Behind the Curve: Can Manufacturing Still Provide Inclusive Growth?

From a book review by Barry Eichengreen:

“Lawrence considers how government can create high-paying manufacturing jobs, a common goal of the Biden and Trump administrations. In seeking to increase the share of manufacturing in total employment, U.S. policy is pushing against the tide. Although the country’s manufacturing output continues to expand, manufacturing employment does not, reflecting mechanization and other factors that have boosted output per worker. Trade similarly limits manufacturing employment in the United States and other advanced economies since low-income countries have a comparative advantage in manufacturing activities that use semiskilled labor. Advanced countries are more likely to hold on to manufacturing jobs involving specialized tasks, but since these require skilled labor, policies promoting them have the perverse effect of widening income inequality. Lawrence concludes that although industrial policies might aid certain workers and specific U.S. states, they are unlikely to benefit American workers overall. To address low pay and worker displacement, he recommends expanding trade adjustment assistance to workers in declining industries, retraining workers to fill high-wage service-sector jobs, providing federal wage insurance that compensates displaced workers for income losses, and creating a better-targeted tax and transfer system.”

Posted by at 8:34 AM

Labels: Inclusive Growth

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