Editors' pick: Originally published Feb. 2.
Manufacturing jobs are declining in the United States and will continue to decline, regardless of what the Donald Trump administration does. This is the way the world is going.
This means that remedies other than fiscal stimulus, deregulation and talking will be needed to deal with the consequences of the decline. Yet these solutions will take time to implement at a time when unemployed or underemployed workers want quicker fixes.
Martin Wolf of the Financial Times presents some interesting data in his most recent column.
For example, Wolf writes about the steady decline in the share of jobs in manufacturing, which has gone "from about 30% of total employment in the early 1950s to just over 8% at the end of 2016."
He goes on to report that "In 1950, employment in manufacturing was 13 million" and "by the end of 2016, it was 12 million...." Total employment went from 30 million to 133 million during this time.
"Thus, all the increase in employment between 1950 and the end of 2016 occurred outside manufacturing."
Still, output rose, a result of a marked increase in labor productivity. In manufacturing, "between 1950 and 2016, output rose by 640%, while employment fell by 7%. Even between 1990 and 2016 output rose 63%, while employment fell 31%."
The interesting thing that shows through Wolf's explanations is that during the periods when the economy was expanding, the changes in employment did not occur. It was only during recessions that employees were let go...and they never returned to the employment lists.
For example, between the late 1990s and 2016, "not surprisingly, the absolute declines in employment in manufacturing occurred during the two recession, in the early 2000s and again in 2007-09."
In other words, when people lost manufacturing jobs during recessions, they were not rehired to the same jobs as the recession ended.
This was previously the essence of economic policies to fight economic recessions. According to the Keynesian way of thinking, as economies entered recession and workers lost their jobs, the government would engage in monetary policies to stimulate faster economic growth, which would result in workers returning to work in the jobs they had lost during the recession.
In the 21st century, this is not what happens. Throughout the latter half of the 20th century, innovation and technology spurred increases in manufacturing output.
When the economy recessed, companies had to pare down their workforces, but even when a recession ended, manufacturers didn't see a need to rehire those laid off.
As this process continued, the labor force participation rate dropped. Former workers could not get rehired, they could not find jobs like they once had, and they stopped looking for jobs.
The labor force participation rate peaked in the first quarter of 2000 and has declined ever since.
The solution to this increase in labor productivity, as Wolf writes, is not protectionism or fiscal stimulus or deregulation.
"The best response must be a combination of helping affected communities to generate new sources of employment and assisting workers (and not just those directly affected) to gain skills and so new jobs. A part of the strategy must also be to help restore lost U.S. mobility."
Yet this is a tough prescription to sell politically. The programs that might retrain workers for meaningful, long-term employment take years to implement. The unemployed want ready solutions. That is the reality.