Wednesday, March 8, 2017

The chart of the day... from Noah Smith's column in Bloomberg yesterday, "Trump's Industrial Rebirth Is a Dead End." It shows the percentage of the American work force employed in manufacturing.

(I couldn't copy the actual chart from his piece, which is updated to 2017, so I lifted the one above from an article in the Economist from 2010. But it looks the same.)

I have to confess, I had no idea that manufacturing employment has been in such a steady decline since World War II. I would have thought there was a big drop-off beginning in the early to mid-1970s, when I remember European and Japanese cars showing up in my town. Now I have to recalibrate much of my thinking about manufacturing.

Since it's so short I can quote the entire piece from the Economist, which I think is still relevant today (my emphasis):

In the early postwar decades, the American economy grew at a healthy clip, and the growth was broad-based. While college enrollment was increasing rapidly, millions of Americans, including many without a college education, earned a middle class wage by working in manufacturing. In recent decades, rising inequality and the stagnation of middle class earnings have generated a wave of nostalgia for the postwar economy, and for manufacturing employment in particular. If only America hadn't lost its manufacturing edge, thanks to strong dollar policies and China's aggressive export subsidies (so the thinking goes), all would be well.

The problem with this is that American manufacturing output has grown steadily (aside from cyclical ups and downs) for the past half century. America remains the world's largest manufacturer, though China, with four times as many people, will eventually take over the top spot. There is no reason to mourn manufacturing. Manufacturing employment is a different story.

That's manufacturing employment as a share of total employment. The downward trend is over 50 years old. It predates the end of Bretton Woods. It predates the union-crushing, deregulating era of the late 1970s and early 1980s. It predates the era of Japanese dominance, the rise of the Asian tigers, and the recent surge in Chinese growth. And what it is driving this trend, overwhelmingly, is technology. Manufacturers have steadily improved manufacturing productivity, routinising and then automating occupations.

A plunging dollar, a "get tough" approach to China, and an embrace of industrial policy won't reverse this trend. Eventually China will face the same dynamic and the same decline in manufacturing employment. Time to accept that reality and figure out how best to prepare workers for the good jobs to come.

The bottom line: while manufacturing in America is actually increasing, manufacturing employment is decreasing. And the trend is unlikely to reverse.

I don't have the answer on how to improve the lot of the white working class in America, but it's clear to me now (not that it wasn't before) that neither does President Trump. I knew he couldn't bring back their jobs, but I didn't know how dire the situation really was.

1 comment:

James said...

Maybe the focus shouldn't be on bringing back factory jobs but rather on how to unionize the jobs that are currently available. Or, if unions are really so terrible then there should be other ways for workers to organize so they have some leverage in bargaining for wages and benefits. Of course the country has seen some of this type of activity with the movement to raise the minimum wage. I guess it is harder for collective actions like those to have an impact though when the jobs do not require the technical skills of manufacturing.

Still it seems like having a say in the workplace is really what is being mourned rather than the type of employment. Economists really need to consider that slightly lower costs at Walmart look good on charts but do not account for the powerful effect of people feeling denigrated by their job. This kind of strong psychological impact is something that seems to get left out in policy analysis. Well meaning (perhaps) social scientists are at a loss as to why constituencies "vote against themselves" because they don't see that people are voting for their dignity as whole individuals rather than to be seen as a set of debits and credits.

Rationalists decry human emotion as a blind spot of humanity. While emotion can make people vulnerable to snake oil salesmen like Trump, it can also be a motivating force to transcend superficial differences of class and skin color. If politicians refuse to engage the good potential of human emotion then they leave voters exposed to people who know how to provoke the bad.