Some of the longer-run economic news is turning around
Here is my latest New York Times column. I would stress that the observed good news is not much showing up in real wages, but at least the outlines of a potential positive narrative are falling into place. For instance:
The nation’s high school graduation rate has risen — to 78 percent in 2010, the Education Department says in its most recent estimate. That’s obviously still not where it should be, but it’s the highest figure since 1974. (For a long time, the rate was under 70 percent. After decades of stagnation, the graduation rate started to turn up in 2000, and the growth has been robust for more than a decade.)
On average, these additional high school graduates — not to mention college degree recipients — will find better jobs and enjoy better health, long-lasting benefits that will be reaped for many decades.
And this:
The growth rate in health care costs has been slowing for the last four years. In some years, in fact, it’s been no higher than the growth rate of the economy as a whole. And much of the change appears driven by efficiencies, rather than by the recent recession. This is documented in a paper by David M. Cutler, an economics professor at Harvard, and Nikhil R. Sahni, a fellow at Harvard Business School; it appeared in the May 2013 issue of Health Affairs.
This cost deceleration isn’t guaranteed to stick, but the danger that sharply rising health care costs, compounding over time, will crash the entire economy is now somewhat reduced.
That’s hardly the Jetsons, but still education and health care have been major productivity drags on the economy in the past (not in terms of the measured number, but in terms of actual performance). Coming from another direction, we even find that California suddenly has a budget surplus. One other reason for optimism is this:
While the populations of countries like the United States are aging, the number of innovative young people worldwide has never been higher. Countries like China, India, Brazil and Russia, despite recent slowdowns in growth, still are making progress in improving their educational systems and scientific networks. That increases their ability to supply technological innovations — or scientists and entrepreneurs — to the United States. These gains can be reaped in coming decades.
For the cold water, do note that none of these other countries are currently major innovators in a way which benefits the United States. Still, perhaps the dependency ratio should be defined in terms of potential ideal creators, rather than bodies and ages per se, and then it is more favorable looking forward. Finally:
Note, too, that none of these trends can be reduced to breathless or utopian claims about the future of information technology, even though each is intertwined with tech progress in subtle ways. Further breakthroughs in technology, perhaps in the field of quantum computing, could add substantially to these positive trends.