Articles written by Lou Glazer
Both President Obama in his State of the Union address and Governor Snyder in his State of the State speech identified manufacturing as a key component of their economic growth strategy. Unfortunately, almost certainly, if the goal is more and better jobs it won’t work.
In a terrific Atlantic Cities column entitled Sorry Mr. President, Manufacturing Will Not Save Us Richard Florida makes the case that factory work is no longer the path to future American –– or Michigan –– prosperity. (Its the case that Don Grimes and I have been writing about for years.) Florida writes: “After shedding jobs for more than 10 years, our manufacturers have added about 500,000 jobs over the past three. … While there is much to applaud about the recent revival of American industry, manufacturing is simply insufficient to help revive lagging industrial regions or power the job creation the nation so badly needs.”
He goes on to list the reasons why that is the case:
- Manufacturing is not a big job generator. “American manufacturing is making a comeback, but is remains an anemic job creator. Manufacturing output is projected to grow from $4.4 trillion in 2010 to a projected $5.7 trillion by 2020, according to the Bureau of Labor Statistics. … But “the BLS projects the U.S. will lose another 73,100 manufacturing jobs by 2020, as manufacturing falls to just seven percent of total employment.”
- Many factory job are no longer high wage jobs. “Production workers across the United States average just $34,220 per year according to the BLS, less than half that of knowledge, professional and creative workers ($70,890) and not that much more than what low skill service workers in fields like food preparation, clerical work and retail sales ($30,597) take home.”
- Manufacturing does not translate into local economic growth and development. Since 2000, “employment in high manufacturing counties experienced a five percent decline, employment in the rest of the nation’s counties increased by five percent “revealing a stark divergence,” according the report” (from the Cleveland Fed).
(The New York Times recently published a related article entitled Rumors of a cheap-energy boom remain just that. Cheap energy was supposed to make American manufacturing more competitive, ultimately creating a million or more jobs. The Times reports little new factory jobs so far and no realistic hope for lots of factory jobs in the future.)
Florida concludes: When all is said and done, it’s not manufacturing that drives economic growth and creates new jobs, but innovation, creativity and talent. The big job generators for the past several decades and for the foreseeable future remain high-skill, high-pay knowledge jobs and low-pay, low-skill service jobs. We need to leverage and deepen the former, investing in the knowledge, technology and skill that drive innovation and economic growth. At the same time, we need to transform the more than 60 million low-wage service jobs into good family-supporting jobs like manufacturing jobs used to be.
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As I have written previously we need an education system that prepares students for the economy they will live in, not the economy that their parents and grandparents experienced. Unfortunately increasingly education policy is moving towards the economy of the past.
Both David Brooks and Thomas Friedman wrote recent columns that illuminate what the economy of the future will be like and what skills matter most to do well in that economy. Both worth reading!
Friedman in a column entitled Need a job? Invent it writes:
This is dangerous at a time when there is increasingly no such thing as a high-wage, middle-skilled job — the thing that sustained the middle class in the last generation. Now there is only a high-wage, high-skilled job. Every middle-class job today is being pulled up, out or down faster than ever. That is, it either requires more skill or can be done by more people around the world or is being buried — made obsolete — faster than ever. … My generation had it easy. We got to “find” a job. But, more than ever, our kids will have to “invent” a job. (Fortunately, in today’s world, that’s easier and cheaper than ever before.) Sure, the lucky ones will find their first job, but, given the pace of change today, even they will have to reinvent, re-engineer and reimagine that job much more often than their parents if they want to advance in it.
In the column Friedman interviews Harvard’s Tony Wagner on the education that our kids will need to succeed in the economy he describes. Wagner says:
“Every young person will continue to need basic knowledge, of course,” he said. “But they will need skills and motivation even more. Of these three education goals, motivation is the most critical. Young people who are intrinsically motivated — curious, persistent, and willing to take risks — will learn new knowledge and skills continuously. They will be able to find new opportunities or create their own — a disposition that will be increasingly important as many traditional careers disappear.” … Reimagining schools for the 21st-century must be our highest priority. We need to focus more on teaching the skill and will to learn and to make a difference and bring the three most powerful ingredients of intrinsic motivation into the classroom: play, passion and purpose.” (Emphasis added.)
