Jobs numbers are set to be released tomorrow morning hot off the heels of the FOMC announcing a fourth $10 billion reduction to quantitative easing. Janet Yellen and other Fed members are most likely betting that the unemployment rate will support their decision—but will it?
Dean Baker, co-founder of the Center for Economic and Policy Research, estimates that the U.S. added a mediocre 180,000 jobs to the economy in April. “We have a little problem here, we still have the weather issue to be sorted out,” he says. He thinks it’s possible that the unemployment rate inches down to 6.6% but “we haven’t had any fundamental changes, you just always see a little bouncing around.”
The economy has seen more of the same lackluster growth month-over-month, says Baker, “We’ve seen this upward distribution of income, and we’ve seen a lot of bad jobs being created.” In order to break out of this cycle, Baker suggests changing the way the U.S. awards patents.
“People don’t realize this, but we spend a lot of money on prescription drugs,” he says. “The reason we do that is because the government is giving drug companies patent monopolies.” Without patent monopolies drugs would all cost between $5-$10 per prescription says Baker.
“That’s about 2% of GDP, the difference between what we pay now and what we would pay without those monopolies. I think that’s the sort of thing we should be looking into. It’s not going to get us jobs tomorrow, but it will get the economy on a more healthy growth path with more equality.”
According to Baker, this problem extends beyond drug patents. Telecom and cable monopolies also hurt the economy.
"We have situations where there are industries that in times past would have been heavily regulated," he says. "They were deregulated and there was competition for a time but it's getting increasingly hard to say that where you have so much consolidation and in many areas you have no choice." Unless we can find a way to create competition, says Baker, these industries have to be regulated to bring down prices which will free up money for people.
Finally, Baker believes that the value of the U.S. dollar needs to come down in order to bring better, higher-paying jobs back to the U.S. "If we got the dollar down we would see more exports, fewer imports and the jobs that we created would be disproportionately manufacturing," he says.
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