Sunday, January 05, 2014

Thinking about employment and industrial development

I quote from a recent post on Roger Peike Jr.'s Blog:
Consider that from 1970 to 2001 jobs in the overall economy grew by 1.8% per year. In government they grew at half that rate. From 2001 to 2011 government jobs grew at 0.4% per year -- less than half the rate of the previous three decades.
  • If government jobs had grown 2001-2011 at the same rate as government job growth 1970-2001, then the US would presently have 1 million more jobs.  The current unemployment rate would be 6.4% rather than 7.0%.
  • If government jobs had grown 2001-2011 at the same rate as overall growth of jobs in the US economy 1970-2001, then the US would presently have 3.03 million more jobs. The current unemployment rate would be 5.1%.
What could the US government do with 3 million more employees?  Oh, I'm sure we could think of something.
Could we use more teachers, more public health workers, more government employees protecting our environment and managing our wildlife? I suspect so. How about an increase in public servants providing mental health, emergency medical and child welfare services? We should not base our public policy on slogans ("Government is not the solution to our problems, it is the problem.")

Peike also provides this graph:

The graph shows the long term trend of reduction in U.S. manufacturing employment and increase in U.S. employment in service industries.

Manufactured goods tend to be eminently tradable. As transportation technology and communications technology have improved and consequently international transportation and communications infrastructures have improved, the costs of transporting goods from country to country have dropped. Labor intensive manufacturing has migrated to countries with relatively low labor costs, and the United States and other countries with relatively low capital costs have specialized in capital intensive manufacturing. There are exceptions, such as food processing which the manufacturing plants have to be close to the sources of raw materials, but the U.S. focuses on manufacturing with lots of capital per worker. Manufacturing remains a major factor in the U.S. GDP. As Pieke states:
While manufacturing has shrunk dramatically as a proportion of all jobs, since 1950 the US has only seen a decrease of 3.7 million manufacturing jobs.
 Once unionized manufacturing jobs provided high school grads with entry into the middle class; no longer! Now we are educating large numbers of young people through college, and many of them are taking jobs that don't fully use the capacities generated by their educations -- if they can get jobs at all.

I think we need a new industrial strategy. The country needs to develop new industries that will produce goods and services utilizing a highly skilled and educated workforce, with value added that justifies good salaries enabling workers to status in the middle class. And it needs to develop many, big industries fast.

How to do so? I don't know. I suppose offering easy immigration to anyone offering ideas for such industries is one step. Tax breaks for new enterprises in new industries. Government support for universities pioneering in technology development and education in new industrial areas seems important. Perhaps some protective tariffs and strong IPR for new industries.

I am suggesting that we not focus policy on training for existing industries, but on developing new industries for the workforce of the future.

No comments: