In one of the most extraordinary interviews I've read for quite some time, former Federal Reserve chairman Alan Greenspan argues that the solution to declining workforce productivity is to lower the wages of the most productive parts of the work force.
At least, I think that's what he's arguing. It's hard to tell, since he speaks in classic Greenspan riddles.
Turning back to the United States, what demographic shift will have major economic implications?
“In the United States, we are in the process of seeing the baby boomers — the most productive, highly skilled, educated part of our labor force — retire. They are being replaced by groups of young workers who have regrettably scored rather poorly in international educational match-ups over the last two decades.”
What else points to the inability of young workers to compete?
“Most disturbing is that the average income of U.S. households headed by 25-year-olds and younger has been declining relative to the average income of the baby boomer population. This is a reasonably good indication that the productivity of the younger part of our workforce is declining relative to the level of productivity achieved by the retiring baby boomers. This raises some major concerns about the productive skills of our future U.S. labor force.”
Can the U.S. government counter this trend?
“Yes, there are options to combat that decline, but contrary to what many people believe, we do very poorly in opening up our borders to skilled immigrants. Our H1-B visa restrictions are a disgrace. Most high-income people in our country do not realize that their incomes are being subsidized by their protection from competition from highly skilled people who are prevented from immigrating to the United States. But we need such skills in order to staff our productive economy, so that the standard of living for Americans as a whole can grow.”
This is a truly bizarre and new form of trickle-down economics. Greenspan thinks that we should import more high skilled workers, reduce the wages of our current high skill workers, and that this will somehow "grow" the standard of living for Americans.
It's almost Orwellian: poverty equals prosperity! Foreign workers equals Americans. Market competition is subsidy. Subsidizing imported workers through subsidized education equals market competition.
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