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Manufacturing Can’t Create Enough Jobs. Infrastructure Can.

  

Category:  Op/Ed

Via:  bob-nelson  •  5 years ago  •  58 comments

Manufacturing Can’t Create Enough Jobs. Infrastructure Can.
Manufacturing is not shrinking in the United States.

S E E D E D   C O N T E N T



Manufacturing is not shrinking in the United States.

512 Quite the contrary, production is growing, and it appears that corporate America — and corporate Europe and corporate China for that matter — intends to put even more factories in this country.

Works Progress Administration employees on a construction job in 1943. Part of President Franklin D. Roosevelt’s New Deal, the W.P.A. employed millions of people.
Associated Press

But jobs in manufacturing are another matter. Unlike big infrastructure projects, which are under discussion between President Trump and Democratic leaders of Congress, manufacturing is unlikely to be capable of producing a great deal of additional employment.

Here’s why.

Modern assembly-line machinery continues to eliminate jobs. Production has been increasing, but factories are doing this with fewer people.

From a post-World War II peak of 19.6 million workers in 1979, employment in manufacturing has declined to 12.5 million, according to the Bureau of Labor Statistics. Put another way, manufacturing has dropped from 23 percent of the total work force to nearly 8 percent. That happened even as factory output rose in total value to $2.154 trillion in 2018. America is making more goods and materials with fewer people.

Walk along assembly lines in many factories today and what is striking is the overwhelming presence of machinery that is only sparsely attended to by human beings.

So what are young people to do? Go to college, they’re told, and qualify to do well-paid work away from assembly lines. Many people have taken that advice. The share of men and women over age 25 with bachelor’s and advanced degrees rose to nearly 35 percent in 2017 from less than 5 percent in 1940, the Census Bureau reports.

But what has also risen, with much less ballyhoo, is the dropout rate from gainful employment — that is, the percentage of men and women who no longer even “participate” in the labor force.

Labor market participants are defined as those over the age of 16 who either hold a job or are actively looking for one, and are thus officially unemployed. Defined this way, the participation rate, according to the Commerce Department, has sunk to 63 percent, its lowest level since the early 1960s, when women started to take jobs in ever larger numbers. Overall labor market participation peaked at 68 percent in the late 1990s, before its nearly 20-year decline.

Why has this happened? Automation is one reason. Another is that two-thirds of products and materials manufactured in the United States are made in factories owned by multinational companies like General Motors, General Electric and Dow Chemical, according to data provided by Michael C. Short, a spokesman for the National Association of Manufacturers.

Instead of ramping up production at their American factories to increase exports, these companies often open assembly lines in Asia, Europe and Central America, and they sell into those overseas markets from their overseas factories. In 2018, for example, G.M. sold nearly four million vehicles in China versus nearly three million in the United States. That makes China, at least for the moment, a bigger marketplace for G.M. than its home country.

original The New Deal employed tens of thousands of people
in the construction of huge dams that generated hydroelectric power.
Here, limestone was blasted for use in the Tennessee Valley Authority’s Cherokee Dam.
Associated Press

President Trump won the 2016 election partly because he made a series of promises. He promised more factory output in the United States and more jobs for blue-collar workers. He also promised to spend heavily on labor-intensive infrastructure projects that presumably would give employment to the minimally educated, just as the New Deal did in the 1930s.

Superficially, all of these promises had a certain historical logic. After all, over the generations, the American economy has periodically generated massive employment increases for blue-collar workers. Farming did so, until it was mechanized, and then manufacturing carried the ball through most of the 20th century.

There have been other major sources of new jobs, as well. The construction of the transcontinental railroad after the Civil War and of major airports after World War II were important contributors. For a while, retail and department stores provided loads of jobs, too. Truck driving is still a big blue-collar occupation, though it is also threatened by automation.

But today, in a nation where most young people still don’t finish college and only two-thirds even sample it, an injection of additional well-paid hourly work (at $20 an hour or more) is urgently needed. With manufacturing unlikely to be capable of producing that employment, the Trump administration is under pressure to generate an alternative source of well-paid hourly jobs.

The answer could be signature public works projects. Mr. Trump has as precedent the efforts of two presidents: Franklin D. Roosevelt in the 1930s and Dwight D. Eisenhower two decades later.

Roosevelt’s New Deal employed tens of thousands of people in the construction of huge dams that generated hydroelectric power and of public buildings, among them post offices that still serve towns and cities across the country.

Roosevelt was a Democrat, but Republicans like Eisenhower also identified themselves with Roosevelt’s New Deal, and construction of the interstate highway system, initiated by Eisenhower in 1956, became an enormous source of publicly funded employment.

