Policy makers on a bi-partisan basis continue to try to recreate the economy of the past.
Lets start with the basic facts from our latest report: The New Path to Prosperity: Lessons for Michigan From Two Decades of Economic Change. The chart below summarizes job growth in America from 1990 – 2011. As you can see over more than two decades job growth in America has overwhelmingly occurred in private sector services. While manufacturing has shed almost six million jobs. (Other goods producing includes construction, farming, fishing, mining (including oil and natural gas) and forestry.)
And yet policy makers––from both parties––continue to make restoring manufacturing jobs the lynchpin of their jobs and economic development strategy. It won’t work! The reasons why are laid out in a terrific Reuters article entitled: Obama manufacturing hubs face uphill struggle to create jobs. Reuters writes:
But after more than a year of operation, the Youngstown hub underscores the challenges facing Obama’s goal of ensuring “a steady stream of good jobs into the 21st century,” as he put it in remarks at a White House event last month. … The Youngstown hub is still in its very early stages but so far, at least, there are no obvious signs of a wider impact. About 29,600 people held factory jobs in the Youngstown metro area in January, the latest month for which data are available. That’s actually slightly lower than the number of manufacturing jobs there when the administration awarded the hub to Youngstown in August 2012 and when it opened its doors that October.
… One of the biggest challenges is the nature of factory innovation itself, which often reduces, rather than bolsters, the need for workers who aren’t very skilled. That means the manufacturing initiative could help create jobs for people with highly specialized skills, such as engineers, but it may do far less to help people struggling to find work after the shuttering of local steel mills.
Increasingly smart machines are doing more and more of the work that used to be done by factory workers. And that trend is almost certain to accelerate. The simple fact is that technology trumps government programs. Yes it is likely that American manufacturing output will increase, but no that increase will not be accompanied by many good paying factory jobs.
What can and should increase as pointed out in the Reuters article are jobs in pre and post production––in fields like engineering; design; supply chain and logistics; and sales and marketing. These are all part of private sector knowledge-based services that have been growing the past two decades and almost certainly will continue to grow. And unlike the remainder of the service sector are the high wage sectors of the American economy.