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Since Donald Trump was elected and before, economists and politicians have debated whether disaffected Rust Belt communities are struggling because of the impact of automation, globalization, or foreign trade. Which is the culprit?

None of them by itself, according to new research by economists Laura Tyson and Michael Spence. They argue that automation, trade and globalization are part of the same, sometimes brutal cycle: Automation first allows companies to contain and cut employee counts, and goes on to trigger a "turbo-charged" reverberation around the world.

Why it matters: If Tyson and Spence are right, the policy answer to rising income inequality and popular disaffection is more complicated than simply attacking robots or globalization. It's been the interplay of these forces that's in part driven a steady decline in labor costs as a share of company profits over the past generation or two.

Expand chart
Data: University of Groningen and University of California, Davis, Retrieved from FRED; Chart: Andrew Witherspoon / Axios

Automation, Tyson writes, leads to "turbo-charged globalization by enabling companies to source, monitor, and coordinate production processes at far-flung locations quickly and cheaply, in order to take advantage of lower labor costs."

What to do about it: Tyson suggests:

  • Spend more money on training and education programs;
  • Beef up "income support programs," like the earned-income tax credit and wage insurance. Under the logic that globalization's winners should compensate the losers, such programs would subsidize workers who lose high-paying jobs and are forced to accept lower-wage work, .
  • Lifetime loans for retraining, which workers can tap and only pay back in line with income.

Go deeper

Updated 1 hour ago - World

North Korea claims latest missile test new weapon launched from submarine

North Korean state media claims the country's military fired this missile on Tuesday. Photo: Korean Central News Agency

North Korean state media announced that a detected ballistic missile launch off its east coast on Tuesday was a newly developed weapon test-fired from a submarine.

Why it matters: Pyongyang's latest in a series of recent missile launches into the sea happened hours after U.S. officials emphasized their commitment to restart negotiations on North Korea's nuclear weapons program, which have stalled since talks broke down during the Trump administration, AP notes.

4 hours ago - Politics & Policy

Manchin's massive means test

Illustration: Aïda Amer/Axios

Sen. Joe Manchin (D-W.Va.) is offering progressives a trade: He'll vote for their cherished social programs if they accept strict income caps for the recipients, people familiar with the matter tell Axios.

Why it matters: Manchin’s plan to use so-called means-testing for everything from paid family medical leave to elder and disabled care would drastically shrink the size and scope of the programs. It also would bring a key moderate vote to the progressive cause.

The China whisperer

Nick Burns. Photo: Chen Mengtong/China News Service via Getty Images

President Biden's nominee for ambassador to China will face aggressive questioning Wednesday about the most important, and potentially perilous, bilateral relationship in the world.

Why it matters: While Nick Burns is an experienced diplomat with support on both sides of the aisle, lawmakers want to use his confirmation hearing to force the administration into some tough positions on China.