Mr. Trump talks of big infrastructure projects, and on Tuesday, at a meeting with Democratic congressional leaders, he agreed to spend $2 trillion to upgrade the nation’s infrastructure, leaving the details (such as how to raise the $2 trillion) to be worked out in coming weeks. Although it wasn’t one of Mr. Trump’s announced priorities, a high-speed, federally funded rail network, for example, could employ tens of thousands of people with high school educations during the yearslong building phase.

Whatever infrastructure project or projects that Mr. Trump and Congress finally agree upon, a labor force participation rate of only 63 percent suggests, rather strongly, that a lot of work force dropouts would come off the sidelines for a job that paid well enough.

Roosevelt and Eisenhower drew in such people with massive and immensely popular public works projects. And what about Mr. Trump or, perhaps, his Democratic opponents? Or the two parties together, as they vie with each other in advance of the 2020 election?

Well, let’s see.



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Bob Nelson
Professor Guide
1  seeder  Bob Nelson    5 years ago

I know... I know...

Policy is boring!

The problem is that if you try to make policy without knowing the facts, you're going to make a mess. (Like the present administration, promising to create manufacturing jobs...)

HSR for the BosWash corridor is a twenty-year project. (The Chinese would do it in ten - already have - but hey!)

 
 
 
luther28
Sophomore Silent
2  luther28    5 years ago

I would like to see them reconstitute the Civilian Conservation Corp plenty of work to be done.

 
 
 
Bob Nelson
Professor Guide
2.1  seeder  Bob Nelson  replied to  luther28 @2    5 years ago

Yes. There needs to be a mix of big projects and small ones.

 
 
 
Bob Nelson
Professor Guide
3  seeder  Bob Nelson    5 years ago
You REALLY need to keep up Don, you really do.

I'm Bob. You really need to keep up George, you really do.

From the seed:

Mr. Trump talks of big infrastructure projects, and on Tuesday, at a meeting with Democratic congressional leaders, he agreed to spend $2 trillion to upgrade the nation’s infrastructure, leaving the details (such as how to raise the $2 trillion) to be worked out in coming weeks.

You really need to keep up Paul, you really do.

 
 
 
Bob Nelson
Professor Guide
4  seeder  Bob Nelson    5 years ago

Speaking of infrastructure:

 
 
 
Nerm_L
Professor Expert
5  Nerm_L    5 years ago

How is it possible to build infrastructure without manufactured goods?  Will Congress agree to source requirements, if not US source then at least North American source?  Or will Congress use infrastructure spending to bail out China?

Here is the reality:  Sectors of US Economy as Percent of GDP 1947-2009 (source citation at bottom of page)

512

Notice that persistent trade deficits began about 1971.  Note the rise in professional and business services began when the US began experiencing persistent trade deficits.  Note that the growth of finance and professional services follow the same trend.  Also notice that finance surpassed manufacturing around 1986 when trade deficits experienced a large increase.

The United States was transformed from a producing economy toward a borrowing economy in the 1980s.  And government policy shifted toward favoring the financial sector at that time.  The United States has become a financial services economy; people are supposed to be obtaining income from financial services.  But all the theories about finance, globalization, and trickle down economics have failed to deliver.

Keep in mind that all the doom & gloom concerning manufacturing jobs is being written by financial reporters.  Multinational corporations headquartered in the United States have become financial enterprises.  Foreign investment is coming into the United States; how are those foreign investors spending their money?  Foreign investors seem to be buying and building manufacturing facilities in the United States.  Even Chrysler has been owned by several foreign businesses.  

Is manufacturing dead in the United States?  Foreign investors don't think so.

Manufacturing Leads as Top Sector for Foreign Direct Investment in the United States

 
 
 
Bob Nelson
Professor Guide
5.2  seeder  Bob Nelson  replied to  Nerm_L @5    5 years ago

I don't agree with everything in your post, but it does imply what I've been saying: If we don't have a master-plan and an oversight entity to ensure that it's applied, our "Me! Me! Me!" ultra-rich will continue to put their own fortune above all else.

 
 
 
Nerm_L
Professor Expert
5.2.1  Nerm_L  replied to  Bob Nelson @5.2    5 years ago
I don't agree with everything in your post, but it does imply what I've been saying: If we don't have a master-plan and an oversight entity to ensure that it's applied, our "Me! Me! Me!" ultra-rich will continue to put their own fortune above all else.

The rich are becoming richer by engaging in finance rather than manufacturing.  Here is an article that provides a non-technical explanation (the article was published by the Guardian, so is British-centric.  But the mechanisms work the same way in the US.)

Wealth inequality is soaring – here are the 10 reasons why it’s happening - Guardian

Debtors don't build wealth by borrowing.  Lenders create money out of thin air but the interest they obtain by lending is real money.  Lenders aren't required to produce anything; lenders get something for nothing.  Finance simply cannot create a broad prosperity.

