Presentation of the OECD Economic Survey of the United States 2020

OECD ECONOMIC SURVEY OF THE UNITED STATES

9 JULY 2020 www.oecd.org/economy/united-states-economic-snapshot/

Key messages • The economy and labour market has been hit hard by the coronavirus • Further macroeconomic policy support remains available, if needed • Supporting workers and getting them back into jobs is vital • Regulatory reforms will facilitate the return to full employment 2

The coronavirus has hit the economy hard

Source: OECD Economic Outlook 107 database

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The unemployment rate increased dramatically

Source: OECD Economic Outlook 107 database 4

COVID-19 infections have proven hard to bring under control

Source: CDC

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The recovery will be gradual

Source: OECD Economic Outlook 107 database

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Recommendations to strengthen the response to health shocks • Improve public health policy coordination across levels of government and reduce regulatory barriers that hinder an effective response • Ensure that the suite of policies that support health insurance coverage do not let large population groups fall through the gaps

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IMPROVING MACROECONOMIC AND INTERNATIONAL TRADE POLICIES

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Budget deficits are increasing

Source: OECD Economic Outlook 107 database

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Monetary policy resumed quantitative easing

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Debt in the non-financial corporate sector is large

Source: SIFMA and OECD National Accounts

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There are large gains in reducing barriers to international trade in services Per cent increases in exports and imports from liberalising international trade in services

Note: The simulation assesses the potential gains from reducing services trade costs to those observed among members of the European Economic Area Source: OECD Metro mode, Benz and Jaax (2020)

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Recommendations to improve macroeconomic and international trade policies • Continue to provide exceptional fiscal support to help unemployed workers and support the recovery.

• In case of a further slowdown be ready to augment forward guidance and quantitative easing.

• Continue providing temporary liquidity support to firms as long as needed to avoid widespread bankruptcies.

• Put more emphasis on lowering regulatory barriers to international trade in services. Abolish or provide permanent waivers for the most restrictive rules, in particular maritime transport between U.S. maritime ports.

• Update the monetary policy framework as intended, retaining discretion in meeting the inflation target symmetrically.

• When the situation normalizes, reform entitlement spending, reduce spending inefficiencies in the healthcare sector, close loopholes and broaden the tax base to ensure long-term debt sustainability.

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HELPING WORKERS FIND JOBS INCLUDING BY MOVING ACROSS THE COUNTRY

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Economic activity is increasingly in metropolitan areas

Source: U.S. Census Bureau

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Housing supply has slowed over time

Source: U.S. Census Bureau

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Housing and transport are big shares of low-income families’ spending Shares of annual aggregate expenditure by income decile, %

Source: U.S. Bureau of Labor Statistics

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Access to jobs is limited when using mass transit Share of jobs accessible by mass transit relative to cars at different time horizons

Note: Base on data for the 50 largest metropolitan areas Source: University of Minnesota Accessibility Observatory

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Broadband coverage in rural areas is often inadequate Share of rural population with access to high speed broadband

Source: Federal Communications Commission

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Infrastructure investment has stalled

Source: Bureau of Economic Analysis

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Recommendations to help workers find jobs • Provide fiscal incentives for states and localities to relax land use restrictions and promote multi-use zoning.

• Help states and localities better co-ordinate land-use, transportation and housing policies.

• Require metro mass transit fund recipients to integrate transport policy with land-use and housing policy.

• Invest in new telecommunication infrastructure where supported by appropriate evaluation such as cost-benefit analysis.

• Improve the maintenance of the road network.

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REDUCING ANTI-COMPETITIVE AND REGULATORY BARRIERS IN THE LABOUR MARKET

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Occupational licensing is quite prevalent

Source: Bureau of Labor Statistics; Koumenta and Pagliero (2017); Morikawa (2018); Zhang (2019)

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Reducing licensing requirements would increase job mobility Job hire rate and estimated job hire rate if occupational licensing coverage was reduced by 5 percentage points

Note: Estimates of consequences of reducing the share of occupational licensing employment by 5 percentage points Source: OECD calculations based on Job-to-Job Flow database from U.S. Census Bureau

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The burden of occupational licensing varies substantially across states Average occupational licensing strictness across 31 occupations (0-6 scale), 2017

Source: OECD calculations based on the Occupational Licensing database from the National Conference of State Legislatures 25

Occupational licensing affects some population groups more than others Occupational licensing by race and ethnicity, % of population

Source: Bureau of Labor Statistics

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Income inequality by race and ethnicity remain large Real median household income, 2018 (thousands) dollars

Source: U.S. Census Bureau

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Non-compete covenants in employment contracts have risen in importance Estimates of federal and state court decisions on non-competes and trade secrets

Source: www.faircompetitionlaw.com based on Westlaw database

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Non-competes are often introduced after a job is accepted and rarely negotiated

Source: Starr et al. (2019)

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Recommendations to reduce anti-competitive and regulatory barriers in the labour market • Anti-trust policy should police markets vigorously to ensure competition remains healthy.

• Encourage states to delicense occupations with very limited concerns for public health and safety and act against anticompetitive behaviour.

• Use federal law to impose recognition of out-of-State licensures, allowing States to set stricter requirements only if they can prove it is necessary to protect the public.

• Address excessive employment barriers that create obstacles for minorities and foreign nationals.

• Outlaw the use of non-competes except where employers can prove benefit to workers.

• Set a minimum earning or minimum skill threshold for using non-competes to protect low-income workers.

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BUILDING ON ENVIRONMENTAL GAINS

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Greenhouse gas emissions have fallen as natural gas and renewables increased in electricity generation

Source: Energy Information Agency

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Recommendations to build on environmental gains • Invest in extreme weather and climate-resilient infrastructure.

• Continue support for fuels and technologies, including nuclear and carbon capture, utilisation and storage, where cost efficient, to achieve further emissions reductions.

• Ensure harmful emissions are priced appropriately.

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For more information Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

http://www.oecd.org/economy/united-states-economic-snapshot/

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