Brooks in a column entitled The practical university explores the skills students need most from higher education. He writes:
… universities are places where young people acquire two sorts of knowledge, what the philosopher Michael Oakeshott called technical knowledge and practical knowledge. Technical knowledge is the sort of knowledge you need to understand a task — the statistical knowledge you need to understand what market researchers do, the biological knowledge you need to grasp the basics of what nurses do. Technical knowledge is like the recipes in a cookbook. It is formulas telling you roughly what is to be done. It is reducible to rules and directions. It’s the sort of knowledge that can be captured in lectures and bullet points and memorized by rote. … Practical knowledge is not about what you do, but how you do it. It is the wisdom a great chef possesses that cannot be found in recipe books. Practical knowledge is not the sort of knowledge that can be taught and memorized; it can only be imparted and absorbed. It is not reducible to rules; it only exists in practice.
Brooks uses Sheryl Sanderg’s book Lean In to explore the practical knowledge one needs to succeed in today’s and tomorrow’s economy. He writes:
Focus on the tasks she describes as being important for anybody who wants to rise in this economy: the ability to be assertive in a meeting; to disagree pleasantly; to know when to interrupt and when not to; to understand the flow of discussion and how to change people’s minds; to attract mentors; to understand situations; to discern what can change and what can’t. These skills are practical knowledge. Anybody who works in a modern office knows that they are surprisingly rare. But students can learn these skills at a university, through student activities, through the living examples of their professors and also in seminars.
Play, passion and purpose. The ability to be assertive in a meeting; to disagree pleasantly; to know when to interrupt and when not to; to understand the flow of discussion and how to change people’s minds; to attract mentors; to understand situations; to discern what can change and what can’t. Think about how aligned our education system is with these skills that may well matter most to doing well in a career of forty years or more. Think about how well you can learn these skills –– in what is increasingly becoming the preferred delivery system of policy makers and pundits for future education –– online or in a virtual school. And then be very worried that we are headed in the wrong direction.
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I have written previously that the state budget policy on a bipartisan basis for two decades has made tax cuts, corrections and health care the priorities. Which by necessity –– or as Bill Clinton says math –– has meant that education, particularly higher education, and support for local governments have been devastated.
Saying you are in favor of these public investments while proposing large tax cuts with no replacement revenue means you are not really in favor of increased public investments in education, infrastructure and quality of place.
Every time I write this I hear from my conservative friends that the Democrats don’t really believe in tax cuts. What matters, of course, is what they do and how they vote. Now we have more evidence of tax cuts as the priority on both sides of the aisle. The House Democrats have just released their budget priorities with more tax cuts front and center. And, what matters most, no replacement revenue. Its one thing to favor shifting the tax burden away from low and middle income households to corporations or upper income households. (Or as Governor Granholm and Business Leaders for Michigan previously proposed a sales tax on services.) But that is not what the House Democrats proposed.
If implemented, these tax cuts, just like those of the last two decades, would have the same effect: diminish the state’s ability to make public investments in education, infrastructure and quality of place. The things that matters most to growing the economy. Saying you are in favor of these public investments while proposing large tax cuts with no replacement revenue means you are not really in favor of increased public investments in education, infrastructure and quality of place.
The budget policies we need as I wrote previously would follow the framework proposed by Thomas Friedman and Michael Mandelbaum in their book That Used to Be Us:
- Spending cuts followed by spending restraints (Michigan, not the nation, has already done the spending cuts)
- Making public investments that grow the economy, particularly education and infrastructure
- Higher taxes
It’s the framework Governor Blanchard followed successfully and that President Obama proposed for the nation in his latest budget. They agreed with Friedman and Mandelbaum who wrote: to assure our “… economic future we will have to spend more, not less, on some things: infrastructure and research and development, and probably education as well.” And to produce the revenue to make those strategic investments requires both spending restraints and tax increases.
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I have agreed to write a monthly blog for the online edition of the Grand Rapids Business Journal. I’m excited about the opportunity. You can find my initial post here.
