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Listen every morning, up first on the NPR app or wherever you get your podcasts. This is Planet Money from NPR. Both Democratic and Republican politicians and presidents certainly seem to think there's something special about manufacturing. Bringing manufacturing jobs back to the United States is one of the big motivations behind President Trump's tariffs.
And even before Trump took office, President Biden also aimed at dramatically boosting domestic manufacturing through things like the Inflation Reduction Act, the Chips in Science Act. America is now actually building a ton of new factories. Spending on manufacturing construction has nearly tripled in the US since 2021. The manufacturing industry is expected to need 3.8 million additional workers by 2033.
But will people want these jobs? Just recently, there were almost half a million unfilled manufacturing jobs. So... Hello and welcome to Planet Money.
I'm Greg Rosalski. And I'm Sarah Gonzalez. Some people want more made in America, but is it just because of nostalgia and political pandering? Or is there a strong economic reason for this?
Today in the show, carving your factoring jobs actually good jobs? And if so, why are there so many vacancies? Also, is having a factory in your town particularly good for the economy? Is it better than other industries?
Like, why are we all in on manufacturing? This week on NPR's Newsmakers, Maine Senate candidate Graham Plattner, a working-class Democrat leaning into one message that the political system is rigged to favor the wealthy. There's only one direction. We need to be pointing fingers.
And that is up. It's not left and right. Can that message help Democrats take the Senate in the series midterms? Graham Plattner, this week on NPR's Newsmakers.
Watch or listen wherever you get podcasts. Okay, Greg, our wonderful Planet Money newsletter writer. You have been... Oh, yeah.
No, you're wonderful. We're both wonderful. And we have both been covering manufacturing a lot recently. But you in particular kind of wanted to figure out, like, what all the fuss is about when it comes to manufacturing jobs?
Yeah, Sarah. I mean, like the question I've been kind of asking is like, why do politicians like kind of obsess on this one sector? Why do they want to bring these jobs back? So I asked a bunch of economists the same question.
So, you have the floor. Is manufacturing special? It is special. Let's talk about that first question.
Big question. You have the floor. Is manufacturing special? Manufacturing was special.
And it has been less and less special with every person here. Is manufacturing special? No, it's not. If we're talking about importance to the economy, no, it isn't.
So I guess I would maybe frame the question a little bit differently. And maybe this is why there's some disagreement. So, Greg, classic, ask a bunch of economists, get a bunch of different answers. Tell me about it.
By the way, that was Gordon Hansen, Enrique Moretti, Norbert, Michael, and Susan Helper. There is a lot of research on this. And that's what we're getting into. Now, from the yes manufacturing is special camp, why do they think it's special?
Like, what economic evidence actually supports this? First up, a former manufacturing executive who really didn't want to give up on manufacturing? I would have 65 and they said it was time to retire. And you're like, what am I going to do with my time?
I'm going to try to fight to bring that manufacturing. Yeah, so that's Harry Moser. He's the founder and director of the Reshoring Initiative. Reshoring as in bringing manufacturing back to America's shores.
And we asked him, why should we care about manufacturing more than, say, like any other sector? Because, you know, there's some free market economists out there and libertarians who are like, we're a growing economy. Sure, we've lost a lot of manufacturing jobs, but we've gained a lot of jobs in other areas. That reminds me of an economist maybe 20, 30 years ago, who said, computer chips, potato chips, what's the difference?
If there were jobs, there was GDP being produced. And obviously, for an economy, there's a difference between having an opportunity to get it out of your head. Okay, basically, Harry is saying here that some industries are more important than other industries. You don't want to have your job.
But I have a lot of potato chips. No, you wouldn't. You put in your corner and finish your whenever job. That's true.
You're right. Anyway, so why makes manufacturing special? First, good. Manufacturing pieces of goods, as opposed to services.
And good, goods are absolutely essential. Yeah, manufacturing produces goods. It produces things we need, like computer chips and microphones for Greg and I to do our jobs or clothes, pillows, rockets, whatever. And, you know, having goods is good.
Now, of course, that doesn't mean these goods need to be made in the US, right? They could be made somewhere else. But people think it's important to make goods domestically for national security reasons. For one, that's why we make tanks and vaccines in the United States and, you know, case of wars or pandemics or other national emergencies.
