Procrastinating on May 26, 2017

Where US Manufacturing Jobs Really Went: No Longer So Fresh at Project Syndicate

Il Quarto Stato

Project Syndicate: J. Bradford DeLong: Where US Manufacturing Jobs Really Went: In the two decades from 1979 to 1999, the number of manufacturing jobs in the United States drifted downward, from 19 million to 17 million. But over the next decade, between 1999 and 2009, the number plummeted to 12 million. That more dramatic decline has given rise to the idea that the US economy suddenly stopped working–at least for blue-collar males–at the turn of the century...

But that thought-nugget way of putting it—that manufacturing was fine, with no massive destruction of manufacturing jobs until 2000—is wrong. There was enormous destruction of manufacturing jobs: but destroyed jobs in one region and sector were more-or-less matched in absolute numbers—but not in shares of the labor force—by rising jobs in another sector and region.

A little family history: Consider the career of my grandfather William Walcott Lord, born early in the twentieth century in New England. The Lord Bros. Shoe Company in Brockton, MA, facing imminent bankruptcy in 1933 at the nadir of the Great Depression, had to close up shop. They moved to and reopened in a place where wages were even lower: South Paris, ME. The workers of Brockton were devastated by this and all of the other southern New England destruction of relatively high-paid blue-collar factory jobs in the Great Depression and afterwards. But in the aggregate statistics the closing of their factory in Boston was offset by a bonanza for the rural workers of South Paris, ME: to move from near-subsistence agriculture for a steady job in a shoe factory.

But that lasted for only fourteen years. In the aftermath of World War II, fearing the return of depression, the Lord Brothers liquidated their enterprise and split up, one brother moving to York, ME; a second to Boston, MA; and my grandfather to Lakeland, FL, halfway between Tampa and Orlando, where he speculated in real estate and engaged in non-residential construction. The effect on the aggregate statistics was again small: fewer workers in boot and shoe manufacturing, but more workers in chemical manufacturing and in construction building and operating the turnkey phosphate processing plants and other factories that the Wellman-Lord Construction Company built. The net factor content of the domestic employment induced by the Wellman-Lord Construction Company was very much the same as that induced by the Lord Brothers Shoe Company in Brockton, MA: the same kinds of people in terms of skills and education—but very different people, in a very different place.

The post-World War II period of apparent stability in manufacturing employment nationwide in reality saw manufacturing (and construction) jobs move from the northeast and midwest to the sunbelt. Those job losses were as damaging to those New England the Midwestern communities then as the job losses of the 2000s were more recently.

And even in the 2000s we had, up until 2006, not blue-collar job loss but rather job churn. The fall in manufacturing jobs was offset by a rise in construction jobs. And in 2006 and 2007 the fall in residential construction jobs was offset by a rise in blue-collar jobs supporting business investment and increased exports. Only with the coming of 2008 and what people still call the Great Recession—although soon “Longer Depression” is likely to be a better name—do we see not blue-collar job churn but blue-collar job loss in America.

There is always churn. That's the reason I think that looking at the share—which shows a smooth decline—yields much more insight than looking at absolute numbers of manufacturing workers. The meme that things were stable for a long time, and then they collapsed with the rise of China is wrong. The right ways to look at it are, instead, two: The first is that things were stable in terms of absolute numbers of blue-collar jobs—with construction booms alternating with manufacturing booms—until 2008 and the financial crisis. The second way to look at it is that there was an extremely large and powerful long-run decline in the share of American jobs that were manufacturing jobs from World War II to the present. To throw out some numbers:

  • The United States was never going to permanently have the 38% of its nonfarm labor force in manufacturing that it had in 1943: that was only if we were building little but bombs and tanks.

  • Instead, the United States’s post-World War II normal was about 30%.

  • Had the United States had been a normal post-World War II industrial powerhouse economy like Germany and Japan, by now the evolution of technology would have carried that share down from 30% to about 12%. Instead, the United States has gone from 12% to 9.2%, because, since the inauguration of Ronald Reagan, the United States has on the whole followed dysfunctional macroeconomic policies that have made us a savings-deficit rather than a savings-surplus country.

  • Instead of the United States, as a rich country, financing the industrialization of the rest of the world and developing economies using that financing to purchase US manufacturing exports; the United States has, instead, been instead acting as... a money laundering center?, a provider of political risk insurance?, a place to put your money so that it will be safe?

  • Morever, if you are not a rich person in a developing country but a developing country, it is nice to have large dollar assets if you want to avoid being subject to the tender mercies of Christine Lagarde of the IMF.

  • Then there is a further decline, from 9.2% to 8.7%, because of changing patterns of trade, primarily the rise of China.

  • And the manufacturing share went from 8.7% to 8.7% because of the result of NAFTA: NAFTA is a nothingburger as far as the fall in the manufacturing share of the workforce is concerned.

  • And the manufacturing share went from 8.7% to 8.6% because of “bad trade deals” the United States made with China, with Mexico, with Canada—and of course, there are substantial and powerful countervailing gains in other sectors that the United States has gotten from the trade negotiations that led to the shedding the extra 0.1%-point of its manufacturing labor force.

In an era of fake news, astroturf social movements, and exceptional and misleading anecdotes, getting the numbers right and getting the right numbers out into the public sphere is the first and most essential task of anybody who wants to play a constructive role in humanity’s long-term planning. It was Abraham Lincoln—did you know he was a founder of the Republican Party?—who said: “If we could first know where we are, and whither we are tending, we could then better judge what to do, and how to do it…”