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Coronavirus pandemic
OpinionComment
Dani Rodrik
Dani Rodrik

Opinion | Why Joe Biden should not look to tax incentives to bring back the good jobs

  • Tax incentives and open-ended investment subsidies to attract firms to lagging regions are not particularly effective
  • Instead, Biden should invest in sectoral training programmes, which equip workers with skills tailored to the needs of specific industries

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Joe Biden, then the presumptive Democratic Party presidential nominee, delivers a speech explaining his “Build Back Better” plan, at a community centre in Wilmington, Delaware, on July 28. Photo: Getty Images/AFP
Dani Rodrik
The Covid-19 pandemic will leave the US economy with a deeply scarred labour market. More than 20 million jobs have been lost during the crisis, and only half have been regained. Not surprisingly, job losses have hit disadvantaged and less-educated workers especially hard.
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This aggravates a pre-existing trend. Long before the pandemic, the US labour market was becoming increasingly polarised. Good, middle-class jobs had been disappearing for decades, owing to automation, deindustrialisation, global competition and the advent of the “gig economy”.

To restore the health of the US economy, society and polity, President-elect Joe Biden’s administration must answer a straightforward question: “Where will the good jobs come from?”

Good jobs require specific skills and can be created only by productive firms. Creating good jobs in ample quantities therefore requires addressing both the supply and demand sides of the problem.

On the supply side, workers must be equipped with the hard and soft skills that productive firms require. On the demand side, there must be a large enough segment of smaller and medium-sized firms that are both productive and able to expand employment.

The past few decades are proof that markets alone will not solve the problem. Governments at all levels must be actively involved. The good news is that we have accumulated considerable evidence about the type of programmes that actually work.

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