig economy so that one is filling one’s hours—and I think that’s actually an important part—important role of a job, is how is one spending one’s day, and we hope one is spending one’s day in a way which brings pride to the individual—but if they’re low-wage jobs then they’re not—they’re not bringing economic security to that individual and that individual’s family.
So that’s part of the reason why we believe, one, we need to be finding a way to make sure that there are benefits that go with some of these lower-wage jobs. And we may need to experiment with, you know, encouraging firms to not just pay the very least that they can pay while they’re stacking up their corporate profits, but to share some of those profits by paying—sharing it with their workers and paying them, you know, a higher wage.
There is a call for increasing the minimum wage, for example. At least the task force got to—at the state level. There were two of us who dissented and said we should be increasing the federal minimum wage as well.
So I—what you’re—what you are—what your question was centered around was exactly the urgency that we felt in writing this task force report. If I had an answer, I would tell you. But I do believe we need to—we need to be thinking creatively because that’s the challenge.
FASKIANOS: Thank you. Next question.
OPERATOR: Thank you. Our next question will come from Indiana University.
Q: Thanks, Professor. Thank you so much for taking our questions.
In just the previous answer, you mentioned how people did not consider tech jobs to be the job of the future, and yet very much today they are the jobs most sought after. So when creating an educational policy that is creating an actual pipeline from schools to jobs, do you think it’s possible that when creating this policy people will look too much towards the jobs of tomorrow as opposed to how different the jobs of the day after tomorrow might look like?
ROUSE: Well, see, that’s my concern about workers learning very, very specific skills; which is, yes, they may get a job for tomorrow, as you put it so eloquently, but maybe not have a job the day after. Obviously, what—there’s a middle ground here. You need to have some specific skills in order to be able to fill the jobs of today. But I also believe that we need a strong educational system—and this is not just at the college level but it starts, you know, in pre-K all the way through high school—so that workers have those critical thinking skills so that they can adapt, so that they learn both the job—they have the skills for both learning the job today, but they can also adapt and learn new skills for tomorrow.
So, you know, all of you on the call are in college, and I’m sure you’re learning wonderful skills that will help you get a job out when you graduate. But you—I also hope, if your professors are doing a good job, your learning skills will help you remain adaptable so that you can pivot and not just, you know, follow one career your entire life. And so I do believe that having—it’s important for people to be literate so you can keep reading, have the numeracy skills because if anything we’re just going to have more and more data. But that all students—you know, this goes pre-K through twelfth grade and into college—have those fundamental skills.
And then if there are those who want to take them into a more vocational direction, some who want to be thinking a little bit more general, and that’s fine. But that we’re adapting not just for today, but for tomorrow as well.
FASKIANOS: Thank you. Next question.
OPERATOR: Thank you. Our next question will come from the University of Southern Mississippi.
Q: Hi. Do you think that AI workers should be taxed to create parity with human workers? And if so, will this cause AI workers to demand to control their own money hundreds of years from now and possibly to ultimately demand the right to vote?
ROUSE: So by an AI worker you mean the computer itself?
Q: Well, there will be a controversy over how AI workers are defined. We would have to define what a robot is and what isn’t a robot. We would have to define that.
ROUSE: Yeah. OK, so you’re scaring me.
You know, so I am not a huge fan at this moment, I have to say, of taxing capital—I mean, I think we should—we are going to tax capital, and I think we should be subsidizing labor to some extent. But I don’t know that I want to tax more machines in order to—I don’t think that will stop the technological change, if that’s what you’re asking.
One of the biggest challenges, I believe, in our technological chain are some of the ethical dimensions and that the speed of change and the people who are—and I’m speaking in gross generalizations, but I feel that there’s a concern that in the drive to have the fastest, smartest, and to solve some of the technical problems which are really fun to work on, we have—we’re not slowing down to think about some of these more—if you want to come back to the question on humanity, some of these ethical questions, some of these bigger-picture questions about what is a machine, what is a person, what does it mean to have the right to vote, who’s running our country?
I have colleagues in the Computer Science Department who are working with our Center for Human Values on exactly these kinds of questions, because I think they need to be worked at together. The computer scientists haven’t been thinking about the big pictures about what does it mean to be a person, what does it mean to have free will and, you know, to—what does it mean to be a citizen, and what are the responsibilities that go with that? And yet the philosophers don’t necessarily have the technical expertise.
So I think this is exactly why I do believe that there’s a really important role for humanity, because if we get too far ahead of ourselves down this technological train, we may not be able to turn back and we may find ourselves in a place we don’t want to be.
FASKIANOS: Thank you.
OPERATOR: Thank you.
(Gives queuing instructions.)
Our next question will come from Kenyon College.
Q: So in the last few decades we’ve seen a lot of industry consolidation, larger companies, public ownership. And so I’m wondering—or essentially the structure in ownership and the nature of, you know, the firm in American economic life has really changed. Have you noticed different types of investment in workers and communities based on the structure and ownership of a company? And, if so, what can we do to incentivize this type of structure and ownership?
ROUSE: So I haven’t—well, you’re raising a really good, important question. I mean, I think what we have seen is a concentration, you know, that we’re seeing some really much larger firms. Some of my colleagues who are fellow labor economists have been documenting that, with that concentration, you’re seeing a smaller share of it going to labor. So I don’t think that’s been very healthy, and that’s contributing to our wage and income inequality. So when it comes to workers, I think we’re losing there.
