 Hi, I'm Pedro Dacosta, Director of Communications at the Economic Policy Institute, and this is the State of Working America podcast where we seek to elevate workers' voices to make sure that they're heard in the economic policy debate in Washington and beyond. It's my pleasure and honor today to be joined by Chris Liu. Chris is President Obama's former Deputy Labor Secretary and he's currently a fellow at the Miller Center at the University of Virginia. Thank you so much for joining me, Chris. Pedro, it's fun. Thank you for having me. So I'm really excited to have this conversation. It couldn't be more timely. I feel like workers' issues are foremost in both the political and economic debates. The debate is shifting, and I really want to take a big picture, look with you at how the economy has changed over time. So if you could talk a little bit about the story that has underpinned the economy, both in this recovery but also longer term about workers losing out, losing ground in the economy, the sort of the story that the American dream has been dissipating for many American families, and that the economy might not be working for everyone. What happened to the U.S. economy over recent decades that has changed the game and made Americans more pessimistic about their future, really? Well, Pedro, I'm glad you mentioned the American dream because I think about my parents. I'm the child of immigrants. My parents came to this country in the 1950s because there was this concept of an American dream. If you came to this country, you got an education, you worked hard, you could afford, you get a good paying job that would allow you to afford a home, save for your kid's education, and retire. And unfortunately in this country right now, that American dream is elusive for far too many people, and it's mirrored in the changes that we've had in our economy. I mean, there was a period of time in the post-World War II era when you could graduate from high school with just a high school education, get a good paying union job that would allow you that American dream, and you had in the back of your mind an understanding that your kids would continue to have a better life than you had your grandkids would even surpass them. For a lot of reasons, which we should explore, that American dream just doesn't exist. I mean, in part it's because of automation and technology and globalization, external trends that have always happened, and we can't really turn back the clock on those changes. In part it's because of unionization and the decline of unionization and the decline of safety net protections for people in this country. But the flip of the story is that when I tell that story about what the post-World War II workforce was like, that was largely a workforce dominated by white men. And so the upside of all this is that we now have a much more diverse workforce. Women are part of it, obviously people are color part of it, but we still have too many people that are being left behind. And when you have a period of time as we are in right now, where you have historically low unemployment, we're below 4% in unemployment right now, yet you have 40% of Americans who can't come up with $400 for an emergency expense. You've got consumer debt, whether it's auto debt, student loan debt that has now reached the pre-recession highs. You've got many people who really have jobs but are living on the edge. There's something wrong. And as you correctly point out, it's not just an economic discussion, it's a political discussion. And it's going to be one of the animating forces of the 2020 presidential election. Absolutely. I feel like it already is. And one of the things we focus on a lot at EPI is how to tell this story of an economy that's not really working for everyone at a time where the headline economic indicators appear to sort of all be falling in line. We have 2% growth overall. We have an unemployment rate that's held below 4% now for a year and a half. But of course that doesn't tell the whole picture and we tend to focus a lot on wage growth. But you mentioned a lot of factors affecting this sort of secular decline, if you will, of the American worker. But I'd like to break some of them down, especially the ones that we might have more control over that are more political. Could you start by talking about the decline of unionization and how it played a role in raising inequality and kind of declining bargaining power for workers and so on. Because one of the key issues it seems and the Federal Reserve and other forces seem to finally be coming to this conclusion is you had this absence of wage growth in this recovery and everybody is asking why why and it's it seemed obvious to anybody who studies labor economics that it was a lack of worker purchasing power. Yeah I mean look you know this better than I do but in a workforce in a work environment absent unions there's unequal bargaining power particularly when you're looking at workforces that are not skilled workers by and large. Unions provide a powerful leveling influence and that combined ability of unions not only to bargain for better wages but better benefits better working conditions lifts up everyone and in the end creates for a more stable workforce. I would posit although I'm sure folks in business would disagree that unions are both good for workers and they're good for companies. But for a variety of reasons including changes in the workforce including obviously political decisions laws that have made it much more difficult to unionize you know that there has been a decline and you know you can see that in