Election 2016 will have consequences for the economy and financial markets. Colin Moore looks at six election issues investors need to be aware of — regardless of who wins.

One of the most historic and contentious presidential elections will soon be over. The 45th U.S. president will have an opportunity to influence issues that could impact the economy, markets and individual investors. Here are six of these issues and my thoughts on what investors should pay attention to, whether or not their candidate wins.

1. U.S. manufacturing — A resurgence will increase demand for capital, not labor
You’ve probably heard promises about a resurgence in manufacturing in the United States, but let me caution you: more manufacturing won’t mean as many more manufacturing jobs as some may promise. That’s because our competitive advantage is our low cost of capital. Suppose, for example, there’s a factory that makes tablecloths. If that factory were in the U.S., you’d probably see a few people supervising the work. Robots, not people, would be doing the work because we can finance the purchase of machinery really cheaply. But if that factory were in Vietnam, you might see one hundred people doing the work. So if manufacturing does come back to the U.S., don’t expect a surge in demand for domestic labor. On the other hand, it helps because more domestic manufacturing will increase demand for capital and improve our trade balance.

2. Immigration — Focus on the rate of immigration
The number of people working, and how much they are producing, are important inputs to productivity and GDP growth. And the only way to effectively change the working-age population, if it’s not through some surprise in the birth or death rate, which is unlikely, is through immigration. So while we do need clear immigration policy, we’ve got to think about the rate of immigration. Germany’s struggle to integrate 1.5 million immigrants shows just how hard it is for a large group to be absorbed in a very small timeframe.

Next, we need to ask to what extent we invite immigrants with skill sets in short supply. Some will say, “That’s biased and you can’t do that.” But it’s our economy, and if we need more engineers or farm workers, we should be able to target those skill sets. This will be an ongoing debate, and the answer may be as much in trade agreements that allow us to move the work to where it makes sense rather than just the people in. I don’t know that we can have pressure on trade and pressure on immigration, because one tends to be the solution to the other.

3. Minimum wage — Room to grow
The split between corporate profits and wages has reached a point that we haven’t seen before. That’s generally where you get political unrest. The number of workers on federal minimum wage is relatively low. Twenty three states have mandated minimums above the federal minimum, indicating that they have decided the federal minimum is too low to lead a basic life, including being able to pay for health care, food and housing. Many living on minimum wage are young and may be living with family, so part of the solution may be a better definition of who is considered to be living on minimum wage. But for those who legitimately are, there is little doubt the rate is too low.

You need people to be spending money in an economy driven by consumption, and wealthy people tend to be net savers. People making lower wages have a greater propensity to spend. Raising the minimum wage opens up the opportunity for some workers to spend more and obtain health care coverage, but its utility in addressing broad wage growth is very limited. Some jobs may be lost initially as a result of a higher minimum wage, but economies adjust to higher costs through improved efficiency when allowed to do so. It is better to do the right thing and help those affected by the change and address the consequences than avoid doing the right thing in the first place.

4. Infrastructure — Another word for subsidies?
We should spend on infrastructure if it has a multiplier effect that helps to increase productivity. For example, does the project help move goods, services and information around? Does it help move energy supplies around quickly and efficiently? In 2009, workers repainted lines on the road thanks to the American Recovery and Reinvestment Act. It was a cosmetic improvement, but it didn’t help trucks move more goods. It did put people to work, but only temporarily.

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