In the Global Economy, All Job Creation Is Local

Atlantic Cities: In the Global Economy, All Job Creation Is Local

But these are fairly predictable answers. So here's something weirder and more colorful: As economics went global, job creation went local. That sounds totally backward. But it's true. ...

Here is his graph showing job creation by year:

Here is his conclusion:

About half of the jobs created between 1990 and 2008 (before our current downturn) were created in education, health care, and government. What do those sectors have in common? They're all local. You can't send them to Korea. As Michael Spence has explained, corporations have gotten so good at "creating and managing global supply chains" that large companies no longer grow much in the United States. They expand abroad. As a result, the vast majority (more than 97 percent, Spence says!) of job creation now happens in so-called non-tradable sectors -- those that exist outside of the global supply chain -- that are often low-profit-margin businesses, like a hospital, or else not even businesses at all, like a school or mayor's office. 

It is both ironic and unavoidably true that the era of globalized profits has dovetailed with the era of localized job creation in low value-added industries, and that the upshot of this has been massive gains at the top and slow overall income growth for the rest of us.

Comments

[ceemac]

So..... Are there/will there be jobs for the average student who just graduated from an average high school?

In 1954 that sort of person could have started to work GM or US Steel the day after graduation. By the time he was 25 was married. Couple of kids. Modest house with 15 or 20 year mortgage at a low rate. Two cars. Modest family vacation every summer. Top grade Heath Care plan. A defined benefit pension that allowed him to retire at 58 after 30 years. In the early 70's his kids went to state college for almost nothing in tuition and they weren't even the scholarship or BEOG kids.

[Michael W. Kruse]

I'm not sure that type of life existed for most folks even in the 1950s, though that was the aspiration. Poverty was above 20% in the 1950s. And poverty then usually meant long periods of deprivation. Not so with most of poverty today. (Poverty rate: Are Americans really poorer than in 1960?) I'd trade indigent health care today for the top grade health care plan of 1954 any day. Only 7.7% of adults had college degrees in 1960. It was 16.2% in 1980, the year prior to my graduation. (Adults With College Degrees in the United States, by County)

I'm not wanting to minimize challenges ahead but I also don't want to romanticize the past.

I think we are in the midst of something as profound as the industrial revolution. The industrial revolution reduced agriculture labor to a small portion of the economy. Wages went down but the cost of everyday goods declined even faster, the quality of goods went up, and the selection of goods ... some never before dreamed of ... came into being. The net being that standard of living went way up.

Automation ... from extraction of resources, to production of goods, to distribution ... is going to radically drive the cost of goods lower, while reducing manufacturing labor to a small number of workers. But how people are employed is going to change, just as it did during the industrial revolution. These shifts have always created new economies that good not be envisioned prior. I suspect education is going to see a complete transformation as society needs different types of workers, possibly within this decade.

We are in the middle of adaptive change and with adaptive change we can't see all the way through to what the new thing looks like. That isn't a denial of challenges but only to say that the status quo is doomed.