terms of rising income inequality in terms of stagnant wages you simply have to look at the experience of other countries you know Germany being a prime example which is a country that is a heavily unionized country where there's far been far more consistent wage growth and far less inequality. And so I wanted to touch on that a little bit further so given the the role of unions declining we've also seen renewed activism in other areas even in some kind of non-union activities including walkouts at places like Google and in the tech sector. What kind of mobilization do you see today that gives you hope that we might be seeing a reversal of that trend? Well even in the union movement while the percentage of unionized employees has decreased in certain sectors they remain incredibly powerful. I'm thinking about the teacher strikes that we've seen over the last couple of years which have pushed effectively pushed for wage increases in red states. Now in part it's not just the union striking but there really is sort of a public outcry that the tax cut policies of the republican party at the state level have really deprived students of a quality education. So that that uproar by teachers has really been mirrored by a public outcry as well that something needs to change along the way but I am also encouraged in general by the increased public consciousness of companies and you know you see this playing out not only as you mentioned in the tech sector but you see this playing out for instance in the area of climate change. You know not with standing President Trump's decision to pull out of the Paris climate agreement you have companies continuing to stay part of that and they're part of that because their workers demanded their customers are demanding it but they also understand it's good for business and it's where the United States should be. So in many ways where the government is failing the workers right now companies are starting to step up. You know last week or two weeks ago the business round table came out with a group of 200 prominent businesses in the United States that came out with a statement where they refocused their mission and they really tried to prioritize not only sustainability but workers. Now we can have a broader I see you I see you smiling we can have a broader conversation about how real that is and what substance is there but that's certainly meaningful and I think it certainly reflects not only where their workers want them to be but frankly where their shareholders want them to be as well. Absolutely I was smiling because I find it fascinating we've there's been this whole discussion about how genuine is that statement how much does it mean I think the fact that it I'm with you that the fact that the statement was made means a lot whether it means that right that they feel pressured to say something it kind of doesn't really matter the mere acknowledgement is substantial. Yeah I mean the proof isn't the pudding I mean ultimately it comes down to when there are actually policies that are being debated at the federal level where the business roundtable and their members ends up being now they've always are at least until at least recently they have supported an increase in the minimum wage in part because most of those companies frankly could not hire workers cannot attract the workers they need paying minimum wage but it will be interesting to see when other more controversial legislation comes up whether there's any there there to that statement. So given the recent tax cuts and the kind of American obsession with tax cuts as kind of the only way to do fiscal policy how much do you think tax policy over time has contributed to again the stagnation of workers wages and inequality. Well look I think what we have learned painfully going back to the Reagan tax cuts is that a trickle down economics does not work it simply doesn't lead to the kinds of gains in terms of higher wages in terms of the hiring certainly not in terms of business investment that the proponents have always suggested it would be and we kind of keep going through this and then we go through not only the federal level the state level this idea that if we keep cutting taxes it's going to eventually help everybody. You know look I'd love to say that the empirical facts will dissuade the next the next group of people from doing this but I'm not convinced of that. Yeah you know we had a talk with Bob Cutner who's recently written a book called The Stakes about how the next Democrat should run as a progressive and I was wondering how you feel about about the race in the following way. There's a school of thought that says that that Democrats and I bring this up because you raised the issue of what the workforce used to look like mostly white and male and there was prosperity for them and now it looks very differently and different and the prosperity is not as equally shared. Do you think that you know how does the Democratic Party play this in the sense of a trying to placate white working class voters in some way by not addressing the issue of race head-on and making making the policy issues more about the economy and b kind of taking the approach that is kind of the sort of rainbow coalition approach and really tackling the issue of race head-on and making that a central part of the campaign. You know let me answer it this way. You have the Trump administration trying to harken back to a time a golden era that frankly didn't really exist for most Americans whether it's in terms of steel tariffs and manufacturing and try cold jobs lots of things frankly that we