Posts by Diane LimMarch 24, 2017 | No Comments » More on: Growth, Productivity & Competitiveness, Labor Markets, Looming labor shortages
This morning’s employment report shows a healthy increase of 235,000 total (nonfarm) jobs last month—pretty much across the board, in all major categories except for retail services. The manufacturing sector alone gained 28,000 jobs—a stronger showing than we’ve seen in a long time.
But we shouldn’t break out the champagne over one month’s worth of manufacturing jobs. Compared with a year ago (February 2016), manufacturing has been essentially flat (up just 7,000 jobs). Looking further back it becomes obvious that manufacturing just has not followed the typical storyline of an industry merely living through and recovering from the Great Recession.
In fact, the saga of manufacturing jobs is not so much about the cyclical recession, but more about more fundamental and longer-term economic trends.
Over the last 10 years, while other sectors have made great strides or at least inched upward, manufacturing has lost over 1.6 million jobs—down from nearly 14 million in February 2007 to 12.4 million in today’s report. Moreover, as a share of total employment, manufacturing jobs comprised just over 10 percent of total nonfarm jobs in February 2007; now, a decade later, they comprise only 8.5 percent.
It doesn’t look likely that once the economy has fully recovered from the recession, that manufacturing will be back to where it was before the recession (in the “old normal”). So what has dealt this more permanent blow to manufacturing?
Believe it or not, it has little if anything to do with public policy. Look to four factors.
First, consumers nowadays increasingly opt for “experiences” rather than “things.” This largely results from the changing demographic composition of American consumers. The rise of retiring, empty-nester Baby Boomers naturally leads to more demand for health care services and tourist destinations. At the other end of the generational spectrum, Millennials can’t live without services like Uber and Netflix; that also means they don’t need their own car or television. A trend away from “things” to “experiences” means jobs in service-providing industries rise (like health care). At the same time, manufacturing jobs in goods-producing industries fall.
Second, there’s automation. With each passing day, companies from a range of sectors use robots to a greater and greater extent. Their capabilities particularly suit them to work alongside or take over the type of work done by manufacturing production workers—tasks that are highly physical, precisely defined, and routinized. And automation will only intensify down the road: a recent McKinsey report determined that about 60 percent of time across all manufacturing jobs is spent performing activities that current technology can automate.
Third, off-shoring production often comes at a cheaper price tag. Locating manufacturing processes in other countries allows companies to leverage the less expensive labor available. Moreover, America’s native-born pipeline of young workers shows no signs of gravitating to the manufacturing sector. Immigrants are not well represented among manufacturing workers either. So we don’t enjoy the benefit of robust supply.
And last but not least, the manufacturing sector as a whole has little worker mobility. During the Great Recession, workers who lost manufacturing jobs disproportionately consisted of middle-aged white men living and working in the Midwest. These workers spent decades at a particular company or in a specific line of manufacturing work. Given their family roots and community ties, they cannot easily move to other parts of the country, where other forms of work (even manufacturing) may be more plentiful.
Mudslinging about which party dealt a blow to manufacturing can make for good politics. But the trends make clear: no public policy could have so much influence as to stop all the fundamental, economic reasons for the industry’s decline. We can’t fight the economic forces driving manufacturing employment, and neither should we try. Such a strategy is inevitably counterproductive. We should focus our public policy efforts on helping those manufacturing workers who got laid off during the Great Recession find a “new normal” – one that maximizes both their desired participation in the labor market and their well-being.
This piece originally appeared in “The Hill.”