An industrial policy for good jobs

For decades, the service sector has driven the economy in the United States. Does industrial policy have a role to play in supporting this growth? Dani Rodrik (Harvard University) has written a policy proposal that outlines how a modern industrial policy framework would create more “good jobs” by improving productivity and labor income growth for workers in the service sector. Rodrik defines good work as one that invests in the skills of workers, gives them a voice, discretion and autonomy, and gives them responsibility for the quality of service.

A modern industrial policy should go beyond the traditional focus on manufacturing and globally competitive industries towards the service sector and small and medium enterprises. And the practice of industrial policy will need to rely less on traditional top-down policy instruments – such as grants and tax incentives for businesses – and more on collaborative, iterative interaction in which public agencies deliver a portfolio of public services. personalized in exchange for companies that undertake flexible commitments on the quantity and quality of employment.

The practice of industrial policy will need to rely less on traditional top-down policy instruments.

Rodrik proposes federal and local initiatives as components of an “industrial policy for good jobs”. The local approach builds on the existing framework of business development and support programs: in this ecosystem, the provision of public services (such as business extension services, infrastructure or personalized training) is aligned on a new, more flexible and contextual model of industrial development. a policy more suited to the challenge of creating good jobs in the service sector. The federal initiative is an Advanced Research Projects Agency (ARPA) focused on promoting employment-friendly technologies: ARPA-Workers. Based on the premise that innovations that complement rather than displace workers are feasible but currently undersupplied, ARPA-W would encourage early investments in digital and other technologies that improve worker skills and create good jobs.

The challenge

Industrial policy is as old as the state itself. Virtually every government in history has engaged in policies to promote economic activities considered essential to national security, economic well-being, or the sovereign’s coffers. Under the influence of free market ideas, the United States has often seen itself as outside this tradition. Yet it was none other than one of the nation’s founding fathers, Alexander Hamilton, who articulated the first and one of the clearest arguments for industrial policy in his “Report on the Subject of manufactures,” which made a powerful argument for subsidizing and protecting America. nascent manufacturing establishments.

The industrial policy debate has traditionally revolved around whether governments should engage in industrial policy, rather than the more relevant (and useful) question of how they should do so. Since governments always engage in industrial policy, it is desirable that they act deliberately and consciously, rather than surreptitiously and without an overall policy framework. The current economic and technological context for industrial policy is very different, not only from the era of Alexander Hamilton, but also from the heyday of industrial policy in the 1960s and 1970s. good practice industrial policies have changed considerably, thanks to accumulated experience and knowledge.

While job creation is almost always one of the stated motives of industrial policy, it is generally assumed that increasing investment in physical capital or innovation will produce better labor market outcomes. Instead, Rodrik provides evidence that good jobs must play an explicit and much larger role in the design of industrial policy. Without programs targeted specifically at providing good jobs and worker-friendly technologies, labor market problems will persist, with significant costs to the social and political fabric of the nation. And if these policies don’t target service sector jobs, the vast majority of American workers will be left behind.

Proposal

ARPA workers: A key component of a good jobs strategy is a national effort to steer technology in a more labor-friendly direction. Rodrik proposes the creation of ARPA-Workers to foster the development of new workforce-friendly border technologies that complement rather than displace workers who have an intermediate range of skills and education. ARPA-W would prioritize technologies that complement and augment what workers can do, expand the range of tasks they can perform, increase their ability to customize services based on specific needs and customer demand , and increase the share of labor in the added value of production.

Local and regional industrial policies: Rodrik offers a competitive grants program that allocates funds and promulgates general principles for the operation of local good jobs programs. In exchange for public services, companies would be asked to make tentative commitments on specific quantities of good jobs they will create at different skill levels. In the proposal, Rodrik offers examples of “good jobs” measures against which local programs could be measured. Instead of tax incentives or unlimited subsidies, the conduct of industrial policy must then rely on the provision of personalized public inputs through collaborative and iterative dialogue with companies, and with flexible conditionality on the quantity and quality of employment. This approach helps companies internalize the externalities of good jobs in their employment, training, investment and technology choices.

What the proposal does not do

The proposal is not sufficient on its own to create an inclusive economy and good jobs and does not substantially substitute other necessary policies. “An industrial policy for good jobs” should be supported and complemented by a variety of regulatory, social insurance and macroeconomic provisions that increase bargaining power and labor organization in the workplace, provide a safety net strong for workers and their families, and ensuring adequate levels of aggregate demand to manage a tight labor market.

A comprehensive and robust set of industrial policies would also target the climate transition (to promote green technologies), the high-tech and digital economy (to promote general innovation) and the reconstruction of national supply chains (to create a more resilient economy). Just as traditional industrial policies cannot be invoked to meet the needs of a good jobs economy, “Industrial Policy for Good Jobs” does not meet these strategic objectives.


The case of long-term care

Long-term care is a sector where employment could increase rapidly in the coming years as the population continues to age and demand for home-based accommodation or assisted living increases. Yet there is a shortage of workers, due to low wages and other undesirable job characteristics. Long-term care could serve as a test case for the idea that sectoral policies organized along the lines of industrial policy might work, because greater productivity is ultimately the most reliable source of better jobs.

Making long-term care jobs “good jobs” involves a comprehensive strategy and requires metrics against which to measure success. An important component of such a strategy would be the introduction of new technologies that complement carers’ skills, such as digital tools that allow carers to gather real-time information and respond quickly and effectively to the needs of the people they care about. load. These changes would require investment in R&D, a willingness to experiment with new work practices and technologies, and the encouragement of on-the-ground adoption through adaptation and contextualization to local needs. If long-term care jobs were to grow in this way, the productivity gains achieved would turn those jobs into good jobs.


The Brookings Institution is funded through support from a wide range of foundations, corporations, governments, individuals, as well as an endowment. The list of donors can be found in our annual reports published online here. The findings, interpretations and conclusions of this report are solely those of its author(s) and are not influenced by any donation.

Leave a Reply