can't go back to where we were. The question is whether it's the answer to for replacing Trump to embrace globalization and trade and the service economy. I don't know that may be the reality that may be the economic reality as a political reality that's a pretty tough message to sell to a lot of people in this country that the type of job you've had and your parents have will never exist again. I think the broader problem in this country and this is not a Democrat versus Republican issue or a red versus blue issue. It's really what we have in this country right now is an urban versus rural issue right now. You know I think back to last year when Amazon was trying to decide where to put their HQ to you know their 20 finalists were places like Philadelphia and Atlanta and Boston and Washington D.C. and New York and that's the problem. The jobs are basically now flowing to urban and suburban areas and again it's you know whether it's Chicago or whether it's Charlotte it's they're largely going to those areas they're not going to places like Mississippi and West Virginia and the old way that those states used to attract businesses there was through tax incentives and I think a lot of companies have realized you know what it's not just about tax incentives it's about it's about having access to a good transportation it's about a trained labor force it's about the types of cultural amenities that our workers and particularly our executives want to have and you see that stratification playing out and it happens in every state. You could have a place like Virginia where Northern Virginia is booming but Southwest Virginia is not. You see this happening between rural Texas and you know the conflict between that and Austin and Dallas and Houston and no one has quite figured out how we bring jobs back to those forgotten places. The Trump answer which is we go back to a manufacturing economy that we had in the 1950s isn't the answer. The answer certainly can't be we're going to train all those people for new jobs because the reality is you can train people for jobs where those jobs aren't going to be there they're going to have to leave. What do we do about those forgotten places and I don't know that any policymaker has the answer or I've heard has the answer to that. Do you think what's your view on the on the manufacturing sector generally you know people as a as a reporter the story that I've also was always told by this sort of consensus economics is that you know forget about manufacturing it's gone and thus that we should just focus on our competitive advantages which is services. I have colleagues at EPI that that kind of beg to different I think that while small as in terms of the the size of the role of the economy manufacturing is important for kind of its multiplier effects do you think that it that manufacturing is something that you know is a sector that we kind of have given up on or and what's the role of automation you know within that because I'd like to expand on that a little bit. Look I'm a big believer in the future of American manufacturing and I don't think we should give up on it and when I was the deputy secretary of labor I spent a lot of time visiting factories both you know a major auto plant outside of Kansas City to small manufacturing facilities in North Carolina and so I've seen people who can do it and what but but you have to do it in a certain way if you go to any factory now it doesn't look like the factory of 20 or 30 years ago. First of all there are very few people that work there it's remarkably clean the machines aren't necessarily run by hand they're run by computers and so we can do advanced manufacturing in this country and we could take advantage of the innovative innovation advantage that we have over countries the skilled workforce that we have but it can't we can't manufacture everything I mean there becomes a love point at which it is no longer efficient for us to do it. I always tell people like look if you want to go to a Walmart and buy a five-dollar t-shirt you can sure as hell bet that that's not going to be made in the United States because the labor cost is just too high that being said you see a lot of manufacturers moving back to the United States both because they're concerned about transportation costs or intellectual property considerations and that they figured out an economical way to do it but it's not easy but I think we would be wrong to give up on it. And how big a threat do you actually feel that automation is to employment generally because sometimes I feel like it's overstated we hear a lot about the roboticization of the workplace but we don't actually see it taking over in any immediate ways. You know I don't know how much of a threat it is but I think it's you clearly can't wish it away you know we've gone through economic changes in our country's history whether it's an industrial revolution or the computer revolution of the 70s or the internet revolution change happens technology is here to stay and what that means is that you're going to be able to go to the auto plant that I went to they're going to be able to make as many cars as they've made 20 years ago with half as many people and it means that you're going to go to a McDonald's and you're going to see the food the order being taken on a computer you're going to punch it in instead of instead of telling it to a cashier so jobs will be lost along the way the challenge is that there will always be jobs for people that cannot be automated and what do you do for those people you know Andrew Yang would say we should give everyone a