The topics will be the same as I write about here. But obviously with a focus on the West Michigan economy. To us that is the seven county Grand Rapids, Holland, Muskegon region. As we have explored many times in the past, what happens in the Grand Rapids metro is very important to the future health of the Michigan economy. Successful big regional economies are what make a state prosperous. So for Michigan to return to prosperity metro Detroit matters most, but metro Grand Rapids and Lansing are real important too. As the three of them go, so goes Michigan.
And all three are facing many of the same challenges. Despite all the talk of how different the regions are, the data indicate that they are all in the same boat. Too concentrated in the economy of the past, rather than the knowledge-based economy that is the core of successful regional economies; undereducated and without a vibrant central city that is essential to retaining and attracting mobil young talent.
So I will explore in my grbj.com blog where metro Grand Rapids is today, where it needs to go in the future to be prosperous and what it needs to do to get there.
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Good news! The Bureau of Labor Statistics just released revised data on Michigan employment for 2011 and 2012. They show larger job gains than previously reported. For the two years combined Michigan added 160,800 jobs, an increase of 4.2%. After a decade of annual job losses (totaling 813,000) this is welcome news indeed.
What I want to explore in this post is how does this compare to past recoveries. Particularly the first two years of the Blanchard Administration (which I was part of) when Michigan was also recovering from a strong national downturn and a near collapse of the Detroit 3. As I wrote in a previous post:
… Governor Blanchard inherited a Michigan economy in worse shape – one can make a strong case far worse shape – than Governor Snyder. We have short memories. The story we have told ourselves over and over again that Governor Snyder inherited the worse economy in Michigan since the Great Depression is not true. Jim Blanchard took office in January 1983. The month before (December, 1982) the state’s unemployment rate was 16.8%. And going up. That month was the peak unemployment rate during the serve downturn of the early Eighties. For all of 1982 the unemployment rate was 15.6%. Rick Snyder took office in January 2011. The month before (December, 2010) the state’s unemployment rate was 11.2%. And going down. The peak Michigan unemployment rate during the Great Recession was 14.2% in August, 2009. When Governor Snyder took office the Michigan unemployment rate had been falling for 16 consecutive months. For all of 2010 the unemployment rate was 12.7%.
Michigan job growth for 1983 and 1984 was 187,700, an increase of 5.9%. The year before (1982) Michigan lost 171,000 jobs. The year before Governor Snyder came to office (2010) Michigan lost 7,000 jobs. Michigan added 180,000 more jobs in 1985 and 96,000 in 1986. No one expects that size job growth in Michigan the next two years.
So what drives these economic turnarounds? The Snyder Administration and its supporters argue that it is their policies working. Basically big business tax cuts, smaller government and now right to work. The Blanchard Administration (as do state elected officials of both parties across the county when their state economies are strong) argued that the Eighties turnaround was driven by their policies working. But in many ways the policies it pursued are the exact opposite of the Snyder Administration. A big income tax increase (to 6.35%), no reduction in the so-called job killing Single Business Tax and once the economy began to expand increased state investments in education, infrastructure and activist business development programming.
So what is the prime driver of the recovery? Quite simply the national economy and particularly the fortunes of the domestic auto industry. Both Governor Blanchard and Governor Snyder took over immediately after the domestic auto industry was in such bad shape that it required federal government bailouts. Those bailouts –– as we explored here and here –– allowed the Detroit Three to reposition itself to regrow once the national economy and auto sales rebounded.
As I wrote previously: … “I don’t believe that the Blanchard tax increases were a major reason for Michigan’s growth in the Eighties. Anymore than I believe the Engler tax cuts were a major reason for Michigan’s economic growth in the Nineties. Or the Snyder business tax cuts have much of anything to do with the growth we are now experiencing that started at the end of the Granholm Administration. … The evidence is overwhelming that what drives Michigan’s economy is the national economy and, most importantly, the domestic auto industry.”
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The Bureau of Labor Statistics recently released data on unemployment and average wage by education attainment for 2012. As their education pays chart (below) demonstrates the evidence is overwhelming that those with a four year degree or more work and earn more than anyone else. End of story!