The policy must shift towards production rather than financial services.  Infrastructure is a viable means to make the policy shift because infrastructure can't be built without manufactured goods.  However, that policy shift is going to require a more nationalist and protectionist approach to economic planning and regulation.  The United States cannot borrow its way to prosperity even if the government is doing the borrowing.  The health of the US economy depends upon American businesses producing things; that's not optional.

 
 
 
Bob Nelson
Professor Guide
5.2.2  seeder  Bob Nelson  replied to  Nerm_L @5.2.1    5 years ago

I kinda sorta agree, except this:

The United States cannot borrow its way to prosperity even if the government is doing the borrowing.

Currently, as for several years already, the US can borrow, long-term, at rates that are essentially zero. Even the stupidest CEO would be borrowing to finance investments, even those with a lousy ROI - hey! the money is free!

But no! America has no problem taking on a trillion in debt, to give it to the ultra-rich, but debt for investment is unthinkable.

Bumper-sticker slogans make wretched economics.

 
 
 
Nerm_L
Professor Expert
5.2.3  Nerm_L  replied to  Bob Nelson @5.2.2    5 years ago
Currently, as for several years already, the US can borrow, long-term, at rates that are essentially zero . Even the stupidest CEO would be borrowing to finance investments, even those with a lousy ROI - hey! the money is free!

Except that's not true:   Daily Treasury Long Term Rate Data - US Dept. of the Treasury

Government borrowing doesn't work the same as consumer borrowing.  Treasury bills and securities are bought with money that already exists in the money supply.  Government debt redistributes money that is already in the money supply.  Only consumer borrowing under fractional lending rules creates money.  As the prior link to the Guardian article explains, the rich are getting richer on consumer debt and not government debt.

The Federal Reserve did create new money with qualitative easing.  And the new money was used to bail out the financial sector and avoid depreciation.  Again the financial sector got something for nothing.  

Everyone wants a credit card that doesn't have to be paid.  But perpetual debt is like perpetual motion, it doesn't work.  The only economic activity that creates wealth instead of money are enterprises that produce things.  Without a strong manufacturing sector the United States loses its ability to create wealth.

 
 
 
Bob Nelson
Professor Guide
5.2.4  seeder  Bob Nelson  replied to  Nerm_L @5.2.3    5 years ago

Your post does not disagree with mine in the slightest.

 
 
 
Nerm_L
Professor Expert
5.2.5  Nerm_L  replied to  Bob Nelson @5.2.4    5 years ago
Your post does not disagree with mine in the slightest.

The financial sector has a vested interest in ensuring consumers become increasingly dependent upon consumer debt.  That's how the rich get something for nothing.

Look at the bit of misinformation in the seeded article:

"From a post-World War II peak of 19.6 million workers in 1979, employment in manufacturing has declined to 12.5 million, according to the Bureau of Labor Statistics. Put another way, manufacturing has dropped from 23 percent of the total work force to nearly 8 percent. That happened even as factory output rose in total value to $2.154 trillion in 2018. America is making more goods and materials with fewer people."

The size of the US population has more than doubled since the end of World War II.  The US real GDP is 8 times larger today than at the end of World War II.  And the manufacturing sectors contribution to GDP has been declining.  The rise in factory output value has not kept pace with population growth or growth in real GDP.  What that means is that the United States is losing its ability to increase and distribute per capita wealth.  Until government policy favoring the financial sector changes it will be almost impossible to create broad prosperity.

That also explains why the appeal of socialism to seize and redistribute wealth is increasing.  If the United States becomes socialist it will happen on Wall Street.  Depending on how Congress handles infrastructure spending, infrastructure projects could be used to move the United States toward socialism rather than retreat from socialism.  

 
 
 
Bob Nelson
Professor Guide
5.2.6  seeder  Bob Nelson  replied to  Nerm_L @5.2.5    5 years ago

Excuse me, but you're giving facts that agree with the seed, and then drawing conclusions that do not follow.

I don't know how to conduct a conversation in these conditions.

 
 
 
Nerm_L
Professor Expert
5.2.7  Nerm_L  replied to  Bob Nelson @5.2.6    5 years ago
Excuse me, but you're giving facts that agree with the seed, and then drawing conclusions that do not follow.

Excuse me but the facts contradict the seeded article.  The seeded article presents data that clearly refute its own conclusions; we don't need to ramp up manufacturing for export (as the article interjects), we need to ramp up domestic manufacturing for domestic consumption.  The seeded article is deliberately misleading.

An important purpose of infrastructure spending is to bolster domestic manufacturing by establishing domestic consumption.  Infrastructure spending isn't just a jobs program.

 
 
 
freepress
Freshman Silent
6  freepress    5 years ago

ABsolutely right, fixing our infrastructure makes us strong, provides jobs and creates a better future which is worth any cost.

 
 

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