In Defense of the Deindustrialization Narrative

A riposte from Clifton Roscoe

Last week, I posted an episode with John McWhorter in which we revisited our first conversation from 2007 to see what had changed. One thing that’s remained the same is John’s insistence that the loss of manufacturing jobs in the US—long a source of stable, well-remunerated employment for black workers—contributed less to black poverty than most people think. To this day, he remains quite skeptical of the deindustrialization narrative’s explanatory power.

I’m more open to the idea that the exporting of manufacturing jobs goes quite a long way to explaining the rise of black poverty and the fortunes of the African American middle class. It can’t explain everything—cultural factors and government social policy are indeed crucial factors—but so dramatic a shift in the country’s industrial sector can’t help but have wide-ranging ripple effects, some of which require subtle economic analysis to detect.

Regular TGS correspondent Clifton Roscoe is, if anything, a stauncher defender of the deindustrialization narrative than I am. With a long career in business consulting, he’s quite familiar with the ways that changes in the nation’s industrial landscape can alter firms’ hiring and production strategies, and the effects of those strategies on the workforce. He wrote in with a response that highlights the “multiplier effects” of manufacturing jobs. Infusing resources into a community via employment will create more employment. When people have more money to spend, businesses will crop up to offer services to those who can now afford them, which creates jobs. And, as Clifton points out, manufacturing jobs have a very high multiplier, which spreads the wealth around the communities in which they were located and helps generate wide-ranging prosperity. But that also means that, when those good jobs disappear, multiplier effect works in the opposite direction, leaving behind an economic vacuum that can eviscerate once-thriving communities in a matter of a couple decades.

That’s a bit of an oversimplification, but I leave you in Clifton’s able hands for the details.

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5th Street, Gary, Indiana. Source: Wikimedia Commons

Yes, Deindustrialization Is as Important as It Sounds

by Clifton Roscoe

Let's agree that deindustrialization isn't the only thing that created problems within Black America. A short list would include:

1. Globalization

2. Automation

3. Immigration

4. Culture

5. Government policies

The deindustrialization story is complicated, but I'll try to keep this brief. Let's start with the macro picture. Manufacturing employment in America peaked at 19.5 million jobs at the end of 1979. The size of the civilian labor force was roughly 106 million people back then. Manufacturing provided well-paying jobs to about 18% (19.5 million jobs / 106 million civilian workers) of the labor force. The growth of this sector helped spur the migration of black people with modest skills from the South to manufacturing towns across America after World War II. These jobs formed the foundation for the growth of the black middle class that took place during the second half of the twentieth century. 

The number of people working in manufacturing today, however, is about 13 million compared to a civilian labor force of 167 million workers. That amounts to about 8% (13 million jobs / 167 million workers) of the civilian labor force. This contraction broke the cycle of generations of blue collar workers earning good wages at manufacturing plants.   

The two primary drivers of manufacturing job losses were globalization and automation.  Companies moved much of their manufacturing operations offshore, purchased imported parts, sub-assemblies, and final products from foreign suppliers, and utilized machines and software to reduce their exposure to high-priced American labor. 

The healthcare and retail trade sectors are now America's largest sources of private sector jobs.  Healthcare employs 16.9 million workers while retail trade employs 15.5 million workers.  Combined, they account for slightly more jobs as a percentage of the labor force (19.4%) than manufacturing did at its peak. But not all jobs have the same economic impact. Data from the Bureau of Labor Statistics (BLS) shows that healthcare workers earn average annual wages of $63,710 as of May 2022 compared to $60,870 for manufacturing workers. Retail trade workers earn $40,420 in annual wages. 

Here are links if you want to do deep dives into manufacturing employment, healthcare employment, retail employment, and the size of the civilian labor force over at the St. Louis Fed's FRED (Federal Reserve Economic Data) database.  Here are links if you want to do deep dives into BLS earnings data for healthcare, manufacturing, and retail trade workers.

