WHAT FUTURE FOR U.S. JOBS AND MANUFACTURING? REVIVING U.S. MANUFACTURING A Presentation to the Board And Staff of Interfaith Worker Justice MONDAY, DECEMBER 10, 2012 Robert E. Scott Director of Trade and Manufacturing Policy Research Economic Policy Institute
Why is manufacturing important?• Source of high wage/good benefit jobs for workers without college degrees.• Cannot close the trade deficit without exporting more manufactured goods.• Best way to bring economic recovery – we need sustained demand, no bubble.• One job in manufacturing supports 2-3 additional jobs, eg, networks of suppliers, R&D, process engineering, etc; the loss of manufacturing means the additional loss of other high end, highly skilled jobs.• Manufacturing is essential to technological innovation.
Why is manufacturing important?Manufacturing is essential for a healthy economy with good jobs
Manufacturing TrendsWhat have been the trends in U.S. manufacturing?
U.S. manufacturing employment, Jan 1970-Oct. 2012
The Trend in U.S. Manufacturing• 1970 – 1998: High manufacturing productivity growth was offset by rapidly growing demand for domestic manufactured, so manufacturing employment was roughly stable.• 1998 – 2010: 6.1 million manufacturing jobs lost.• Productivity growth caused only a small share of the manufacturing jobs lost since 1998.• Most of the lost jobs were due to the huge rise in the U.S. trade deficit in manufactured goods.
What happened to manufacturing There has been a big decline in the growth of value added inmanufactured goods produced in theUS, either for domestic consumptionor export, largely due to a rise in the value of imports, harming the economy and workers.
The Decline in ManufacturingIs the decline in manufacturingthe inevitable result ofproductivity gains and/orglobalization … so there’s nothingwe can do about it? • NO
The Decline in ManufacturingWhat caused the decline in manufacturing?
The Decline in ManufacturingThe decline in manufacturing is largely due topolicy choices – today we discuss the two mostimportant ones.1.Unfair trade practices2.Lack of support for the manufacturing sector
Unfair Trade Practices: 1Currency manipulation• Approximately 20 countries are significant currency manipulators including China, Taiwan, Malaysia, Saudi Arabia and Switzerland• Eliminating currency manipulation could create 2.2 million to 4.7 million U.S. jobs over next two to three years.
Unfair Trade Practices: 2Subsidies / dumping•China has poured tens of billions of dollars over the pastdecade into: • Steel • Paper • Auto Parts • Solar panels • Glass•China’s Steel capacity has increased ten-fold in a decade • China and many other countries found guilty in dumping cases (sales below cost) in many products
Unfair Trade PracticesThere is a conflict of interest between WallStreet (financial institutions, large retailers,and ? multinational manufacturers?) and MainStreet.Our policies support and our politicians aresiding with Wall Street, not our Main Streetmanufacturers, but this is not in the bestinterests of the people of the US.
Unfair Trade PracticesOur trade problems and loss of manufacturing are largelydriven by “Wall Street” corporations (multinationalmanufacturers and financial firms) that benefit from othercountries’ unfair trade practices which allow them toproduce cheaply abroad. The Citizens United decisionenhanced the power of MNCs and Wall street firms.Our trade/manufacturing problem is a political, noteconomic, problem.It is not an inevitable outcome of globalization orproductivity increases in manufacturing.
Lack of Support for ManufacturingOther countries with strong manufacturingsectors provide support for manufacturers thatwe fail to do.The U.S. could and should supportmanufacturing. We’ll discuss specifics inupcoming slides.
What can be done to address unfair trade practices and provide support for manufacturing?
What Can Be Done re: Unfair Trade Practices• Eliminate global currency manipulation. Outlaw purchases of U.S. government securities by countries that won’t sell their own. This is legal under the WTO principle of reciprocity.• End subsidies. The most egregious are illegal under WTO. We need an independent government agency to initiate fair trade cases.• Trading system reform. Revise U.S. general administrative trade law.
What Can Be Done re: Support for Manufacturing• Increase spending on training and community college programs• Increase government R&D (nondefense)• Greater access to capital for manufacturing firms• Manufacturing extension service• Invest in new industries, make commitments to new products (government purchases)• Invest in infrastructure: in short term, creates jobs and increases demand for manufactured goods; in longer term, boosts private sector productivity
Manufacturing in the U.S.The U.S. can have, and needs to have, astrong manufacturing sector.It is a question of power, politics, andinternal U.S. policies that can and mustbe changed.
Additional ResourceHarold Meyerson, “The Politics of IndustrialRenaissance,” American Prospect December2009
U.S. manufacturing: Growth in real value added and labor productivity, 1990-2011
U.S. manufacturing: Goods trade deficit, 1989-2011
U.S. manufacturing: Real value added, 1989-2011