By Susan Ozawa
January 28, 2009 - 2:35pm ET
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Taking a closer look at a graph presented by James Galbraith at a conference earlier this month we can identify the basic building blocks needed to begin the necessary step of serious engagement in industrial policy in the US. The case for industrial policy is clear; the US must have a sound plan to address long-term growth, viability, and stability of major macroeconomic variables to encourage long-term investment in our economy. The paper, by Hale and Galbraith,“The Evolution of Economic Inequality in the United States, 1969-2007: Evidence from Data on Inter-industrial Earnings and Inter-regional Incomes”, decomposes data on inequality in a number of ways demonstrating the dynamic effects of asset appreciation on inequality. The following graph is particularly useful in devising a domestic investment strategy going forward. Click on the graph to see the full image.
The sectors with high labor shares that are relatively profitable are:
1.) Professional and technical services;
3.) Government and government enterprises;
4.) Construction and
5.) Health care and social assistance.
The sectors that are not boom sectors with growing employment shares include:
1.) Transportation and warehousing;
3.) Health care and social assistance;
4.) Educational services;
5.) Administrative and waste services;
6.) Other services, except public administration;
7.) Arts, entertainment and recreation; and
8.) Accommodation and food services.
The two sectors that are in both categories include:
1.) Construction and
2.) Health care and social assistance.
Thus construction and health care and social assistance should be key industries to target because they are 1.) Relatively profitable, 2.) Not as sensitive to booms and 3.) Have relatively large and increasing wage bills. More decomposition and analysis is needed, particularly looking at the distribution of income within sectors and the reasons for these findings to determine how productivity and high wage shares can be promoted in other industries. However, the candidates for domestic investment can be shortlisted.
What is most interesting is the fact that these sectors happen to be of tremendous importance to the majority of voters, across partisan lines and have already come to the fore as key sectors of concern. A recent poll by Frank Luntz, found infrastructure is a top priority to Americans including the majority of Republicans. He states, “fully 84% of the public wants more money spent by the federal government -- and 83% wants more spent by state governments -- to improve America's infrastructure. And here's the kicker: 81% of Americans are personally prepared to pay 1% more in taxes for the cause.”
Other landslide findings from a poll on health care confirms what American constituents pushed both Republican and Democratic candidates to endorse at the core of their platforms: Health care for all is a central national priority. Download Lake Research Poll Memo (pdf). Download the Lake Research Presentation (ppt).
This consensus preceded and shaped the development of the Obama administrations’s and Congress’ economic recovery proposals with the majority of funding outside tax relief, targeting infrastructure investment, health care and social assistance. To see how the plan endorsed by top labor leaders, community organizations, economists and policy experts aligns on investment in infrastructure, long-standing health care gaps as a down payment on great reform and targets those in need see the following chart.
Thus, these issues are not contentious across party-lines; they will continue to be pushed because they are necessary, needed, strategic, politically viable and socially useful. It will become more clear with time that we all must roll up our sleeves and get to work rebuilding our nation and leave the ideological platforms of yesteryear behind.
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