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- [Announcer] Welcome to the Wiener Conference Calls series, featuring leading experts from Harvard Kennedy School who answer questions from alumni and friends on public policy and current events.

- Hello and welcome. I'm Ariadne Valsamis, from the Office of Alumni Relations and Resource Development at the Harvard Kennedy School, and it's my honor to welcome you to this Wiener Conference Call. These calls are very generously supported by Dr. Malcolm Wiener and his wife, Carolyn, who championed the Kennedy School in so many vital ways and we're very grateful for their support. I wanna give a couple of reminders before we start. The call is being recorded. It will be posted on the Kennedy School's website and on our YouTube page. If you would like a real time transcription of the audio, please use the meeting controls on the bottom of your Zoom screen, and you wanna find the show captions button. If you would like the best view of our speaker, please select speaker view, that's on the top right of your Zoom window. And we are very privileged today. We're joined by Gordon Hanson, who's the Peter Wertheim professor in urban policy and the academic dean for strategy and engagement at Harvard Kennedy School. Gordon is also the co-director of the Reimagining the Economy project with Professor Dani Rodrik. And Gordon's current research addresses the causes and consequences of regional job loss, the effectiveness of place-based policies in alleviating regional economic distress, and how the energy transition will affect local labor markets. We're very fortunate that he's agreed to share his work today with the Kennedy School's alumni and friends. And I will turn it over to you, Gordon.

- Thank you very much, Ariadne. It's really a pleasure to be with you all today. It's election season. There's lots going on, and what I'd like to do is just kinda take a step back and think about what might come after the election in terms of economic policy, either by a Harris administration or a Trump administration. I'm gonna focus in particular on policies that have a specific objective in mind, and that's helping America's left behind regions. And that terminology of left behind is something that both that the Biden administration has used, that the Trump administration used earlier, and that candidate Harris has used. So what I'm gonna do is kind of give you a sense of, well, what does left behind mean and where did being left behind come from, and what are its long-run economic consequences? And then I'll highlight the two very different approaches. Well, I'll highlight the commonalities between President Biden and President Trump and how they define the problem and the high-level goals that they set out, which were mainly about bringing more manufacturing jobs back to the United States, and then highlight the sharp differences and the particularities of how they sought to bring that reality into being. I'll close with what we're doing at the Kennedy School on all of this. We have developed a data visualization platform in which we try and provide practitioners, journalists, students, academics, anyone who's interested information at their fingertips which allows them to evaluate what's happening in America's local labor markets and where are the resources coming from, state and federal governments, going across a wide variety of programs. And I'll say a little bit more about that in closing and how we've used it in the work we're doing so far. I'll try and do all of this in about 23 minutes and leave us ample time for discussion. So I'm gonna jump in to some slides. I promise very few words and lots of pictures. So the work I'll talk about today is part of the Reimagining the Economy project with which Dani Rodrik and I are running inside the Malcolm Wiener Center for Social Policy here at the Kennedy School. So what does it mean to be left behind? There's a very simple metric that tells us a great deal about what's going on economically in the place. And that is the rate of joblessness, which is different than unemployment. To be unemployed means you are out of a job and looking for work, to be jobless means you're out of a job, whether or not you're looking for work. The unemployment rate rises and falls a lot over the course of an economic cycle as we go from economic expansions to recessions and so forth, the rate of joblessness moves more slowly, and that joblessness is indicative of a much deeper economic pathology. So I wanna kind of show you some data on what joblessness looks like in the United States and how it's evolved over the last 30 years. And then talk about the economic consequences of being in a place where joblessness is high. So I'm gonna show you, I'm showing you two maps right here. Each map shows the fraction of prime age men. Prime age means ages 25 to 54. We focus on prime age because, historically, employment rates among this group have been very, very high. I'm focusing on men because you wanna separate men and women when looking at changes in employment rates over time, because women's employment rates have increased just across the board. And so, whereas today, joblessness for men and women look similar, they started at very different places. I'll come back to that in just a second. So the map shows you, then, what's going on in local labor markets. What's a local labor market? It's a collection of counties in which people live and work. One of the things we've learned about the US economy over the last 15 or so years is that economic mobility, the movement of workers from one place to another, isn't nearly what we thought it was. Students move, recent graduates move, the highly educated move. But once somebody's over 30 years old, and especially for those who do not have a college degree, mobility in response to changing economic times is pretty muted. What that means is understanding what's going on inside the places in which people live and work are really important. And this concept of local labor markets and understanding what causes wellbeing to change in these regions has been the centerpiece of the work I've been doing for a couple of decades. So what