The multiplier effects for healthcare, manufacturing, and retail trade jobs are very different. The Economic Policy Institute (EPI) estimates that each durable manufacturing job leads to the creation of more than 7.4 indirect jobs. Each non-durable manufacturing job leads to 5.1 indirect jobs. Each healthcare and social assistance job, by contrast, leads to 2.1 indirect jobs according to EPI. Each retail job leads to 1.2 indirect jobs. Use this link if you want to do a deep dive (See Table 1).

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The multiplier effects associated with healthcare and retail trade are less than half of those associated with manufacturing. That explains why the loss of a manufacturing job is more consequential than the loss of a healthcare or retail job. The loss of 6.5 million manufacturing jobs led to the loss of between 30 and 50 million indirect jobs, if you assume a multiplier of between five and seven. Manufacturing plant closures can catalyze an "economic doom loop" in affected areas. You've seen the devastation of manufacturing job losses in places like Chicago and Detroit, so I won't belabor the point.

Immigration has hurt blue collar workers too. There are more than 30 million foreign born workers in America today. They account for just over 18% of the civilian labor force (30 million foreign-born workers / 167 million civilian workers). That's a record high. Use this link to access a BLS report for 2022. I could only find BLS figures for the percentage of foreign-born workers going back to 1996. They accounted for just under 11% of the civilian labor force back then. Use this link, go to Tab 3, and click the "View Chart Data" link at the bottom of the graphic if you want to do a deep dive. 

Immigrant workers aren't evenly dispersed across the country or across all sectors of the economy.  In Dalton, Georgia, a place that used to be known as the "Carpet Capital of the World," Hispanics now account for more than half of the population according to the US Census Bureau. Why? The answer is simple: Carpet manufacturers made a concerted effort to bring in cheap immigrant labor. Nothing else explains why so many Hispanics are clustered in a small Georgia town. The Wall Street Journal published an article about this back in 2014.

The combination of globalization, automation, and immigration hit blue collar workers of all stripes hard. Economists Anne Case and Angus Deaton (a Nobel laureate) wrote about "deaths of despair" while Obama was president. He brought them to the White House to discuss the issue. Things have only worsened since then. Drug overdose deaths are at record levels, about 107,000 in 2021, according to the CDC. Black people fell prey to "deaths of despair," too. The rate of black drug overdose deaths exceeds that of all other racial groups, according to the CDC.

No disrespect to Glenn or John, but it's too easy to dismiss the impacts of deindustrialization and all the ripple effects that came with it. What would either of them have done if they were an unemployed blue collar worker in a place like Akron, Ohio, local manufacturing plants were closing and/or laying off workers, and a third of the jobs in their industry had disappeared?    

Unlike academia, companies rarely recruit out-of-state blue collar workers and pay to relocate them. It would be dumb for manufacturers to move to places with cheap labor only to hire and relocate high-priced labor from other places. All the car makers, for example, that set up shop in Alabama over the past twenty years (e.g., Mercedes-Benz in Vance, Honda in Lincoln, Hyundai near Montgomery, Mazda-Toyota near Huntsville, etc.) hired and trained local workers for their blue collar jobs. I could go on, but I hope you get the idea.   

Displaced manufacturing workers often struggle to replace the income they lose when their employers close plants. The multiplier effects of plant closures depress local economies and limit employment opportunities, it's hard to move without a job in hand, and the odds of an unemployed blue collar worker with modest skills and limited capital starting a successful business are low. 

Immigrants with modest skills show us that motivated people can overcome difficult situations, but they represent a small percentage of the disadvantaged people in their home countries.  Most of the peers they left behind stay put and endure tough lives. Sometimes the ones who stayed get lucky and a relative makes a go of it in another country and sends them money.  Sometimes a relative helps them migrate to a new country. The vast majority, however, don't leave their homelands, just as many Americans who lose their jobs don't leave their communities either.   

I won't deny the impacts of culture and government policies, but John McWhorter has to make stronger arguments if he wants to counter the potency of the deindustrialization narrative. I would pay to be a fly on the wall if he stood before a black audience in Gary, Indiana and tried to convince them that the loss of steel jobs wasn't that big a deal and that culture and government policies are the primary reasons why their town has lost 62% of its population since 1960 and the local poverty rate is over 30%.

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