The other way in which economists are starting to really focus on—in fact, I think there was a panel out at Jackson Hole, which is the big conference that the Federal Reserve hosts every year; one of the Feds host every year in Wyoming—there was an entire panel on monopsony. And what economists are thinking there is that one reason why we have not been seeing much wage growth, despite the fact that the economy is doing much better, is because firms are employing monopsony power.
For example, I have colleagues here who’ve documented that in New York City, even among fast-food restaurants, there were noncompete clauses. So if I was hired by a Burger King on, you know, West 57th, and then I left, I couldn’t go try to get a job at Burger King on East 59th because of a noncompete clause, which is just ludicrous. And the whole purpose there is to prevent competition for workers to bid up their wages. And we can see this in other areas as well.
So economists are actually focused on some increasing concentrations, both in terms of the market side, in terms of monopoly, and also in terms of firms kind of colluding and setting up structures. Even occupational license is another way to generate monopsony, so that in both cases the workers are losing. And that is part of the explanation for why we’re seeing this much greater wage and income inequality, and it’s become actually anticompetitive.
So that is more what I’m hearing. Yes, there have been some firms that are doing more employee ownership. But I actually haven’t heard that that has become—has a huge increase. I’m hearing more of the concern about the concentration and the exercise of market power.
FASKIANOS: Thank you.
I think we have another question.
OPERATOR: Thank you. Our next question will come from Washington and Lee.
Q: Hello. Yes. So currently countries with, you know, large workforce are at an economic advantage because they have, you know, more human capital to put to work. But as AI and automation advance, will this economic advantage put countries at a disadvantage in the near future?
ROUSE: Well, I think it will depend—right, it’s all about the cost and benefit. So if you’ve got lots of workers that you’re not paying very well, that still may be a cheaper way and a more efficient way to produce your widgets than bringing in machines to produce it.
So I think it will depend. I think what—I would expect nonetheless that in large countries such as China, where wages right now are very low, that as there’s more economic activity there and workers start to demand higher wages, the wages will start to rise. And then there’ll be more of an incentive to mechanize. But when you have lots of workers, if they’re not being paid very much, the cost-benefit still works out to be more labor-intensive in one’s production rather than bringing in capital.
Part of what happened in the U.S. is that wages started to get much higher. Some people point to unions as being overly successful in some sense. And so wages were high. If you look at—and also these benefits. So one argument that people have made is that, well, because we tie health insurance, retirement benefits, sick days—all of those benefits are tied to employment—it’s cheaper for an employer to say I don’t want to have to pay all of that. I’ll hire, you know, a computer instead; whereas if we instead shared the cost of those benefits and were more central so it was disentangled from the employment, that lowers the overall cost of hiring a worker from the firm’s perspective and starts to even out the cost-benefit.
Those are just some ideas that people have been tossing out. I think that is—you know, clearly the extra cost of the benefits is one reason why firms prefer to hire even contingent workers over hiring a regular employee for a number—you know, some of the regulations that go along with hiring a regular employee.
So I don’t expect it in some of these countries where, you know, right now wages and working conditions are not very good and wages are low, that they will mechanize really quickly. But that will come over time if their labor standards increase.
FASKIANOS: Dr. Rouse, you’ve talked about the things that you think are essential for, you know, colleges and community colleges to give to their students. You are the dean of—there at the Woodrow Wilson School. What advice are you giving to students about what they should take away from, you know, their degrees as they look out into the changing world and the changing labor market?
ROUSE: Well, that’s a good question. So we—so at the Woodrow Wilson—we’re an unusual school within Princeton, because Princeton doesn’t really have professional schools. So we are the one professional school. We also have an undergraduate major. And I say this by way of saying that we are a very disciplinarily based public-policy school. And so we do tend to emphasize the basics. So I believe that our students need to write well. I believe they need to understand statistics and econometrics. I think they have to understand political institutions.
We’ve been bringing in behavioral policy as a foundational element. And I’ve been trying to bring in and increase what our students learn in terms of tech policy. They will not become computer programmers. They will not be experts in cybersecurity, at least most of them. But they should at least be fluent in the policy issues and some of the terminology and understanding the issues so they can at least understand what’s happening in the organization.
So even here I believe in the basics, because I believe that careers are long. People do many different things. And what’s most important is that you have the capability to learn and adapt and to grow as you go out.
Well, with that, I thank you again for your time today. We really appreciate it. If—all of you, for your terrific questions. If you haven’t read the report, please do so. We hope that you will read it, share it with your colleagues.
And just to let you know, our final call of the semester will be on Wednesday, November 28th at 12:00 p.m. Eastern time with Elizabeth Economy, the head of our Asia Studies here at CFR, and she’ll talk about “The Reign of Xi Jinping in China.”
And in the meantime, I encourage you to go to CFR.org/Campus, follow up on Twitter at CFR_Campus, for information on CFR resources, upcoming events, and all of the resources that our fellows here produce and the resources from Foreign Affairs.
So, Dr. Rouse, thank you again for doing this, and to all of you for being with us.
ROUSE: Thank you very much. It was a pleasure.