Terrific New York Times magazine article entitled Why Are Politicians So Obsessed With Manufacturing? It details the reality that no matter what candidates from both parties promise manufacturing jobs are not coming back.
(Edward McClelland explores this topic specifically about Michigan in a recent New York Times op ed. He cites our “The New Path to Prosperity: Lessons for Michigan From Two Decades of Economic Change” report as evidence that manufacturing jobs are not coming back to Michigan.)
This, of course, is the core finding of Michigan Future’s more than two decades research into how globalization and technology are changing the economy. The reality is that we have transitioned from a factory-based to a knowledge-based economy. There is no going back no matter which party is in control in either DC or Lansing. And no matter what the policy agenda.
The Times writes: Manufacturing retains its powerful hold on the American imagination for good reason. In the years after World War II, factory work created a broadly shared prosperity that helped make the American middle class. People without college degrees could buy a home, raise a family, buy a station wagon, take some nice vacations. It makes perfect sense that voters would want to return to those times.
From an economic perspective, however, there can be no revival of American manufacturing, because there has been no collapse. Because of automation, there are far fewer jobs in factories. But the value of stuff made in America reached a record high in the first quarter of 2016, even after adjusting for inflation. The present moment, in other words, is the most productive in the nation’s history.
Politicians of all persuasions have tried to turn back time through a wide range of programs best summarized as “throwing money at factory owners.” They offer tax credits and other incentives; some towns even build whole industrial parks, at taxpayer expense, so they can offer free space for manufacturers. By and large, those strategies haven’t helped. One of Trump’s keynote proposals is to encourage domestic production by taxing imports — an idea more likely to cause a recession than a manufacturing revival. Clinton is promising to basically extend the efforts of the Obama administration, which said it would create a million factory jobs. With just a few months left, the president is still more than 600,000 jobs short.
As we have write frequently it would be better if we could recreate a high wage, high employment manufacturing sector. Its what made Michigan one of the most prosperous places on the planet for most of the 20th Century. But those day are gone––largely because manufacturing is increasingly done by machines not workers.
This is the same path that agriculture followed a century earlier. And no matter how many promises candidates have made or how much public money policy makers have thrown at farming over that century farming now accounts for less than two percent of American jobs.
The Times article points us in the right policy direction. Working on raising the incomes of those who are in the jobs that people without college degrees actually hold in today’s and tomorrow’s economy. They ask:
According to the Bureau of Labor Statistics, there were 64,000 steelworkers in America last year, and 820,000 home health aides — more than double the population of Pittsburgh. Next year, there will be fewer steelworkers and still more home health aides, as baby boomers fade into old age. Soon, we will be living in the United States of Home Health Aides, yet the candidates keep talking about steelworkers. Many home health aides live close to the poverty line: Average annual wages were just $22,870 last year. If both parties are willing to meddle with the marketplace in order to help one sector, why not do the same for jobs that currently exist?
Exactly! The American economy is now predominantly service providing. And will be even more so in the future. Knowledge-based services are high wage industries. But industries that predominantly employ those with low education attainment are low wage. If we are serious about raising the living standards of non college educated Americans we need policies that will raise employment earnings for those in those service occupations.
That means as the Times writes: “This myopic focus on factory jobs distracts from another, simpler way to help working Americans: Improve the conditions of the work they actually do. Fast-food servers scrape by on minimum wage; contract workers are denied benefits; child-care providers have no paid leave to spend with their own children.”