Manufacturing in America is facing a critical moment as both major political parties seek to boost this sector of the economy. Despite ongoing efforts, many economists question whether these jobs can return in significant numbers. A recent report by NPR’s Planet Money explores why manufacturing jobs are so important and what makes them special.
Manufacturing has long been viewed as a vital part of the American economy, often associated with better pay and job stability, especially for workers without college degrees. This phenomenon is known as the "manufacturing premium." Gordon Hanson, an economist from Harvard, emphasizes that historically, manufacturing jobs have paid more, particularly for those without higher education. However, some research suggests this premium may have diminished in recent years.
To better understand the situation, Planet Money examined a comprehensive study by economists David Card, Jesse Rothstein, and Moises Yi. They tracked the earnings of over 100 million Americans as they changed jobs across various industries. This approach allowed them to see how much pay is influenced by the industry itself versus the individual worker’s skills and background.
The findings reveal that workers who switch from low-wage jobs, like those in restaurants, to manufacturing can expect a pay increase of about 35%. This is a significant jump compared to other sectors, with manufacturing offering better pay than industries such as retail, education, and healthcare. However, some sectors, like information technology and utilities, provide even higher pay premiums.
The research also breaks down the manufacturing sector into subsectors. For instance, manufacturing jobs in electronics and transportation equipment offer higher premiums, while apparel and furniture manufacturing pay less.
So, what accounts for this manufacturing premium? One reason could be the historical strength of unions in this sector, which have traditionally pushed for better wages and benefits. Daron Acemoglu, a Nobel Prize-winning economist, points out that manufacturing jobs are crucial for unionization, which helps secure better pay for workers.
Another factor might be the nature of factory work itself. Although some believe factory jobs are more dangerous, data shows that manufacturing has a lower fatal injury rate compared to sectors like agriculture and construction. Additionally, many workers find factory jobs uncomfortable, which could explain why there are often fewer applicants despite the higher pay.
Interestingly, the manufacturing sector remains a significant source of good jobs in the U.S., even as its overall share of employment has declined. In 1980, manufacturing accounted for nearly 40% of good jobs, but today it represents only about 10% of the workforce. Despite this decline, it still provides about 20% of all good jobs, meaning it continues to play a crucial role in offering higher wages to workers.
Economists remain skeptical about the government’s ability to revive large numbers of manufacturing jobs. Automation has reduced the need for workers, and while tariffs might help bring some jobs back, they could also lead to higher prices for consumers.
In conclusion, while manufacturing jobs are special due to their potential for better pay and stability, the future of this sector remains uncertain. Many experts believe that instead of solely focusing on manufacturing, efforts should also be made to create good jobs in other areas of the economy, particularly in services. This approach could help ensure that workers, especially those without college degrees, have access to better opportunities moving forward.