And some people are like, we need to make even more things in the US for national security reasons. And there's people who argue that manufacturing just like leads to more innovation, which leads to economic growth. So they say that makes it special. Others say it's special just based on where in the US, these jobs and factories tend to be in places with not a lot of good job options.
Or they say, you know, manufacturing is special because these jobs have been historically more unionized and they provided a good path to the middle class. Right. But here is probably the most popular reason for the yes manufacturing is special camp among economists, the pay. As long as we've been able to measure earnings in the sector, it's just paid workers more, especially workers without a college education.
So that's Gordon Henson. He's an economist at Harvard Kennedy School, who's probably one of the leading researchers on American manufacturing. He says manufacturing pays more than a lot of other industries. Economists call this the manufacturing premium.
And Gordon points to what he calls the gold standard of research on this from economist David Card, Jesse Rothstein and Moises Yi. They followed over a hundred million Americans as they jumped between industries. Basically, according to their research, if you take two statistically identical workers, like same background, same skill, same race, gender education, everything, and you randomly plop them in different industries, here's what you would see. Let's take someone working in the restaurant industry, which has the lowest average earnings.
So like a server, if a server were to quit their restaurant job and switch over to working in manufacturing, they would get, on average, a 35% pay bump. Not a bad bump. I want that. Hello.
Yeah, so pretty substantial premium. It's higher than if that restaurant worker moved over to retail, which would be an 11% premium, or if they moved to agriculture or education or health care, it's even better than the pay bump from moving into finance and insurance jobs, which would be a 32% increase. Now, obviously, people in finance tend to get paid a lot more than people in manufacturing, but when you put a side education level and everything, there's something about manufacturing that delivers workers an extra pay bump. So pretty special in terms of pay.
Although the manufacturing premium is lower than some other sectors, like if the restaurant workers switched to working in utilities, they'd see a 49% premium working in mining, oil and gas. That's a 62% premium. So I don't know. I'm gonna say manufacturing is like medium, special when it comes to pay.
Yeah, though, we should say that jobs and manufacturing can really vary, right? Like so like garnet workers, they don't get much of a pay bump if any at all. But if you're making cars or planes or petrochemicals, the premium is a lot higher. And yet, there are still a lot of vacant manufacturing jobs in the US right now.
There were recently about 500,000 openings, including in the higher and higher premium paying manufacturing jobs. So the US is having a hard time feeling the existing manufacturing job openings right now. And yet politicians are going all in trying to create more of them. So why is that right?
Like if it pays such a premium, why are Americans taking these manufacturing jobs? Part of the story here is that there's been a pretty tight labor market, right? A lot of industries have had a hard time feeling jobs. But it's not just that.
It may be that the pay premium just isn't high enough, right? The obvious economic response here is raise the pay people. I have less than zero sympathy for employers who go around complaining about labor shortages and skills gaps. Orrin Cass is the chief economist and founder of American Compass, a conservative think tank.
And he's also a vocal advocate for Trump's tariffs. And when it comes to all of these manufacturing job vacancies, he's actually like, I don't know what to tell you companies pay more. I don't know if I mentioned on the side, I run an incredibly innovative biotech company that employs leading scientists at $10 an hour to develop extraordinary cures. I have 500,000 job openings as well.
And I have not been able to fill one of them. Yeah, pay workers more. And I bet you won't have so many job openings, right? And this sounds great.
But if companies have to pay more, would they still be profitable in the US? I mean, that's one of the reasons manufacturing went overseas in the first place. I mean, to be internationally competitive, if the going rate is not enough, like if the reservation wage of Americans is so high that they're going to have to hike their wages up because there's already a pay premium, right? But especially when it comes to the lower end stuff, like a peril.
I mean, like, is that just like, are we just not going to be competitive? Because the wage that they're going to have to pay is so high that it just makes it not doable here? So I think there's a real confusion that people have when they start asking sort of, you know, how much can we afford to pay and so forth? Because the question is about productivity level.
If somebody in the United States is 20 times as productive as somebody in China, and you have to pay them 20 times as much, you're no better or worse out as a result that you are equally competitive in either case. The competitiveness problem emerges from a labor force and religious perspective when you get the opportunity in some places to pay a lower wage relative to the workers output, which is a polite way of saying you have a problem when it's much easier to exploit workers in some places than others. Yeah. So in the US, Orrin is saying if workers are a lot more productive than workers in say, China, American companies can pay higher wages and still remain competitive.
