Andy Grove III

Business Week chose Duke’s Vivek Wadhwa to respond to Andy Grove’s commentary on the need to retain manufacturing jobs. Wadhwa’s response is quite consistent with the basic Michigan Future view of the economy.

That the kind of factory jobs that are going overseas are not the kind of jobs Americans need– far too low wage – and even if they were there is little policy makers can do to keep them here. Enacting tariffs – which Grove recommends – to raise the cost of work done overseas would most likely lead to retaliation from the very countries we want our companies to sell to.

Wadhwa advocates instead policies that will help America create what’s next and prepare workers for those enterprises. His agenda includes expanded training, encouraging entrepreneurship, recruiting high skill immigrants, commercializing university research and matching incentives offered by other countries to keep company R&D here. Except for the last item, pretty consistent with what we and many others, who believe American prosperity is tied to making the transition to a knowledge-based economy, advocate.

We aren’t arguing that the loss of factory jobs – particularly those that are high paid – is a good thing. But rather that it is a new reality. America no longer has a competitive advantage in routine factory work and more advanced manufacturing is mainly done by machines so it needs far fewer workers. Grove doesn’t deal with how, even with tariffs, America can recreate a broad high paid manufacturing base.

What Wadhwa doesn’t deal with is Grove’s argument that without lots of factory jobs – particularly in high tech industries – America will not have enough jobs. Grove writes: You could say, as many do, that shipping jobs overseas is no big deal because the high-value work—and much of the profits—remain in the U.S. That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work—and masses of unemployed?

This is the great unknown. Will a knowledge-based economy (particularly one that is less dependent on borrowing) create enough jobs so that we are not faced with chronic high unemployment? And will that economy  create enough high paid jobs to support a broad middle class? America’s history is that it has come through each economic transition more prosperous. Michigan became a high income state for most of the last century because it led the way in the transition from a farm based to a factory based economy.

Our core belief is that the same will be true in the current transition. We lose factory jobs, but gain both knowledge and service jobs and are prosperous again.That is not to say that some people won’t get hurt. They will. Major economic shifts not only make some companies obsolete but they also make the skills some bring to the labor market worth less. So they either have to get new skills (which is hard for many) or their standard of living declines. The task then for policymakers is a combination of aligning with new realities to grow the economy as Wadhwa recommends as well as help those hurt by the transition.

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