But manufacturing jobs are still in decline
Illustration: Klawe Rzeczy
Aug 8th 2024 | Atlanta
REPUBLICANS AND DEMOCRATS do not agree on much, but both parties want to help America’s “left-behind”. Presidents Donald Trump and Joe Biden enthusiastically pursued policies to boost the economic fortunes of people who have, in some sense, struggled amid globalisation and deindustrialisation. Both Mr Trump and Kamala Harris, the Democratic nominee, promise that if elected in November they will do more of the same. On the face of it, their efforts seem to be working. The left-behind are doing better than they have done in years. But there is a catch. The manufacturing jobs that once sustained them are still in decline.
In the decades before Mr Trump’s election in 2016, few groups fared worse than men without a high-school education—one definition of the left-behind. The decline of America’s manufacturing sector closed off economic opportunities to workers whose hard and soft skills were weak. In 1979 a man with a college education earned about 60% more a week than one who had dropped out of high school. By 2016 the “college-wage premium” was 170% (see chart). The relative risk of unemployment grew. Thousands dropped out of the labour force entirely. Much of this economic misery was concentrated in out-of-the-way, unfashionable places, in parts of rustbelt states such as Michigan and Ohio, which received little attention from either politicians or the national press.
All that changed in 2016. Mr Trump campaigned, won and governed on a promise to help the left-behind, raising tariffs in an attempt to boost manufacturing jobs. Americans in the political centre and on the left decided that they also needed to do more to help globalisation’s losers. Many of them pored over J.D. Vance’s “Hillbilly Elegy”, a book published that year about the left-behind, as if they were 19th-century anthropologists trying to understand a long-lost tribe. The results of this soul-searching are visible in Mr Biden’s policies to boost manufacturing jobs. His administration is pouring hundreds of billions of dollars’-worth of grants and subsidies into job-creation efforts in the rustbelt and beyond.
Chart: The Economist
Happily, the economic fortunes of the left behind have massively improved. Since Mr Trump came to office the college-wage premium has steadily shrunk. In recent years wage growth among poorer Americans has easily outpaced that enjoyed by richer folk. A man without a high-school diploma, in full-time work, now earns about $40,000 a year on average. And more of them are in a position to do so. In 2022 and 2023 just 5.1% of men without a high-school education were unemployed, in line with the lowest rate since records began in the early 1990s. Labour-force participation is near an all-time high. America’s left-behind are still relatively poor. But things are clearly moving in the right direction.
A number of factors explain why this is so. Under both Mr Trump and Mr Biden the labour market has been unusually tight, driving up the demand for people with poor qualifications. Both presidents implemented large amounts of fiscal stimulus, while the covid-19 pandemic created labour shortages. Men without high-school diplomas have found work in all sorts of industries, from driving trucks to working in hotels. A raising of minimum wages, especially at the state level, has consolidated these gains. Since 2016 Ohio’s minimum wage has risen from $8.10 an hour to $10.45, for instance. Analysis by Goldman Sachs, a bank, suggests that, in effect, the national minimum wage has risen by more than $3 since 2016.
It is hard, however, to make the case that the industrial policies favoured by Mr Trump and Mr Biden have made much of a difference. The manufacturing jobs that both presidents wish to revive are nowhere to be seen. The share of Americans employed in manufacturing has steadily fallen since 2016 (see chart). The decline has occurred as the number of manufacturing jobs in competitor countries has risen—by 1% in Germany, 3% in Canada and 5% in Italy. Meanwhile, wages in America’s manufacturing sector have fallen relative to the overall average. Manufacturing industry, in sum, is struggling. It looks like a poor return for all American politicians’ efforts to restrict imports and channel money to favoured industries.
Even as manufacturing has withered, the employment it offers has become less welcoming to people with poor qualifications. Our analysis of official microdata finds that, since 2016, the share of manufacturing workers without a high-school diploma has fallen from 9.6% to 7.9%. (Other industries saw a decline too, though that of manufacturing was unusually large.) Companies have automated out of existence many of the jobs that once suited people with poor qualifications. Some have been outsourced to cheaper countries. Job growth in manufacturing, such as it is, now largely benefits people with fancy qualifications. Since 2016 the number of male PhDs working in American manufacturing has risen by over 50%. The sector today is more about twiddling computer code than banging bits of metal together.
True, success stories do exist. Over the same period manufacturing employment in Harris County, Georgia, a two-hour drive from Atlanta, has doubled. Korean car companies have piled in, raising wages (and giving the area plenty of excellent Korean restaurants). The car factories employ not just PhD graduates, but also people who like NASCAR racing. Still, Harris County, like many of the places that have seen manufacturing grow, has long been prosperous. It was never left behind.
Zoom in on the places that Mr Trump and Mr Biden really care about, and fewer wins are to be seen. Data on “left-behind places” from the Economic Innovation Group, a think-tank, suggest that since 2016 their combined manufacturing employment has fallen slightly, even as it has risen in better-off parts of the country. Some places are in real trouble. Although Michigan, for example, has had a lower rate of unemployment than the national one, the picture is uneven. In its Roscommon County manufacturing employment is down by 40% from its pre-pandemic level. And the losses keep coming. So far this year companies across Michigan have announced over 4,500 lay-offs, 20% more than in the same period last year.
It may be too soon to expect a renaissance in manufacturing jobs as a result of Mr Biden’s drive to create them. After all, it takes time to build a factory and then staff it. But that merely illustrates the bigger, quicker and more durable returns of sensible macroeconomic policy. Both Republicans and Democrats will continue to push for industrial policies. Be sceptical of what they can achieve.
Source (Archive)
(even though the TV said so, so it must be true) except for BUT THE FOOOOOOD and because illiterate third world hordes make great indentured servants for megacorps, and that second one doesn't sound very good. So they go with the only explanation they have.
