LOC02:42
23:42 GMT
WASHINGTON, Oct 8 (KUNA) -- With US GDP growth averaging only two percent over the last five years, experts believe slow innovation and strict regulation may be to blame, in addition to the obstacle of an aging population.
At a seminar hosted by the International Monetary Fund (IMF) on day two of its Annual Meetings, the consensus was that the government needs to introduce policies that foster youth entrepreneurship, counter job loss, and improve the skills of the older workforce.
Former Chief Economist of the US Census Bureau and University of Maryland Professor John Haltiwanger said innovation "doesn't come out of thin air," and productivity growth in an advanced economy like the US is "connected to ongoing experimentation by young entrepreneurs."
Major investment is typically required from different parties, he added, and young firms can often find themselves shut out.
The productivity slowdown thus reduces the likelihood of non-competitive companies making an exit from the market, and startups are slow to grow, he explained.
Standardization is also an issue, Haltiwanger noted, giving the example of "everyone having the same phone."
This is "not inherently a bad thing but it does make it so that these days it's hard to break into the market as young entrepreneur," he said.
Haltiwanger suggested that an achievable policy would be to have the government "change the Small Business Administration to the Young Business Administration - and that is a cabinet position."
Martin Baily, a senior fellow at the Brookings institution think tank, said the productivity slowdown may also be because "we've run out of significant innovation," and "the best companies' productivity is increasing but other industries are not keeping up."
He pointed to reduced competition, capability, and motive to change as the culprits.
"Investment to a great extent follows the innovation," Baily said, and recommended government issue policies to improve the skills of the aging workforce.
The only government representative on the panel, Chief Economist at the US Treasury Karen Dynan, acknowledged that there are "various pieces of evidence that suggest that there are barriers to competition in this country," and said the Obama Administration issued an Executive Order in the spring to examine them.
"There are things we understand about the slowdown and things we don't understand," she said, but added there is a definite "lack of business investment and lack of technological advancements" in the US currently.
The Administration is also looking into licensing issues that prevent people from being able to cross state lines and continue doing the same job they were before, Dynan said.
"Regulation in that case is not helping us," and leaves people out of a job for too long, she added.
While licensing is needed for consumer protection purposes, a less arduous certification process can sometimes suffice, and that's what the government intends to do, she said. (end)
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