Factory Fallacies

There’s been a lot of recent buzz about the revival of “industrial policy” in the United States. Insofar as that means thinking about the fact that employment growth in different sectors has different implications for prosperity, it seems all good to me. But all-too-often it seems to mean literally policy designed to encourage factories, manufacturing, and industrial enterprises. In my latest column I say this is a mistake and that rather than looking to poorer countries like China and Japan as models for American prosperity, we should look to the most propserous parts of America with their sectoral specializations in software, media, finance, technology, biotech, and other high-value services.

As an additional point to that, it’s worth emphasizing something Jed Kolko said back in February—even in manufacturing-oriented places, relatively few people are actually making stuff on factory floors:

Only 56% of jobs in manufacturing companies involve making or fixing actual stuff, what the government calls production, installation, maintenance, and repair occupations. (If you’re doing the math, that means only 4.5% of jobs in the U.S. involve making or fixing stuff in manufacturing industries.) What’s the rest? Service jobs: management, finance, sales, office support and so on. And don’t look to high-tech manufacturing for production jobs, either: just 32% of jobs in the computer and electronics manufacturing industry involve production, installation, maintenance or repair.

Now there’s nothing wrong with management, finance, sales, office support, and so on but it’s good to have a realistic sense of what we’re talking about. My basic point, however, is this. In Maryland, median household income is $70,000 against a US average of $52,000. That is a staggering 34 percent difference. If we could make more of the country more like Maryland (or Connecticut or New Jersey or the Bay Area) and fit more people into Maryland (or… or… or…) and improve the quality of the infrastructure connecting other places to Maryland (or… or… or…) we’d be making huge progress.