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