Myth of the Makers

The government should not promote manufacturing as a way of generating new jobs. Especially not as a way of recapturing a nostalgic image of the economy of the 1950s. We only have to look at the experience of workers in factories in Detroit or China to see the downsides of working in modern manufacturing. Instead, governments should be trying to create jobs in which people have a degree of autonomy, mastery and purpose.

In both the UK and the US politicians have said that they will give extra support to the manufacturing sector. In addition Gene Sterling, the Director of Obama’s National Economics Council, recently gave a speech in which he seemed to be putting the case for ‘industrial policy’ (i.e. governments actively supporting certain industries through, for example, cash).

As Ezra Klein rightly points out the argument for an industrial policy being made by some policy makers is that we should support manufacturing NOT as a way of creating jobs but as a way of creating ‘spill-over’ effects.

However, politicians know that they can appeal to many voters by saying that they will create new manufacturing jobs. This argument’s appeals comes from a variety of reasons including the pain that the closure of big plants caused for many communities, the fact that in many areas no employment or no equivalently employment filled the vacuum caused by the closure of these plants and the idea that real economic activity involves making physical things.

We don’t need to be reminded but here is a graph clearly showing that in all rich countries the number of people working in manufacturing has been declining for decades now.

Here is an infographic from the census that explains a bit more of what has been happening in the US;

You can see that in the 1940s the largest sector for employment was manufacturing. Now education, healthcare, other caring professions, retail and administrative work are all significantly bigger employers.

It is very tempting to look at the large number of people who are currently unemployed, to notice that they are often living in areas that used to have large numbers of people working in manufacturing and to call for governments to support the creation of manufacturing jobs in these areas. But what would these jobs be like? Lets look at the examples of Detroit and Shenzhen.

What is it like working in these new manufacturing jobs in Detroit? Well, it is a lot like the existing manufacturing jobs in Detroit but you get paid a lot less (half what others are getting) and you get fewer benefits. It looks like the only way that these car factories can compete with Japanese or German competitors is through lowering wages. Are we really so keen to create these kind of low paid jobs?

And what is it like working in manufacturing in China? Here is Rob Schmitz’s piece from NPR on exactly this topic;

http://www.marketplace.org/node/53056/player/storyplayer

Workers that make iPads in China use their hands. It sounds like monotonous and tough work. However, as Leslie Change reports in her piece, the work is attractive because it is well paid (compared to the work you could find in rural China), can help people get a better education and perhaps also because of the bright lights of city life. Their main complaints about the work are the unfair treatment they get from their supervisors and also the rapidly increasing cost of living in cities like Shenzhen. In fact, some factories are finding that they are having to raise wages, increase mechanization or relocate because it is hard to retain workers in many of these factories.

Do either of these types of job actually sound that attractive to you? Do they sound much much better than working in education or healthcare or retail?

Some (notably Richard Sennett) have argued that fewer people working with their hands has a number of other, almost spiritual downsides including the loss of the satisfaction people can get from making. I have spoken to many people who would agree with this and who talk about the days in which “people actually made things”.

This is overblown. Does the actual tasks that you perform in your work matter that much? I think that the relationships you have at work and the degree of autonomy, mastery and purpose your jobs gives you are far more important than whether or not you use your hands. In particular, your relationship with your supervisor can have a dramatic effects on your levels of stress, anger and worry.

It is very tempting for politicians to promise an eager public that they will create new manufacturing jobs. We are eager for these new jobs because we have such high levels of unemployment, because many of us still hurt from the loss of manufacturing jobs and because we think manufacturing is real work. None of these is a good enough reason for governments to promote manufacturing jobs. Instead, governments could do much more to create new jobs, especially ones in which people have a more equal relationship with their supervisor and in which they have a degree of autonomy, mastery and purpose.

 

Unemployment and neighbourhoods

There are now a very large number of unemployed people in Europe. One in three people aged 15 to 24 is out of work and looking for work. There is less unemployment in Washington DC, overall, than in many other American cities but unemployment is sickeningly high in some areas.

You see, D.C. is divided into eight wards, and those areas with the highest concentrations of low-income and African American residents also face the highest unemployment rates. 1 in every 4 people in Ward 8 is out of work and looking for work, whereas only 2.5% of people in Ward 3 are unemployed.

What is the answer to this problem?

Many people would say that education is the answer. But a new report from the Centre for Economic and Policy Research shows why this might not be the case. They found that a third of people who are in low paid jobs have some college education and another 37% have a high school diploma.

Getting more formal education is no longer a guarantee of a job or a well paid job (although a college degree is still a very useful thing to have when you are looking for work.

Why?

Partly because education is a ‘positional good‘. To an extent it doesn’t matter what your objective level of education is for your job hunting prospects. What matters is how well educated you are compared with other people in the economy. Because so many people now have high school diplomas it does not have the cache with employers that it used to have.

What would happen if, through some miracle of public policy magic, we managed to get college degrees for all unemployed or low paid people in America? I am guessing a few things would happen;

1.College degrees would no longer be seen as an important qualification by employers.

2. Employers would find new ways of privileging some people over others (perhaps post-graduate qualifications) for work

3. There would be lots of unemployed people and people on low paid work with college degrees.

Does that mean that we just have to resign ourselves to the fact that some areas will have very high concentrations of unemployed people or people on low pay than others and all the problems that come with this in terms of crime, mental health and sense of community?

In both America and England this is in fact current government policy. Whereas in 2001 New Labour pledged to “narrow the gap” between the poorest neighborhoods and the rest of the country, there is no such commitment currently being pursued by governments on either side of the pond.

Instead politicians and policy makers talk about social mobility and expanding opportunities. The clear implication of this approach is that those few people who are able to take advantage of these opportunities and will literally become socially mobile and move on, out of neighborhoods with a high concentration of people with low incomes.

Meanwhile, those people who lose out in this new mobility rich world (warning: social mobility means your income may go up as well as down), will find that the only places where they can afford to rent or buy are neighborhoods with a high concentration of people on low incomes.

Perhaps this will always be the case as long as we have both;

1. A large number of jobs that pay low wages (currently, in the UK and the USA roughly 1 in four jobs are low paid, McDonalds and Safeway are two of the largest employers in DC, employing 15,000 and 10,000 people each)

2. Rent and house prices that are set by the market meaning that people are often paying to live away from neighborhoods with a large concentration of people with low incomes.

This is one of the reasons why an ‘economics first’ approach to regeneration is, as John Houghton writes, destined to fail.