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home : most recent : development - economic September 23, 2017


9/4/2017 7:15:00 PM
OPINION: Continued problems in the Rust Belt are homegrown

Michael Hicks is the George and Frances Ball Distinguished Professor of Economics and the director of the Center for Business and Economic Research at Ball State University. His column appears in Indiana newspapers.

Explaining the role of international trade on manufacturing jobs and the plight of the Midwest remains a daunting task for an economics professor. Perhaps this is because the telling of fables is so spiritually comforting. After all, it is easy to hope that prosperity will return to some beleaguered Rust Belt town if only we can stop Chinese imports. It is much harder to admit that our real challenges are homegrown.

Still, it isn’t just sloppy thinking that leads to mistakes on trade. A raw and unseemly form of anti-intellectualism is at work. Now, having dug foxholes on four continents during my frivolous youth, I am cautious about tossing out that slur, but that’s the nicest term I can muster.

Driving around Muncie, Gary, Youngstown or Flint, it looks like manufacturing jobs have all packed up and gone overseas. It also looks a lot like the world is flat. Both observations are equally wrong, but the jobs picture is a lot easier to figure out.

2015 was the record year of manufacturing production in the USA. By whatever metric you wish — inflation adjusted dollars, pounds of stuff, total cars — we are near record-level production, and 2017 looks like it may be a new peak. However, manufacturing employment nationwide topped out in 1979. Since peak manufacturing we’ve lost about 7.5 million factory jobs, all the while our production has continued to increase. This is a familiar story; 2017 looks to be a record agriculture year in the USA, but we’ll have the fewest agriculture workers in history. In both sectors we’re simply producing more goods with fewer workers. This trend is as old as the Republic, and so should be a surprise to precisely no one.

This does not mean trade has been painless. The highest technical estimates of lost factory jobs due to international trade are 1.4 million, or 15 percent of the total job losses. But, we’ve been running a trade deficit since 1980, due primarily to the strength of our currency as a safe harbor. Over that time period the U.S. has gained some 53 million new jobs. Over 9 million of those new jobs are in transportation and logistics sectors needed to move all those traded goods. So, for every factory job lost to trade there’s at least three new logistics jobs. The problem is these new jobs require different skills and are located in different places.

To be sure, the pain of lost factory jobs is the same whether it is due to international trade or to mechanization. That is what we see in Muncie, Gary, Youngstown and Flint. All these places lost factory jobs, but it is both wrong and counterproductive to lay the blame at the forces of international trade. The same phenomenon is happening everywhere, including China, which has seen the factory share of jobs drop by 50 percent since 1980.

Today’s problem is far different than the pandering story about evil international trade. Nowadays, with the unemployment rate hovering just above 3 percent in Indiana, there are simply no available workers to fill factories should they come. That problem is homegrown.

Modern employers insist upon well-educated, flexible and sober workers. In turn, these workers can move nearly anywhere they wish and find good jobs. Places that cannot attract workers, and hence their prospective employers, are simply going to continue to shrink. We can sit around and blame our prospects on the lack of nice weather, but then that hardly explains the economic vibrancy of Boston or Chicago.

The continuation of rust belt challenges is mostly a consequence of too little long-term thinking about the future. It is time to move well beyond the five-year business attraction plan and focus on attracting people. Communities that persist in doing the same old things will continue to get the same old results.

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Editor, John C. DePrez Jr.; Executive Editor, Carol Rogers; Publishers: IBRC and IAR


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