Last week, I begged to differ with a guy claiming that manufacturing was indeed special because people earned a wage premium simply by entering the sector, or as he put it, that there were "labor market rents" associated with getting a manufacturing job.
Turns out Christina Romer has my back!
She points out that (a) on the low skill end, manufacturing pay premia have shrunk and likely will continue to shrink, and (b) increased technical sophistication in manufacturing has created more jobs that require higher skills. She points out that the number of manufacturing workers with some college education has more than doubled. Thus, subsidizing manufacturing is NOT likely to reduce income inequality in the US.
Romer attributes the shrinking premium to low skill workers to increased international competition, while I attributed it to both that factor and the decline of union strength. She doesn't point out that there is an upside to increased international competition, namely lower priced goods for American consumers.
3 comments:
"...subsidizing manufacturing is NOT likely to reduce income inequality in the US." I was all set to believe this and change my policies -- then I read the next post by Mungowitz: economists can't predict anything. Why bother?
I respectfully disagree with my co-blogger. We can predict tons of things, perhaps chief among them being the likely actual effects of proposed policies.
"She points out that the number of manufacturing workers with some college education has more than doubled."
But, more people also have degrees so I am not sure this means much. In the extreme, if everyone has a degree and there are still manufacturing jobs. Then manufacturing jobs will be held by college graduates. It doesn't mean they will pay any better or necesarilly require any more skill.
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