"Although everyone does benefit from lower-priced goods and services, people also care greatly about the chance to be productively employed and the quality of their work. Declining employment opportunities feel real and immediate; the rise in real incomes brought by lower prices does not. For example, according to recent surveys, a substantial number of Americans believe that their children will have fewer opportunities than they have had. The slow recovery from the recent economic crisis may be affecting these perceptions, which means that they might dissipate as the situation improves and growth returns. But the long-term structural evolution of the U.S. and global economies suggests that distributional issues will remain. These must be taken seriously."

. . . .

"The structural trends affecting the U.S. economy cannot be explained by changes in technology alone."

. . . .

"If giving technology as the preferred explanation for the U.S. economy's distributional problems is a way to ignore the structural changes of the global economy, invoking multinational companies (MNCs) as the preferred explanation is a way to overstate their impact. MNCs are said to underpay and otherwise exploit poor people in developing countries, exporting jobs that should have stayed in the United States.

"MNCs do, indeed, play a central role in managing the evolution of the global economy. They are the principal architects of global supply chains, and they move the production of goods and services around the world in response to supply-chain and market opportunities that are constantly changing. MNCs have generated growth and jobs in developing countries, and by moving to those countries some lower-value-added parts of their supply chains, they have increased growth and competitiveness in advanced economies such as the United States. A June 2010 report by the McKinsey Global Institute estimated that U.S.-based MNCs accounted for 31 percent of GDP growth in the United States since 1990."

. . . .

"What is needed instead of benign neglect is, first, an agreement that restoring rewarding employment opportunities for a full spectrum of Americans should be a fundamental goal. With that objective as a starting point, it will then be necessary to develop ways to increase both the competitiveness and the inclusiveness of the U.S. economy. This is largely uncharted territory: distributional issues are difficult to solve because they require correcting outcomes on the global market without doing too much damage to its efficiency and openness. But admitting that not all the answers are known is a good place to begin."

. . . .

"As important as education is, it cannot be the whole solution; the United States will not educate its way out of its problems. Both the federal and state governments must pursue complementary lines of attack. They should invest in infrastructure, which would create jobs in the short term and raise the return on private-sector investment in the medium to longer term. They should also invest in technologies that could expand employment opportunities in the tradable sector of the U.S. economy at income levels other than the very top. The private sector will have to help guide these investments because it has much of the relevant knowledge about where these opportunities might lie. But this effort will also require the participation of the public sector. The U.S. government already invests heavily in science and technology but not with job creation as its primary focus; that has generally been viewed only as a beneficial side effect. It is time to devote public funding to developing infrastructure and the technological base of the U.S. economy with the specific goal of restoring competitiveness and expanding employment in the tradable sector."

. . . .

"But even these measures may not be sufficient. Globalization has redefined the competition for employment and incomes in the United States. Tradeoffs will have to be made between the two. Germany clearly chose to protect employment in the industries of its tradable sector that came under competitive threat. Now, U.S. policymakers must choose, too.

"Some will argue that global market forces should simply be allowed to operate without interference. Tampering with market outcomes, the argument goes, risks distorting incentives and reducing efficiency and innovation. But this is not the only approach, nor is it the best one. The distribution of income across many advanced economies (and major emerging economies) differs markedly. For example, the ratio of the average income of the top 20 percent of the population to the average income of the bottom 20 percent is four to one in Germany and eight to one in the United States. Many other advanced countries have flatter income distributions than the United States, suggesting that tradeoffs between market forces and equity are possible. The U.S. government needs to face up to them."

. . . .

"The United States will not be able to deduce its way toward the solutions; it will have to experiment its way forward."