But a little problem. In recent years, American manufacturing has actually seen an alarming decline in productivity growth. So maybe these jobs are just not paying enough. And that's why there are so many openings.
But also, there is a skills issue here. Right. That's what a lot of economists and people in the industry say is actually the biggest challenge. People don't have the necessary skills for these jobs.
Carolyn Lee, president of the Manufacturing Institute and on profit says these jobs often require a lot of training. Half of our jobs are open jobs in manufacturing last time I checked, required a college degree. And half of them didn't. And I will say that every single one of them requires skills or the ability to learn and attain new skills.
Speaking to industry leaders and economists, I heard that one of the big issues in the United States is we lack a strong workforce development system. Things like apprenticeships and certificate programs at community colleges to give people the skills they need to work in advanced manufacturing. Recently, President Trump ordered his administration to create, quote, a plan to reach and surpass one million new active apprentices, though many other politicians have also talked a big game in this area. And we haven't seen much progress.
So the pay, the skills that is part of the story here. But the elephant in the room here is kind of that like maybe there is a skills gap because people don't want to invest all of the time and effort to learn these skills because they don't think that these jobs will exist in the future, because of automation, for example, manufacturing in the US has been seen as dying for decades. Carolyn and others in the industry say manufacturing in the US might have a bit of a PR problem. She says people have an outdated view of what manufacturing work actually is.
They are high paying high quality jobs, right? It is not manual labor necessarily. And it is not, that you are standing on assembly line and doing the same thing for 40 years. It is not what your job is today.
Okay. There is a wide variety of manufacturing jobs out there. You can be the machine operator or engineer on the R&D side of things and marketing. Those are considered jobs in manufacturing too.
Not all manufacturing jobs are directly involved in making stuff. In fact, it is about two in five are. But we have spoken to workers who are making things like on the factory floor, like garment workers in LA for example. And they talk about the long hours, the below minimum wage pay, the monotony of the job, the toll that doing the same arm movement for example over and over and over for hours a day for years of your life and having your body.
Yeah. And other factory floor workers have said things like factories can often get really hot when you're wearing protective gear and you're around a bunch of machines wearing. They said things like shift schedules can be inflexible. So manufacturing jobs are not always the best and most satisfying jobs for workers.
After the break, our manufacturing jobs good for the economy. Like when a factory comes to town, how much does that make an economy grow? Can bringing back manufacturing revitalize the heartland? Brazil used to have one of the fastest growing economies in the world.
It called it the country of the future. There are songs, well, Brazil, well, because it seems like we have it all, man. But then the music stopped on the planet. Many podcasts, a lot of countries these days aren't rich.
They are poor. They're just kind of stuck in the middle. Why is that? Listen on the NPR app or wherever you get your podcasts.
Over the last 50 years, as computers and free trade revolutionized America's economy, job opportunities became more and more concentrated in America's big cities. Big cities grew, got expensive to live in, had a bunch of college educated people living in them, all of them. The economists now call these economically successful more tropolysis superstar cities. Meanwhile, a lot of towns across America lost their factories and saw a process that looked like the reverse of superstar cities, in unwinding a loss of good jobs and community struggling.
And there's this hope among some that revitalizing the manufacturing sector could promote economic growth in those places, like in the heartland. And the theory behind this is pretty fascinating. Okay. When manufacturing plants went away in some of these places, they took something with them.
The whole economic ecosystems that those plants created around them. And the theory is bringing manufacturing in particular back would be good, because in order for a community or city to see a lot of growth, that city has to export something or sell something to people outside of the community. The growth of the city is a function of the growth of its export base. You don't have to export to the rest of the world, but you got to export to somebody outside the city boundaries, the rest of the state, the rest of the country.
And that's because you're not going to grow just by selling to yourself. This kind of sector is known in economics as a tradable sector. Tradable sectors pull in well from the outside. They include manufacturing, but also agriculture, like farmers who grow, I don't know, like Brussels sprouts and sell it around the country or world.
But it can also include colleges that educate students from outside the community or fancy hospitals where people fly in to get surgeries, tech, finance, mining, tourism. Non-tradable sectors would be like restaurants, gyms, barber shops that just kind of circulate wealth that already exist in community. You know, the way I always put it is like, we can't all just be cutting each other's hair. Is this because I'm balled or I cut my own hair, okay?
