Politicians need to shift focus towards service industry

Credit: India Price/Online Editor Credit: India Price/Online Editor

Manufacturing has always been a mainstay in American politics. The reasons politicians love manufacturing are obvious. Manufacturing jobs used to be broadly unionized and tended to pay well with some benefits all without requiring a college degree like many similarly paying jobs do. This made the factories highly favorable due to the boost they provided to the economic well-being of families who might otherwise struggle. Furthermore, manufacturing the products themselves is far more expensive than shipping them, so politicians could reliably push for manufacturers to get all sorts of goodies for bringing manufacturing to their districts, which in turn made the politicians' constituents happy.

Manufacturing’s role in the economy, however, is a different story. From the 1960s until recently, manufacturing has been steadily becoming a smaller and smaller part of the American economy. After the 2001 entry of China into the World Trade Organization (WTO) and the 2000-01 recession, American manufacturing took a particularly big blow. Manufacturing jobs have been in decline even despite the recent uptick in the number of factories around the nation. To make things worse, American workers became less central to the value of manufacturing due to outsourcing and automation. As a result, manufacturing unions have weakened and manufacturing jobs now make less money than service sector jobs. The average manufacturing worker makes $20.47 per hour compared to the average service sector worker’s $21.37 per hour. The decline in the number and value of manufacturing jobs has taken the legitimacy out of some politicians’ favorite talking points.

Politicians won't let the reality of the situation stop them, however; and manufacturing talk isn’t going away on the campaign trail. Both Republican presidential nominee Donald Trump and Democratic presidential nominee Hillary Clinton have dedicated plenty of energy to this topic at campaign events. The new reasons for going back to the manufacturing well for political fodder are distressing. The decline of American manufacturing has hit older workers without college degrees particularly hard, and their economic anxiety is easy for politicians to take advantage of. Talking about bringing back manufacturing garners political support from this vulnerable population without offering real solutions. In addition, the rhetoric of manufacturing jobs being “moved” overseas, or countries having “stolen” jobs from Americans makes for very easy scapegoats and easier applause lines for politicians.

With all of the focus on manufacturing, the idea that manufacturing is the core of the American identity and the American economy is not going away. That said, both prongs of this idea are probably not true.

Jobs that pay someone enough to live and that don’t require a college degree are a big part of the American Dream, but those jobs don’t necessarily have to be manufacturing. The prominence of unions in manufacturing is what caused factory jobs to be a path to the middle class without requiring a degree. As unions are weakening, manufacturing no longer even fits that bill.

The economy might even be better off if we stopped focusing so much on manufacturing. Take Hon Hai, most commonly known as Foxconn, one of the largest manufacturing companies. Hon Hai’s revenue is about 70 percent of Apple’s and about 190% of Microsoft’s. However, their profits are less than 10 percent of Apple’s and less than 30 percent of Microsoft’s. Simply put, manufacturing companies’s profit margins are quite slim even when they produce high value products such as electronics. As a result, manufacturing jobs are not paying well enough to help stimulate the economy by helping people have money to spend, and manufacturing companies also have profit margins too slim to help infuse money into the economy. This then drives the problem with pay because workers are another expense that has to be slashed when money gets tight. This is bad for the economy as a whole.

With manufacturing seemingly offering nothing to anyone, it’s time politicians turned their focus to our continuously growing service sector. Since no political blood is spilled over the service sector, it’s generally vilified as a continuous churn of low-paying jobs, but it doesn’t have to be. There are a number of ideas floating around to improve the quality of service sector jobs such as unionization. New technologies and better management increase the productivity of individual workers which often gets that position a raise. These are areas the government could potentially be able to help. These are the policies that need to start making the cut when it comes to jobs plans. Current political rhetoric would be well placed in the 1940s, but we don’t live there anymore. Manufacturing can’t absorb so much of our economic energy that we ignore the economy we have now.

When people run for office, the things they say matter. Candidates need to stop making promises to reverse major trends in the global economy — this is not something that the government can do. This focus also leads politicians to make bad decisions which just end up weakening our economy and the quality of life of the people participating in it. Politicians have to work with our current economic reality. The service sector jobs that are impossible to outsource or automate have stayed, and we have to shift our focus to making those jobs compensate workers better. Living in the past makes for some nice political rhetoric but it is no way to shepherd an economy.