And yet its not end of story. There continues to be a constant barrage of stories that getting a college degree is no longer a good investment. That there are too many college graduates. That the real job demand is in lower skilled occupations. Its malarkey!
To make matters worse, in addition to too many of us are giving our kids bad advice, policy increasingly is moving in the wrong direction too. Politicians from both parties run on more and better jobs platforms and then when in office cut funding for the driver of more and better jobs: higher education. Not smart!
Jordan Weissman in the Atlantic in an article entitled A Truly Devastating Graph on State Higher Education Spending writes about states across the country slashing higher education funding since the onset of the Great Recesssion. (Only energy rich states Wyoming and North Dakota have increased higher education funding since 2007.) The result: much higher tuition. He presents data (below) that demonstrate “deeper budget cuts did generally correlate with bigger tuition increases.”
If more and better jobs are the goal: support for higher education is one of, if not the most, powerful lever available to policy makers. We need to end this disconnect between policy and the economic reality.
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Catherine Rampell in a New York Times Economix blog entitled Health Care Aside, Fewer Jobs Than in 2000 makes the case that other than health care the American economy has not added jobs for more than a decade. Pretty amazing and worrisome. Almost certainly unsustainable.
The basic facts: “In 2000, the economy had about 121 million non-health-care payroll jobs. Today, on a seasonally adjusted basis, there are 120 million non-health-care jobs. Meanwhile, the health care industry has added about 3.6 million jobs in that time frame, growing about 33 percent (14.5 million health care jobs today versus 10.9 million in 2000).”
Its no wonder that health care occupations end up on all the “hot jobs” lists. And one of the reasons there is such a big push for education to emphasize math and science. But that is all based on the assumption that health care will continue to be sheltered from globalization and technology. That health care will be delivered largely face to face by professionals serving patients.
In a facsinating article entitled The Robot Will See You Now the Atlantic explores the revolution that may well be around the corner in how health care is delivered. Which if it comes to pass will substantially reduce the need for health care professionals. (And the article claims is likely to sustaintially improve the quality of heath care. Which, of course, is far more important that what jobs are likely to available in the sector in the future.) They write:
But according to a growing number of observers, the next big thing to hit medical care will be new ways of accumulating, processing, and applying data—revolutionizing medical care the same way Billy Beane and his minions turned baseball into “moneyball.” Many of the people who think this way—entrepreneurs from Silicon Valley, young researchers from prestigious health systems and universities, and salespeople of every possible variety—spoke at the conference in Las Vegas, proselytizing to the tens of thousands of physicians and administrators in attendance. They say a range of innovations, from new software to new devices, will transform the way all of us interact with the health-care system—making it easier for us to stay healthy and, when we do get sick, making it easier for medical professionals to treat us.
… Specifically, they imagine the application of data as a “disruptive” force, upending health care in the same way it has upended almost every other part of the economy—changing not just how medicine is practiced but who is practicing it. In Silicon Valley and other centers of innovation, investors and engineers talk casually about machines’ taking the place of doctors, serving as diagnosticians and even surgeons—doing the same work, with better results, for a lot less money. The idea, they say, is no more fanciful than the notion of self-driving cars, experimental versions of which are already cruising California streets. “A world mostly without doctors (at least average ones) is not only reasonable, but also more likely than not,” wrote Vinod Khosla, a venture capitalist and co-founder of Sun Microsystems, in a 2012 TechCrunch article titled “Do We Need Doctors or Algorithms?” He even put a number on his prediction: someday, he said, computers and robots would replace four out of five physicians in the United States.
Will machines eliminate 80% of doctor jobs? Who knows? But probably unlikely and certainly not soon. But it also almost certain that smarter and smarter machines will dramatically change the way health care is delivered and with it both the demand for health care workers and the occupational structure of the sector. (The article speculates that along with fewer doctors the sector will need more IT workers as well as nurses and para professionals.)
The article adds to the evidence that predicting job needs into the future is getting harder and harder. And that we need to resist calls to alter our education to prepare people for specific occupations that we believe will be in demand in the future. That kind of narrowing of education is almost certainly not good for either the student’s career or the economy.
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