It goes without saying that Ohio has suffered a great deal over the last two decades. During the “boom years” of the 1990s, it grew at a slower rate than the national average and it declined further than almost any other state after the recession of the early 2000s.
Over that time it has become commonplace to hear that we are in a “new economy.” In fact, the phrase is invoked so often, it has become cliché. However, that does not mean it lacks validity. This article from the Wall Street Journal (WSJ) highlights something Ohioans grasp instinctually, but the full ramifications are not fully appreciated- manufacturing will likely never again be the main driver of full employment in the future.
For context, consider the Buckeye Institute’s monthly Ohio by the Numbers report, which uses Bureau of Labor Statistics numbers. Think about the following:
• Ohio’s peak employment in March of 2000 stood at 4.85 million;
• From 1990-2000, Ohio’s private sector jobs increased 714,000 or 17 percent growth. That growth rate placed Ohio at number 37 nationally;
• From January 2000- January 2010 Ohio’s private sector lost 614,300 or 12.7 percent. Other than Michigan NO state in the entire country had a higher percentage of private sector job losses;
• Ohio’s manufacturing jobs went from over 1.04 million in 1990 to 611,700 in 2010, a decline of over 41 percent;
Over the same time that manufacturing employment was taking a nosedive, jobs in various service industries including professional and business services and, especially education and health services took off.
Professional and business service jobs went from 445,000 in 1990 to slightly over 611,000 in 2010, an increase of 37 percent. Education and health service jobs increased from over 534,000 jobs to nearly 837,000 jobs, an increase of nearly 57 percent.
As of November 2011, manufacturing in Ohio employs 638,200 while those service industries account for over 1.5 million jobs. In terms of the percentage of private sector jobs in the service sector versus the manufacturing sector, the service industries have more than picked up what was lost by manufacturing.
This is a grand shift.
Everyone knows it, but official numbers confirm it
Many lament these numbers. The entire edifice of the “Rust Belt” was built on blue collar, largely manufacturing based jobs. Many seeing this edifice appear to crumble, deem it a tragedy. Yet, the reality is far more complex than this simplistic narrative of unstopped decline.
The WSJ piece quotes Lawrence Katz, a Harvard labor economist,
“These long-term trends related to technological change, productivity improvements and globalization are likely to continue…
… “We don’t expect to restore agriculture as our primary source of employment growth. The same is true for manufacturing.”
The piece goes on to make clear that while the national numbers (and ObN numbers for that matter) seem to show manufacturing “withering,” that is not a wholly accurate picture.
Yes, the number of manufacturing jobs nationally is down, but output in American factories is up 3.8 percent. Productivity increased 40.4 percent.
Essentially, we still make stuff in the US and Ohio. Indeed, the Ohio Department of Development indicates Ohio ranks as the eighth largest exporter in the US.
So what do we make of this? Are we suffering through an unmitigated tragedy? Are we still a manufacturing powerhouse that is competitive nationally? What of this grand shift of our employment profile? Are we destined to be a service economy?
These are all very serious questions and the answers are not simple. In a way, all of the above have some element of truth to them but fail to reflect the magnitude of what is happening to our economy.
Simply put, we have no idea what the future will look like and that is the point.
Holding on to vestiges of the past brings a great deal of comfort, but may only prolong the pain. Whatever public policies Ohio leaders engage, they must think about the future and not the past.
Irrespective of the doom and gloom prognostications, manufacturing will not disappear from Ohio. It will, however, not be the backbone of Ohio’s future economy as it once was.
Current service industries may look to be the only thing we can imagine for tomorrow. But tomorrow’s page in the history books is yet to be written and once it is, we are unlikely to have conceived of it beforehand.
Policy must embrace the entrepreneur. It must embrace the Schumpeterian “creative destruction” that renews the promise of a new day, while still offering a hand up to those in need (rather than a hand out). To do otherwise, is to confirm those vague feelings of tragedy and make them a collectively self-willed and self-fulfilled prophecy.