The Manufacturing Industry Is Never Going To Solve Our Jobs Problem


Tuesday night, President Obama laid out his blueprint for an economy that’s “built to last” in his annual State of the Union address – and according to Obama, “this blueprint begins with American manufacturing.”  Which begs the question…  What’s with the focus on manufacturing?

Is it because manufacturing jobs are inherently better than service jobs?  That’s a tough argument to make, as Matthew Yglesias points out over at Slate.

Is it because manufacturing can solve our jobs problem?  Doubtful.  Divide manufacturing into two categories: labour intensive and technology intensive.  The U.S. can’t compete in labour intensive manufacturing, because the key driver of labour intensive manufacturing costs is wages – and wages are a lot lower beyond America’s borders.  On the other hand, the U.S. might be able to compete in technology intensive manufacturing.  Unfortunately, by definition, this realm of manufacturing depends on technology, not very large numbers of people.  I.e., it won’t solve our very large jobs problem.

Is it because manufacturing is critical to innovation?  The New York Times explored the link between manufacturing and innovation last year.  And, in my opinion, this link provides one of the better arguments for supporting manufacturing.  The existence of a manufacturing base can facilitate innovation, which in turn drives economic growth.  But it’s not clear where this argument leads.  Should the U.S. subsidise unprofitable manufacturing because it may facilitate innovation?  Such a policy seems impractical (and potentially runs afoul of international law).  Probably better to spend the money on other strategies that promote innovation (e.g., investing in basic research, education, support for entrepreneurship).

Is it because manufacturing is critical to national defence?  This is another decent argument for investing in manufacturing, albeit one that you don’t hear that often.  Put simply, if a war breaks out and we can’t produce weapons, we’re in trouble.  That said, this argument demands support for a fairly narrow range of manufacturing.

Is it nostalgia?  
A colleague floated this explanation this morning, and I think there’s something to it.  Manufacturing was a big part of America’s 20th Century story, when America’s middle class emerged and – to hear the politicians tell it – life was good.  Of course, this is not a strong argument for focusing economic policy on manufacturing.  But it may explain why politicians seem to focus on it – it’s a policy prescription that resonates because it reminds people of the good ol’ days.

I think the best explanation for politicians’ focus on manufacturing is the absence of good ideas about how to create jobs on a large scale.  And reviving manufacturing at least sounds like it might create a lot of jobs.  But the reality is that we desperately need to develop new strategies for creating jobs in the 21st century – not simply recycle the strategy that worked in the 20th Century.

To be sure, manufacturing will play a role in the economic life of America.  And we would be wise to support the development of sectors of manufacturing where the U.S. can effectively compete.  

But, let’s be honest: reviving large scale manufacturing is not a viable approach to solving our jobs problem.  And as long as politicians continue to believe that it is, our national discussion about how to create jobs in the 21st Century will simply go in circles.