you're seeing on the left is for the year 1990, the fraction of prime age men without a college degree who were jobless, you see in dark red places where the jobless rate was above 25%. That's concentrated, you can see a concentration in Appalachia. You can see concentration in New Mexico, in the lower Rio Grande Valley of Texas, and some rural parts of industrial states, Upstate New York, Upper Michigan, and some other places in the low-lying areas of the Southeast. On the right-hand side, what I'm showing you is the same thing, but now for prime-age men with a college degree. The cutoff values for colors are exactly the same. And what do you see? Joblessness in 1990 was much less common among the college-educated. Now what's happened over the last 30 years is that joblessness among non-college men has increased dramatically. Whereas among college men, not much has changed. So let me do that again for you. What you see is a dramatic expansion in these dark red and pretty dark red areas. That increase in joblessness is due to kind of three big things. One is the consequences of globalization and manufacturing job loss that was a result primarily of import competition with China. Work on this as part of the China Shock agenda is something that I've pioneered with my colleagues David Autor at MIT and David Dorn at the University of Zurich. But that's not the only thing that's going on. Technological change and automation have been very important. The loss of jobs in coal mining, and some parts of kind of old industries have been important, as well as secular shifts away from the types of industries that employed lots of of workers without a college education. So the combined results of those shifts over the last 30 years gives us this map in which we see concentrated pockets of joblessness in lots of the United States, and then high levels of joblessness, more than 20%, in a huge chunk of the country. When you look on the right, you see what's gone on with workers with a college degree. Do the slideshow one more time. Almost nothing's changed. It's like college-educated workers live in a different country. Our concern about joblessness is that, and then let me finally say, if we were to look at this map for women today, it would look almost exactly the same. Joblessness among non-college women is high where joblessness is high among non-college men. And well, joblessness is just low everywhere for college-educated men or women. The reason we're concerned about joblessness goes back to insights that William Julius Wilson, a great sociologist, really a landmark in scholarship on the challenges of inner city life in America, was at the Harvard Kennedy School for much of his career. And what Wilson discussed and put forth is the idea that what's troubling about low income areas is not poverty, people can be poor and they can be doing okay, they can be making progress in their lives, it's poverty combined with joblessness, because when you have joblessness, what happens? Families break down, the incidence of criminality goes up, drug and alcohol abuse goes up. And what you have is a lack of investment in the social fabric of a community that can lead to a downward spiral. This was something that Wilson studied in the case of inner city Chicago in the 1960s and 1970s. What we've seen since that time is now that those same pathologies play out in former manufacturing regions that are small and medium-sized towns. So that's our reality today. And what's been just really interesting to us who study economic policy is the way in which Democrats and Republicans kind of agree that joblessness is a big issue, manufacturing job loss should draw our concern, and that we should be doing something about bringing jobs back to former industrial areas. And so what we've seen, first on the part of President Trump and then on the part of President Biden, are concerted efforts to try and do just that. So what I'll do next is talk about what was the Trump approach, then talk about what the Biden approach was, and then talk about where we might go from here, and then we'll open stuff up for questions. So what did President Trump do? Well, president Trump made it very clear he wanted to bring manufacturing jobs back to the United States, and his main mechanism for doing so, in addition to some tax incentives that were part of his 2017 Tax Cuts and Jobs Act that include the creation of Opportunity Zones, happy in the Q and A to talk about what Opportunity Zones are and what we know about them. But really his primary policy tool was raising tariffs on imports of goods from China. And these were primarily manufactured goods. And his theory of change, and there was a very clear theory of change there that was spelled out by his trade representative, Robert Lighthizer, was that if we put import tariffs on Chinese manufacturing goods, we're gonna reduce those imports, we're gonna expand production of manufacturing goods in the United States, and we're going to then increase manufacturing employment. On the left, what you see is a map based on research that David Autor and David Dorn and I just completed last year, which shows what are the regions that should have benefited from those manufacturing tariffs that President Trump put on Chinese goods. And if you compare maps, you can see that the dark red areas in the jobless map and the magenta, dark magenta areas in the tariff maps have a lot of overlap, not perfect overlap, but the Trump tariffs were targeting lots of areas that had been subject to manufacturing job loss. What we then went on to do was to ask the question, well, was the theory of change validated? Did those tariffs then turn into more manufacturing jobs? And the answer is largely no, that we saw very little employment recovery in the places in which that should have benefited from those higher tariffs. And what we uncovered was several reasons for this. First is that China didn't sit still. What China did was almost immediately after the US raised tariff tariffs on imports of Chinese goods, they put tariffs on imports of US goods. And on the right, that map shows you in darker colors the regions that were hit harder by China's retaliatory tariffs. And