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The
annual Economic Report, prepared by the Council of Economic
Advisers, argues for restoring the public sector as a partner in
long-run growth, and adoption of policies aimed at curbing the
disproportionate market power of companies and employers that
limits economic equality.
“The government has a role to play in reducing inequality,”
Cecilia Rouse, who chairs the council, told Reuters, stressing
that ending lingering disparities in the U.S. labor market and
racial wealth gaps would "absolutely" boost U.S. growth and
competitiveness after years of weak progress.
“The real point is that these imperfections in the market have
real economic costs in terms of our GDP growth," she said,
citing research https://www.brookings.edu/bpea-articles/the-economic-gains-from-equity
by San Francisco Federal Reserve President Mary Daly, which
concluded that systemic disparities cost the U.S. economy nearly
$23 trillion over the 30-year period from 1990-2019, and
providing more equitable access to labor markets would add $790
billion to the U.S. economy annually.
Biden welcomed the report in a statement, and vowed to continue
working to deliver "more equitable growth" and expand the
productive capacity of the U.S. economy.
The report delves deeply into the impact of non-competitive
labor markets, the market power of employers and monopolies in
maintaining inequality in wages, and unfair hiring practices
that ultimately curtail economic growth for all.
"The costs of ignoring these structural forces are increased
inequality and reduced economic growth and output," the report
concluded, citing inefficient labor market outcomes,
misallocated talent, suppressed innovation and reduced
incentives for investment in human capital.
It noted that nearly 20% of U.S. workers reported being bound by
noncompete agreements that limited an employee's ability to join
or start up a competing firm, and said employer market power was
responsible for keeping wages 15% below where they would be in a
perfectly competitive market.
It said government actions could curtail these market forces
through increased enforcement of current labor protection and
antidiscrimination laws, support for greater unionization, which
can lead to higher wages, and raising the federal minimum wage
from $7.25 an hour, where it has been fixed since 2009.
It also underscored the beneficial impact of providing
affordable childcare and early childhood education, as well as
paid family and medical leave, and a child tax credit - all
measures included in Biden's ill-fated $1.7 trillion Build Back
Better spending package that floundered in Congress last year.
(Reporting by Andrea Shalal; Editing by Leslie Adler)
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