Harvey to be costliest natural disaster in U.S. history, with an estimated cost of $160 billion
The massive destruction of property caused by hurricane Harvey will certainly increase demand for goods and services – for building materials, machinery, and appliances for countless construction projects; for health care services and disaster related government services; and for countless personal items that have been lost. Even though the disruption of Gulf Coast businesses and industries has idled workers in that area, the longer term impact on job growth will be large and positive. The U.S. might finally see wage growth and more people coming back into the labor force.
Yet, there is a catch. Massive destruction like we have seen with hurricanes Katrina, Sandy, and Harvey reduces the total wealth in the U.S. On average, the quality of life in the U.S. declines. That means that most if not all of the added jobs will only only contribute to replacing lost wealth, not adding to the total stock of wealth. (It is also worth adding that many of the goods that go into restoring the lost wealth will be imported, so some disaster induced job growth will be exported to low wage parts of the world.)
The bigger point is that we have to see Harvey’s impact on job growth as part of an epochal change in job growth for the U.S. and for the world economy. Three forces are coming together to accelerate the destruction of existing wealth in the world economy: climate change, which is producing more extreme weather events and putting negative pressures on the world’s agricultural industries; increasing civil strife and wars, which are destroying massive amounts of existing wealth in some places and forcing up the costs of protecting existing wealth everywhere on the planet; and the aging of the massive amount of wealth items produced and put in place over the course of the 20th century, which is accelerating the rates at which those items of existing wealth must be repaired and replaced. These forces are transforming global employment.
In these historical circumstances, there will be plenty of jobs for the world’s people, but they will all be devoted to protecting existing wealth (military and policing forces, home security services, property insurance services, etc.) and to replacing wealth that is being lost. Plenty of jobs, but a very big social justice question is emerging in this era of no net wealth growth: how do we fairly allocate jobs and income when trickle down wealth growth has come to an end?