More Profits, Fewer Jobs, But Many Fewer Workers, Too
William Galston makes a valid point with his comment that low interest rates may be counterproductive in the country's search for more employment ("Soaring Profits but Too Few Jobs," Politics & Ideas, April 2). If capital is cheaper than labor, labor will be displaced in favor of capital investment.
Mr. Galston inveighs against the fact that the compensation share of GDP has declined from 64% to 61% since December 2007. But note that this decrease, not coincidentally, mirrors the decrease in labor-force participation from 66% to 63% over the same period. Fewer people working, fewer people getting compensated. And with capital providing a larger share of the input, it is only natural that capital's share of the output, also known as profit, has gotten larger.
But where Mr. Galston really loses me is with his touching faith that new policies are needed "that focus relentlessly on aligning growth with job creation and compensation with productivity." At the risk of sounding cavalier, haven't the existing policies done harm enough already? The Competitive Enterprise Institute estimates that in 2013 regulatory costs amounted to $14,678 per family, or 23% of the average household income of $63,685. Here's an iconoclastic suggestion: Get rid of the policies and rules and regulations that strangle job creation and see growth, employment, tax revenue and compensation soar.