thousand dollars a month others would say maybe we simply need to raise the minimum wage to help give those people living wage the truth of the matters in some ways some of the fastest growing jobs in this country are nurses aides and home health workers and you're never going to be able to automate that away and yet those jobs pay subsistence wages and so if those are the jobs that can't go away then we need to make sure that somebody can actually do those important jobs and still make a living and and raise a family on that absolutely and that goes back to of course workers rights and unions and I wanted to ask you about about Trump's promises and and promises captain and not so it's easy to forget that he ran on a sort of pro worker platform right because he's done so many he's taken so many anti-worker policy measures over time could you talk a little bit about how Trump's role in in sort of labor policy specifically anything that keeps you up at night that worries you any rollbacks because it seems like there's a lot happening under the hood or under the radar that really we don't have the room for that kind of wonky news in this news cycle you know I made the statement on another interview another media outlet recently where I said that Trump is the most anti-labor president that we've seen potentially at least since we passed the Fair Labor Standards Act in the 1930s somebody quibbled with me as to whether Reagan had been worse and I said well okay we can have that conversation although you know even president Reagan you know the minimal wage was increased under his period of time you know his labor secretary still did good things on behalf of workers the truth is I'm hard-pressed to find anything that this president has done that has helped workers you know it's not just a tax cut that's added over a trillion and a half dollars to the to the federal deficit which makes it much more challenging to do anything else it's the rollback of important policies that we did during the Obama administration like the overtime rule like the fiduciary rule it's appointing conservative judges that have consistently taken anti-worker positions you know the only thing in many ways that has saved this country is I think just their sheer incompetence their inability is to get some of these rules out the door but you know if he gets four more years he will do far more damage and what is amazing to me is that as you pointed out he promised to undo the American carnage and to think and to remember the forgotten Americans in this country and and what he has done is to advance a purely pro employer pro corporate agenda and you know and even on the moves that he's tried to do I mean look he's promised to bring back coal jobs and yet he's you know appointed a former coal mine executives to to oversee their safety and he's undone the safety protections for them and so even when he takes a half step in the direction of workers he takes like two or three steps backwards absolutely no it's been it's been quite a barrage to keep up with it's interesting that you brought up immigration because I feel that you know in your own experience because it's a because it's similar to my own and to so many Americans but also because it to me it speaks to how rather than kind of reviving the American dream or even believing in it Donald Trump is kind of putting it seems to be putting a nail in its coffin or because you know other than the idea apart from the idea that if you work hard you can get ahead and everything else we discussed of the American dream the other side of the American dream is you can come from somewhere else with nothing and get ahead and right your parents immigrated here for that reason my parents came here from Brazil for that same reason there was opportunity they could they could go to great schools primarily and that's what that's what they came here for how do you see his immigration policy affecting the labor market in the long run because we know we need a growing population to sustain you know economic growth is in part based on population growth we need young people to kind of maintain a healthy vibrant society how does his immigration outlook kind of compliment the the the you know how does the white nationalist part of the agenda compliment the the corporatist part you know the irony is that he will make the argument that his immigration policies are important to sustaining the economy and you know you're a good folks at EPI and other economists will tell you that immigration is vital to the growth of a company and so you know what he's basically saying is look we should create standards that we should only take you know high skilled immigrants to this country from certain types of countries and he doesn't overtly say it although it's pretty obvious that there's a racial element to that the truth of the matter is you know many of our families have come here without a huge amount of skill without a huge amount of education and have done wonderful things and that is the American story if you're coming here and you're willing to work hard you can get ahead but even leaving aside you know whether we should prioritize skilled versus unskilled the truth of the matter is the U.S. economy cannot function without a supply of unskilled labor to this country whether it is people that are picking fruit or vegetables and farms or seasonal seafood workers on the Maryland eastern shore or even Donald Trump's own properties like Mar-a-Lago depend on a supply of guest workers which needs to happen in this country and then you look more broadly at this and you look at