Federal Assistance to Troubled Industries: Selected Examples. Congressional Research Service. Baird Webel. March 19, 2020
Serious disruptions for certain industries caused by the COVID-19 (coronavirus) pandemic have led to calls for federal government assistance to affected industries. Direct federal financial assistance to the private sector on a large scale is unusual, except for geographically narrow assistance following natural disasters. Nonetheless, assistance to business sectors affected by COVID-19 would not be the first occasion on which the federal government has aided troubled or financially distressed industries. Historically, aid—sometimes popularly referred to as “government bailouts”—has taken many forms and has occurred under a wide variety of circumstances. Past assistance has involved such instruments as loan guarantees, asset purchases, capital injections, direct loans, and regulatory changes, with the specific mix of policies varying significantly from case to case. These differences make it somewhat subjective as to what should be defined as a “bailout.”
To help inform congressional debate, this report examines selected past instances in which the government has aided troubled industries, providing information about the way in which such assistance was structured, the role of Congress, and the eventual cost. In order to provide greater detail, the examples all involve cases in which federal assistance was (1) widely available to firms within an industry rather than being targeted to a particular firm; (2) extraordinary in nature rather than a type of assistance that is routinely provided; and (3) motivated primarily by a desire to revent industry-wide business failures. The coverage is not exhaustive, and excludes cases in which ssistance was targeted at individual firms rather than at entire industries. In some of these cases, the government was able to recoup much or all of its assistance through fees, interest, warrants, and loan or principal repayments. In others, there were no arrangements made for recoupment or repayment.
[PDF format, 31 pages].
Employment Creation Potential, Labor Skills Requirements, and Skill Gaps for Young People: A Methodological Framework. Brookings Institution. Haroon Bhorat et al. March 4, 2020
This paper presents a methodological framework for assessing the extent to which youth unemployment can be addressed through employment creation in industries without smokestacks in individual countries, as well as the skill gaps in the youth population that need to be addressed for this potential to be reached. There are two components to the method: (i) estimating skill demand, and (ii) identifying skill gaps in the target youth population. On the labor demand side, the framework seeks to identify the skills required for a sector to reach its employment potential. On the supply side, the methodology ultimately aims to answer the question: Do the skills to meet the demand in the sector exist in the population; and if not, where are the gaps? [Note: contains copyrighted material].
[PDF format, 51 pages].
Internet Regimes and WTO E-Commerce Negotiations. Congressional Research Service. Rachel F. Fefer. January 28, 2020.
From retail to agriculture or healthcare, digitization has affected all sectors and allowed more industries to engage with customers and partners around the globe. Many U.S. companies thrived in the initial online environment, which lacked clear rules and guidelines, quickly expanding their offerings and entering foreign markets. As the internet has evolved, however, governments have begun to impose national laws and regulations to pursue data protection, data security, privacy, and other policy objectives. The lack of global rules and norms for data and digital trade is leading to differences in these domestic internet regimes. Competing internet regimes and conflicting data governance rules increase trade barriers and limit investment flows and international commerce, restricting the ability of U.S. businesses and consumers to enter and compete in some markets. For example, foreign internet regimes may use national security regulations to block cross-border data flows, disrupting global supply chains and limiting the potential use of and gains from emerging technologies. The creation of national technology standards can also limit market access by foreign firms.
As the digital economy expands, the diversity in digital rules is poised to grow in complexity and create new trade restrictions. The resulting patchwork of technical standards and national systems creates challenges for international trade, and may signal an impending fracturing of the global internet. Without agreement on global norms or common trade rules, some analysts foresee a splitting of the internet into distinct nation-led “dataspheres” and virtual trading blocs.
[PDF format, 29 pages].
Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy. World Economic Forum January 2020.
Nature Risk Rising, produced in collaboration with PwC and the first report in the New Nature Economy series, explains how nature-related risks matter to business, why they must be urgently mainstreamed into risk management strategies, and why it is vital to prioritize the protection of nature assets and services within the broaderglobal economic growth addenda. [Note: contains copyrighted material].
[PDF format, 36 pages].
Automation: A Guide for Policymakers. Brookings Institution. James Bessen et al. January 14, 2020.
Advancing technologies are increasingly able to fully or partially automate job tasks. These technologies range from robotics to machine learning and other forms of artificial intelligence, and are being adopted across many sectors of the economy. Applications range from selecting job applicants for interviewing, picking orders in a warehouse, interpreting X-rays to diagnose disease, and automated customer service. These developments have raised concern that workers are being displaced by advancing automation technology. Indeed, over 18 recent studies predict job losses from new automation technologies, including some predictions of massive job losses (Winick 2018). A large literature on worker displacement suggests that the effects of such developments could be dire: individual workers subject to plant closings and mass layoffs experience reduced employment probabilities and wage reductions, leading to long-term earnings losses, as well as reductions in consumption and worse health outcomes. Concerns about these effects of automation have led some commentators to call for policies to directly combat mass unemployment, such as a Universal Basic Income.
But is this right? At a time when many firms are investing in automation, the unemployment rate is at historic lows. Low unemployment might seem hard to reconcile with apocalyptic predictions about mass unemployment. This paper reviews the evidence from recent studies and reports on a new paper we have written, “Automatic Reaction: What happens to workers at firms that automate” (Bessen et al. 2019). This paper is the first to take a look at what actually happens to those workers. We build on some of the findings in order to draw the implications for policy. [Note: contains copyrighted material].
[PDF format, 17 pages].
The Macroeconomics of Automation: Data, Theory, and Policy Analysis. Brookings Institution. Nir Jaimovich et al. January 14, 2020.
Advanced economies have experienced a significant drop in the fraction of the population employed in middle wage, “routine task-intensive” occupations. Applying machine learning techniques, we identify characteristics of those who used to be employed in such occupations and show they are now less likely to work in routine occupations. Instead, they are either not-participants in the labor force or working at occupations that tend to occupy the bottom of the wage distribution. We then develop a quantitative, heterogeneous agent, general equilibrium model of labor force participation, occupational choice, and capital investment. This allows us to quantify the role of advancement in automation technology in accounting for these labor market changes. We then use this framework as a laboratory to evaluate various public policies aimed at addressing the disappearance of routine employment and its consequent impacts on inequality. [Note: contains copyrighted material].
[PDF format, 51 pages].
Global Social Mobility Index 2020: Why Economies Benefit from Fixing Inequality. World Economic Forum. January 2020.
The World Economic Forum has created a new index to measure social mobility, providing a much-needed assessment of the current state of social mobility worldwide.
The headline finding of the report is that most economies are failing to provide the conditions in which their citizens can thrive, often by a large margin. As a result, an individual’s opportunities in life remain tethered to their socio-economic status at birth, entrenching historical inequalities.
This is a major problem not only for the individual, but also society and the economy. Human capital is the driving force of economic growth. As a result, anything that undermines the best allocation of talent and impedes the accumulation of human capital may significantly hamper growth. Poor social mobility coupled with inequality of opportunity underpin these frictions, suggesting that if the level of social mobility were increased, it could act as a lever to economic growth.
The Global Social Mobility Index, which benchmarks 82 global economies, is designed to provide policy-makers with a means to identify areas for improving social mobility and promoting equally shared opportunities in their economies, regardless of their development. [Note: contains copyrighted material].
[PDF format, 218 pages].