President Trump built a campaign around promises to revive manufacturing and energy jobs, telling coal miners in Ohio, for instance, that coal is coming back. (It’s not.) Manufacturing has made a mild comeback, but it is nowhere near the source of jobs it once was. (“There were 184,000 manufacturing jobs created in the 11 months since Trump took the oath of office, compared to a loss of 16,000 in 2016, according to the [Bureau of Labor Statistics]. This is a substantial one-year gain, but it’s still more than 1 million manufacturing jobs below the level at the start of the Great Recession.”) Trump’s mind-set, sorry to say, is that of a septuagenarian stuck in a time warp, grossly ignorant about the shape of the U.S. economy and the nature of 21st-century manufacturing.
As the Pew Research Center pointed out last year, manufacturing production is certainly strong, but manufacturing jobs are not:
Manufacturing jobs in the United States have declined considerably over the past several decades, even as manufacturing output — the value of goods and products manufactured in the U.S. — has grown strongly. …
Manufacturing jobs peaked in 1979 at 19.4 million, according to the Bureau of Labor Statistics, and by 1987 had fallen to 17.6 million. What had been a slow decline in employment accelerated after the turn of the century, and especially during the Great Recession. Manufacturing payrolls bottomed out at fewer than 11.5 million in early 2010, and even though more than 900,000 manufacturing jobs have been added since, overall employment in manufacturing is still at its lowest level since before the U.S. entered World War II.
As a share of the overall workforce, manufacturing has been dropping steadily ever since the Korean War ended, as other sectors of the U.S. economy have expanded much faster. From nearly a third (32.1%) of the country’s total employment in 1953, manufacturing has fallen to 8.5% today.
Trump’s view is akin to bemoaning the loss of agricultural jobs in the early decades of the Industrial Revolution. His manufacturing nostalgia appeals to older, white workers displaced from jobs in the Rust Belt, but obsession with manufacturing jobs is not the basis for a vibrant economy.
A recent Brookings Institution study points to the actual state of the 21st-century economy:
Dating back to the mid-1990s, economists have identified that a small number of high-growth businesses account for most job creation in the United States. According to this early work, just four percent of firms—the “gazelles”—accounted for 60 percent of job creation during the late-1980s and early-1990s. A more recent study by the Bureau of Labor Statistics produced findings of a similar magnitude, showing that 2.4 percent of firms accounted for 40 percent of new jobs from the mid-1990s to the late-2000s.
What do these firms look like? They’re not coal plants or heavy manufacturing factories. Rather, looking at the top 5,000 “high-growth companies” (I5HGCs) over seven years, we find they “are concentrated in a relatively small number of industries. Six of the 26 industries account for 52 percent of I5HGC entries, and 80 percent of entries are in the top 13 industries. The three information technology industries—IT Services, Software, and Computer Hardware—account for 21 percent of I5HGCs. The other predominantly high-tech industry—Health (which includes biotechnology and medical technology)—accounts for another eight percent.” Of the the 25,776 companies that made up the universe of 15HGC’s included in the study, only 821 are manufacturing firms.
Consistent with other data about population growth and wealth accumulation, rural America is not where the jobs are. The “substantial majority of I5HGCs are located in large metropolitan areas (those with one million or more residents). However, medium-sized metros (those between 250,000 and one million residents) make a meaningful contribution as well. In fact, on a population adjusted basis, medium-sized metros as a group have a higher ‘density’ (I5HGCs per one million residents) than do large metros. This is evident by the concentration of medium-sized metros among the densest cities for I5HGCs.”
The places where high-growth firms congregate are both small and large metropolitan areas with high percentages of workers with college degrees, a high percentage of the workforce in high-tech jobs, a large percentage of the population in the prime entrepreneurial-age bracket (35-44 years) and with start-up cultures that are already strong. “Entrepreneurial regions tend to stay that way, and the evolution of a region becoming more or less entrepreneurial occurs slowly. This is partly due to culture (some areas are more entrepreneurial) and partly because of experience (entrepreneurs learn from themselves and from other entrepreneurs).”
The take-away from this is that trying to recreated the 1960s economy in the Rust Belt is a bad and wasteful idea. It’s also a pipe dream to think the high-growth, job-rich firms of today and tomorrow are going to start in places with aging populations, low college-graduation rates and declining business start-up rates. (Ironically, if you did want to pursue that, you’d encourage immigration, a population from which a higher percentage of younger, entrepreneurial workers come.)
Instead, we should be preparing workers for job-rich sectors of the economy and making it easier for workers to get to where the job-rich communities are. That means promoting physical mobility, worker training and education appropriate for developing skills needed by thriving industries, as well as making job-rich areas more affordable (decrease zoning regulations, build transportation out to suburbs and exurbs, etc.).
We have too many politicians who are clueless about the modern economy. They pursue dreadful policies (protectionism, immigration restriction) that move us in the wrong direction and make political promises that are never going to be met. We’d do better getting rid of the aging baby boomers and Goldman Sachs tycoons in this administration (and Congress) and replacing them with millennial entrepreneurs and mayors and governors with a strong record of nurturing high-growth business environments.