different places around the country the immigration story is not quite what Donald Trump has suggested you know one of the most meaningful trips I took when I was the deputy secretary of laborers I went to Dayton Ohio which has obviously been in the news recently because of unfortunate incidents and I spent time with the mayor there Mayor Nan Whaley who had a spearheaded a welcome basically a welcome home a welcome to America initiative to bring immigrants and refugees to Dayton and in part because of that initiative she's been able to stem the decrease in population in Dayton through bringing immigrants refugees in who have both brought skills who have helped reinvigorate the downtown have brought a whole new interesting set of cultural amenities restaurants and you see this playing out you know again you know that you look in places like Iowa in Arkansas and whether it's meat packing plants or whatever it is these small towns understand they can't exist without immigrant workers now look we should obviously ensure that people are coming here they're coming here legally that we figure out a path for citizenship for the people that are here but this country has always been about opening our arms to go from other countries not only because it was a right thing to do but it was a smart thing to do so I wanted to shift the discussion a little bit thank you so much for that because that's really that's really helpful and insightful I want to ask you a little bit about the current state of the economy because you know people seem to be it's actually a curious state of affairs for somebody who was a reporter during the last financial crisis last time around everybody was asleep at the wheel we all thought you know we all everybody was saying growth was still strong when we were already in the deep recession this time we're sort of recession sensitive yeah we're kind of we're always we're always seeing it around the corner and we've been seeing it around a corner for a long time and so it's interesting there were no moment where growth is you know weakening but not exactly faltering and yeah we're talking about recession so I have two separate questions for you one is how do you look at the current state of affairs and how do you assess the current economy but also looking at a potential next recession whenever it might arise how well prepared do you think we are not just economically but also politically in terms of having learned the lessons from from the last one I am I am on the fence as to whether we're heading into a recession but we are the economy certainly is slowing down right now and whether it's consumer confidence numbers that came out recently that showed the biggest decline in six years or manufacturing slowdown the biggest drop in three years the jobs market clearly is slowing down at this point and so you see a lot of indicators suggesting a slowdown and obviously the president's trade war is creating headwinds that are that are creating a lot of uncertainty for businesses right now the challenge and as we mentioned at the outside is that you've got a lot of Americans notwithstanding the fact that they have jobs are really kind of just living paycheck to paycheck and so it really would not take much increase in the unemployment rate to throw a lot of people over the edge right now and and that's troubling and then you look at frankly the macroeconomic tools that we have at our disposal to fight it we're now heading the annual deficits now will approach one trillion dollar really for the for the foreseeable future under this president and potentially the next president you've got interest rates which are really low so a lot of the tools and levers we traditionally had at our disposal to get ourselves out of our session may not be available the next time around what do you make of one last question which is a little bit more specific but kind of frightens me a little bit because it's it was one of the key buffers in the last recession and that's state unemployment benefits it seems like that's really the first line of defense when we have a recession and there's an uptick in joblessness but a lot of the state benefits as far as I understand it have been curbed over time and have been diluted and there were caps put on it how concerned are you that we have you know whether or not we have the fiscal room whether we even have the fiscal policy infrastructure to deliver the stimulus in the right ways look I mean this is sort of a broader problem in our country right now during this last you know nine years of economic expansion it would have been the smart thing for a lot of states not only to build up surplus in their budgets potentially sharp their unemployment systems which is you suggest correctly there have been all the eligibility standards have complicated people's ability to get unemployment the benefits really aren't what they ought to be and so it is a safety net but it's the pretty tenuous safety net right now and they certainly many states certainly are not ready for the deluge of you know of people that might come their way if we have a recession I don't think we're going to be in the 10 unemployment range that we were in 2010 but as I said there's so many people that are on the edge right now that you could sort of see this as a house of cards coming down pretty fast Chris Lou thank you so much for taking the time Chris is a fellow at the Miller Center at the University of Virginia and he's also the former deputy labor secretary under president Barack Obama thank you so much for your time I really appreciate it my pleasure thank you