I cut my own hair, okay? I'm self-sufficient. So a popular way to think about how valuable a tradable sector is is to calculate how many jobs each tradable sector job creates in other sectors. In Rico, Moretti, an economist at UC Berkeley estimates that for each one job in the manufacturing sector, 1.6 additional jobs get created in the local community outside of manufacturing.
It's called the multiplier effect. And here is what drives the multiplier effect. First, manufacturing plants need suppliers, right? Often nearby.
That creates jobs. But also, workers get paychecks and they spend their money in the community on things like going out to eat, getting haircuts, going to the gym, and the better the manufacturing job, meaning the better the pay, the more the worker spends and the more jobs are created. That's the multiplier effect. So yeah, the average manufacturing job, it creates 1.6 extra jobs in the local community that's over 10 years.
By comparison, in Rico calculates that the average tech job creates five additional jobs. So it's a much higher multiplier. That said, high end manufacturing jobs, like say making computers or computer parts, those can get pretty close to matching the multiplier of the tech jobs. So can manufacturing revitalize a community?
It kind of depends. It depends on things like what they manufacture, is it advanced or not that determines how much workers get paid, and it depends on things like how many workers, you know, a plant employees. But either way, Orin cast specifically supports policies that would bring manufacturing in particular back to the heartland. He says it's not the only industry that can revitalize it, but that it is probably a strong bet.
Would it be financial services? Sure. Could it be tourism? Sure.
Manufacturing isn't the only answer. But manufacturing is a good answer. And there are a lot of places where manufacturing is a much more likely answer than some of the things that we've seen be successful elsewhere. So there's sort of spatial allocation of jobs that seems to be lurking behind what you're saying.
What makes you think that manufacturing will go to the same places that they were lost, like left behind communities? Well, if you're thinking about where to locate manufacturing, you're just looking at a very different set of factors than if you're asking where to locate an investment bank. Yeah, Orin says opening up an investment bank has just different needs than opening up a manufacturing plant. What are the key things that you need for manufacturing?
Certainly a trained workforce is one element of it. But you also need a lot more space, right? Good luck setting up your manufacturing in Manhattan. You need close connection to natural resources, potentially low cost energy, logistics and transportation, infrastructure and so forth.
And so at a minimum, the answer is going to be not the same places you're doing media and finance and tech. Orin thinks policies that boost manufacturing could help lead to more regionally diversified economic growth. But Gordon Hanson, who is also on team, these jobs are special, says that even though manufacturing jobs provide good paying jobs to people who are in desperate need of good paying jobs, particularly people without a college degree, he suggests that politicians may be taking the love of manufacturing a little too far. Like maybe it's not worth starting a trade war and exploding the rest of the economy for the sake of this one sector.
I think we've developed kind of a collective fetish for manufacturing, which is really unproductive. The problem is not too few manufacturing jobs. The problem is too few good jobs for workers without a college education. We should then think about how do we create more of those good jobs?
Yeah, Gordon says we need more good jobs and manufacturing jobs are good jobs. But the reality is that going forward, manufacturing will always be like a best, a small slice of the US economy. Jobs in manufacturing have been declining around the world in large part because of automation. So maybe instead of obsessing on bringing manufacturing back, Gordon says we should focus on trying to replicate some of the things that made manufacturing jobs special in the first place, like trying to get more high paying industries outside of manufacturing to lower some of the barriers for people without a college education.
If you like today's episode, you can learn more about manufacturing at the Planet Money newsletter. This episode was actually based on a series that broke about manufacturing in America. You can read more at nbr.org slash manufacturing. Also last week we read an episode about what manufacturing work in the US can be like for workers.
The focus was on garment workers and how much they're paid to make each piece of clothing made in America. We're going to have a lot of time to get to the same time. How are you? 15 cents today.
You can listen to that episode right now in the Planet Money feed. It's called Made in America. This episode was produced by Sam Yellowworth Kessler. It was edited by Justin and Pop Trek by Ciara Huadiz engineering by Debbie Dottree with help from Robert Rodriguez.
Alex Goldmark is our executive producer. I'm Sarah Gonzalez. And I'm Greg Rizelski. This is NPR.
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