Hard industries, hard work, and big opportunities

The shortage of skilled trade workers in the U.S. is a challenge, and it’s about to get worse. Recent supply-chain disruptions and second thoughts about China’s manufacturing dominance are likely to boost domestic industry and exacerbate an existing dearth of workers. 

The growing shortage, however, may come with a long-term silver lining. If we rethink our attitudes and approaches to the physical industries, we could set a path not only to boost the supply of skilled labor but also to rebalance jobs, incomes and productivity across the U.S. economy.

Over the last 30 years, the global shift of manufacturing to Asia and other developing regions dramatically reduced demand for skilled labor in general. Manufacturing jobs, for example, fell from around 18 million in 1990 to around 12.5 million today. Globalization offers many benefits, but not without concentrated costs. And now many wonder if we overdid it. 

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Over the last several decades, educational and social trends also emphasized services and information work, rather than physical work. Jobs in health care, education and nonprofits exploded. High-paying finance and software jobs grew as well. But not always fast enough to make up for the loss of jobs in traditional industries.

This secular rush toward soft industries also eroded the supply of skilled labor, arguably even faster than demand. When industrial clusters evaporate and the culture turns its nose up at physical work, skills erode and new workers don’t show up to disfavored industries. U.S. home builders and construction firms and the manufacturers who survived the Asian shift have been struggling with this shortage for many years.

Falling labor-participation rates over the last two decades – especially among men – exacerbated these shortages. The employment rate for men ages 25-54 has fallen from nearly 92% in the late 1970s to under 85% in late 2021. These are the people who in the past made up the bulk of the skilled trades. 

How much of the falling work rate is the result of less skilled physical work, or the cause? Do some skilled workers, who prefer physical work, drop out of the labor force altogether when skilled jobs evaporate? Or do firms and industries, unable to find skilled workers, look elsewhere? Probably some of both, and the effects are likely reinforcing. No doubt, cultural factors apply, too. 

At least two big swings will drive efforts – already underway – to bring more manufacturing on shore. 

New shifts are now amplifying these shortages. At least two big swings will drive efforts – already underway – to bring more manufacturing on shore. 

First, supply-chain disruptions, partly a result of the pandemic’s “hard-stop and restart,” have exposed inadequacies in our mostly hyper-efficient global goods markets. The second effect is probably bigger and more important: increasing trade, diplomatic and military tensions with China are leading many to rethink the massive decades-long relocation of manufacturing to Southeast Asia. 

We cannot merely order industries and investors to build domestically. Neither can we subsidize our way toward a more rebalanced economy. Private industries that rely on skilled labor must lead its resurgence through mentorship and skills development programs to train and advance a new generation of skilled laborers.

Skilled trade jobs are good jobs that become careers when workers are given the tools and support they need to secure gainful employment and the financial independence, stability and opportunity that it brings. Organization like SkillsUSA – and its partners like Invitation Homes, Home Depot and John Deere – that train students for careers in trade, technical and skilled service occupations are more needed than ever as the demand for skilled work accelerates.

We also need to make domestic investment worthwhile – to make it profitable. The 2017 tax reform was a good start. Many investments under the prior tax code were simply financially prohibitive. Reducing the corporate tax rate and allowing for immediate capital expensing was thus necessary if we want massive new domestic investment. The 2017 tax reforms, however, are not sufficient. We need even more aggressive tax policy and a range of new regulatory, energy, environmental, educational and infrastructure policies that make physical industries attractive.

At the same time, we aren’t turning away from the digital economy. In fact, infusing more information technology into the physical industries is the chief way we can turn low-value-add old industries we pushed off shore into high-value-add industries we want here at home. In other words, robots are the friends of skilled labor. Without them, we can’t profitably build at home at all. 

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The use of robotics, computer vision, additive printing and artificial intelligence to boost our construction and factory capabilities will be central to any hard industry resurgence. As I’ve argued before, “The goal is not to bring back old industries and old jobs with old capital goods. The goal is to help traditional industries – manufacturing, transportation, retail, wholesale, health care, food, education, energy, etc. – to transform and create new jobs, using a mix of physical capital and cutting edge technology.”

Our financial and cultural gaps are in large part the result of an information technology gap, a policy gap, and an understanding gap between soft and hard industries. A renewed appreciation for the hard work that powers the economy, too often taken for granted, can revitalize every facet of the economy and generate booming jobs for those most in need.

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