what you see is there's a fair bit of overlap between the map on the right and the map on the left, not perfect by any means, but many of the places that might have been helped, on the one hand, by import protection from China were now facing tariffs on exporting goods to China. So China itself undid part of the effect of the Trump policy. But then something else happened, and that is that we stopped importing some goods from China and we started importing them from somewhere else, and primarily Vietnam. There was plenty of leakage there. There was also kind of uncertainty over, well, would these tariffs last? And so we didn't see a sharp increase in investment in new manufacturing capacity that happened in the aftermath. The new capacity we did see was in plants that are just very capital-intensive. They don't use nearly as many workers as old factories did because technology has changed in the 30 years since those factories disappeared. If you take a step back, though, and think about the Trump theory of change, you'll see that it has a lot of causal links. You have tariffs to imports, to production, to jobs. And all of those links have to be operative. There's a principle in economic policy of targeting, if you wanna achieve a given outcome, you wanna target policies that go after that outcome as directly as possible. And that means policies that would target employment and not imports. And so there was some fuzziness in the fact that you had a pretty involved causal chain that took you from the policy to the action that we wanted to accomplish. What a candidate Trump is proposing for a new Trump administration is more of the same: much higher tariffs on imports of goods from China and imports of goods in general. Now we don't know what the magnitude of those tariffs will look like. So it's kind of hard to forecast what their impacts would be. The sort of tariffs that Trump is talking about would be so expansive as they would like as to require an act of Congress. Whereas what Trump has done so far, he could do as president. And so I think there's some doubts about the ability of a President Trump to enact the trade policies that candidate Trump is proposing. Okay, so what about what President Biden has done? So President Biden passed four big pieces of legislation, and you'll see those on the left. The ARPA was the American Recovery and Production Act; The IIJA was the Infrastructure Investment and Jobs Act; The IRA was the Inflation Reduction Act; And the Chips and Science Act was the CHIPS Act. What these pieces of legislation did were, one, to provide subsidies for investment in specific types of economic activities. So that could have been building infrastructure, it could have been building clean energy generation capacity, or in the case of the CHIPS Act, building new semiconductor capacity. Most of the money that President Biden authorized was really tied to sectors and not tied to places. What President Biden also wanted to do was not just to activate those sectors, but to try and help regions in which that had lost manufacturing jobs. So a secondary part of these pieces of legislation was money that really did try and target distressed places. And so as we total it, and you look across the different provisions of these four pieces of legislation, we tally about $80 billion over roughly a decade in money that would go to place-based, that would really target places in distress. Is that a big number or is that not a big number? So what we've also done as part of the Reimagining the Economy project is we are measuring what the United States does when it comes to place-based policy, all the stuff we do to try and create jobs, raise wages, upgrade economic structures in places that are hurting economically. That is simple to say, but it's really hard to do, because these policies are undertaken by just a cacophony of federal, state, and local agencies. So we've spent the better part of three years cataloging everything that happens in these domains. And the result of that is what you see on the right. I'm not gonna go through what all the colors mean, although I would be really excited to do so, 'cause it was a lot of work, and it's the first time this has ever been done. And what it shows you is that the US spends around a hundred billion dollars annually on what you consider kind of place-based policy. And so what President Biden was proposing, 80 billion over 10 years, think of that as kind of a 10-20% increase in what the US is doing already. So his numbers seem big, but we're already doing a bunch of stuff. Here's the kicker though, and that in order to get access to this money, you had to then, for most of these programs, you had to organize a consortia, a group of organizations, that would do a thing in your region that met the requirements of one of these laws. Let me give you an example of an organization we're working with in West Virginia. Coalfield Development is based in Huntington, West Virginia. And their mission is to try and retrain workers who've lost jobs in coal mining and coal-mining related industries so that they can find well-paying employment in a region that has been really hard hit by the energy transition. To qualify for the money, what they had to do was form a coalition with about eight other organizations that would then create a plan for bringing a set of policy packages to a wider region. And so this is kind of about a six-county, no, it's a 8-to-10 county chunk of Appalachia that would work on not just workforce development and worker training, it would work on investing in communities, it would work on revitalizing communities, and also have a clean energy component. So that's great, but in order to organize a consortia, you have to know what you're doing. You have to have administrative capacity, you have to have to understand how the federal government works, and you have to have kind of a well-defined set of programs that you can then roll out. Whole field development is among the most innovative programs in the space of place-based policy in the United States today. Its founder won a MacArthur Genius Award for his work. You don't want that to be the threshold for getting acces