Great analysis! And I find the 2018 inflection point very interesting. I've studied the trade shock and the impact on manufacturing a bit and noted a divergence between high vs low skilled manufacturing work. Since the US is actually producing more manufacturing output than it has in the past, a lot of is driven by high skill manufacturing. Two additional points - I'd make: unfortunately, re-training problems have been shown to have limited effectiveness - actually to such a degree that it would be better to just give the money to the displaced manufacturing worker rather than funding them. Second, the issue with long run manufacturing employment is that people entering the labor force have already adjusted their expectations about the economy going forward. One of the biggest issues of the trade shock generated by China joining the WTO was that people who were in manufacturing were all of a sudden put at a disadvantage with no possible alternative (re-training is costly). So their lifetime incomes went down in both nominal and real terms. New people entering the labor market, see that manufacturing (especially the low skill manufacturing) does not pay as much, so they choose other sectors - mainly the service sector. This creates a hollowing out by age - few if any young people enter manufacturing (an example of this was the US textile industry under the Multi-Fibre Agreement - people did not train become textile workers, while the older textile workers just stayed in it until the industry died out). Convincing new people to become manufacturing workers is difficult because of commitment issues - does anyone believe manufacturing is here to stay for 40 years when they enter the labor force?
The core problem with manufacturing in America is that the infrastructure isn’t here the same way it is in other countries. For example, a lot of machinery is made overseas and the people familiar with those machines are overseas too. This makes it incredibly difficult to manufacture here. A other example, finding skilled labor is really really hard. Can barely find people with knowledge of lean manufacturing in states like Utah and California. In Mexico, it’s very easy.
I am not sure the solutions you propose will really do much. The real problem is that American made products are very difficult to produce in a cost effective way that meets consumer expectations. Maybe this will change as robotics become widespread.
Super post! I love how you set up the data with an "explore link".
I didn't realize the connection between the loss in manufacturing jobs and the pick-up of those workers by the service industry. No wonder wages have declined.
Dec 25, 2023·edited Dec 25, 2023Liked by Jeremy Ney
I would like to point out as a STEM grad/15 year+ machinist that indeed college is important in manufacturing as our field is far more complex and rigorous today more than it ever has. My industry stopped being some refuge/dumping ground for the high school dropout/non graduate adult population back about when corduroy bell-bottom pants were still cool 50 years back. Most if not all companies won't even entertain an interview for a machinist position for someone without a degree in this or at minimum several years' background in machining which is nigh impossible to do without majoring in this at some point
Nice piece, Jeremy. The role of automation in manufacturing has definitely displaced US non college workers, but that may change in the future as supply chains re and near shore. At Exponential Industry, I cover the technology transformation that is taking place in manufacturing. In my estimation, automation and AI will actually increase wages as American manufacturing productivity will greatly increase. Many machine shops will and do currently require highly skilled machinists (that don't require a degree) and are augmented by automation. Lights out manufacturing is still not possible for most assemblies.
Until the government can reestablish an effective balance between labor and management where both are fairly compensated it's an uphill battle. Reagan's trickle down economics didn't do the American workers any favors. I like alot of Robert Reich's articles too. He's got extensive knowledge of the overall industry with his Labor Sec experience. Keep up the good work!!
Great analysis! And I find the 2018 inflection point very interesting. I've studied the trade shock and the impact on manufacturing a bit and noted a divergence between high vs low skilled manufacturing work. Since the US is actually producing more manufacturing output than it has in the past, a lot of is driven by high skill manufacturing. Two additional points - I'd make: unfortunately, re-training problems have been shown to have limited effectiveness - actually to such a degree that it would be better to just give the money to the displaced manufacturing worker rather than funding them. Second, the issue with long run manufacturing employment is that people entering the labor force have already adjusted their expectations about the economy going forward. One of the biggest issues of the trade shock generated by China joining the WTO was that people who were in manufacturing were all of a sudden put at a disadvantage with no possible alternative (re-training is costly). So their lifetime incomes went down in both nominal and real terms. New people entering the labor market, see that manufacturing (especially the low skill manufacturing) does not pay as much, so they choose other sectors - mainly the service sector. This creates a hollowing out by age - few if any young people enter manufacturing (an example of this was the US textile industry under the Multi-Fibre Agreement - people did not train become textile workers, while the older textile workers just stayed in it until the industry died out). Convincing new people to become manufacturing workers is difficult because of commitment issues - does anyone believe manufacturing is here to stay for 40 years when they enter the labor force?
The core problem with manufacturing in America is that the infrastructure isn’t here the same way it is in other countries. For example, a lot of machinery is made overseas and the people familiar with those machines are overseas too. This makes it incredibly difficult to manufacture here. A other example, finding skilled labor is really really hard. Can barely find people with knowledge of lean manufacturing in states like Utah and California. In Mexico, it’s very easy.
I am not sure the solutions you propose will really do much. The real problem is that American made products are very difficult to produce in a cost effective way that meets consumer expectations. Maybe this will change as robotics become widespread.
Super post! I love how you set up the data with an "explore link".
I didn't realize the connection between the loss in manufacturing jobs and the pick-up of those workers by the service industry. No wonder wages have declined.
Manufacturing is probably going to decline every year from now since AI is getting more advanced
I would like to point out as a STEM grad/15 year+ machinist that indeed college is important in manufacturing as our field is far more complex and rigorous today more than it ever has. My industry stopped being some refuge/dumping ground for the high school dropout/non graduate adult population back about when corduroy bell-bottom pants were still cool 50 years back. Most if not all companies won't even entertain an interview for a machinist position for someone without a degree in this or at minimum several years' background in machining which is nigh impossible to do without majoring in this at some point
Nice piece, Jeremy. The role of automation in manufacturing has definitely displaced US non college workers, but that may change in the future as supply chains re and near shore. At Exponential Industry, I cover the technology transformation that is taking place in manufacturing. In my estimation, automation and AI will actually increase wages as American manufacturing productivity will greatly increase. Many machine shops will and do currently require highly skilled machinists (that don't require a degree) and are augmented by automation. Lights out manufacturing is still not possible for most assemblies.
Until the government can reestablish an effective balance between labor and management where both are fairly compensated it's an uphill battle. Reagan's trickle down economics didn't do the American workers any favors. I like alot of Robert Reich's articles too. He's got extensive knowledge of the overall industry with his Labor Sec experience. Keep up the good work!!
Excellent analysis and explanation of what is happening with the labor market 👍 👏 😀 🤔 👌