You’ve heard the analogy: It’s easy enough to get the toothpaste out of the tube, but it’s much harder to get it back in.
Daniel Gros, Director of the Centre for European Policy Studies, wrote a post entitled “The Skills Deficit,” in which he persuasively makes the same point about manufacturing in the US:
The structural shift towards exports will be difficult and time-consuming mainly because producing the high-tech goods that the US should be exporting requires a skilled workforce, which has largely been lost and cannot be re-created overnight. During the ten years preceding the peak of the bubble in 2007, about four million jobs were lost in the US manufacturing sector, whose share in total employment fell from more than 17% to 12%. Unemployment remained low because the booming domestic economy created enough jobs in services and construction. (Emphasis ours.)
But the route out of manufacturing into services or construction is not the same as the route back in. Manufacturing technologies and workers compete internationally and are constantly improving; transitioning back into manufacturing requires a great deal more training than was needed to phase into real estate, construction, or the service industries.
Additionally, since 2007 the US has lost 1.9 million more manufacturing jobs than Gros mentioned above, as well as 2 million construction jobs and just shy of a million retail jobs (see the interactive chart below for national employment from 2007 to 2010 for every sector). But this time we felt these losses much more acutely than in the boom.
The solution? Gros says it won’t be an easy fix, but points to a similar situation that Germany faced in 1995:
… (O)ne million construction workers were laid off and could not find jobs elsewhere. The German economy faced a decade of high unemployment and slow growth.
Exports initially did not constitute a path to recovery because the deutsche mark was overvalued, and some manufacturing capacity had been lost during the unification boom. “International competitiveness” became the mantra of German economic policymaking. But it still took more than ten years for Germany to become the export powerhouse of today.
- via Project Syndicate
