Manufacturing and Mining

One of the oft-quoted statistics is that if it were an independent country, California’s economy would be among the ten largest.  In 2015, it was sixth, just behind the UK and just ahead of France.  Texas and New York are also major players:  Texas’s economy is slightly larger than Canada’s (in 10th place), while New York’s is just behind Canada.

However, there’s an important factor:  California (where I was born) is also more populous than New York (where I live) and Texas (where I have relatives).  Thus, while China’s economy is larger than New York’s, China has more people; as a result, the standard of living in China is lower.  From the ground, the important question isn’t “How much does my country make?” but rather “How much do make?”

For that, you want to look at the per capita figures:  that’s the total GDP divided by the total population.  I won’t do the comparisons for other countries, but only for California, New York, and Texas.  Under this comparison (again for 2015), New York comes out 2nd, California is 10th, and Texas is 13th.  Put another way:  If these states had the same populations, New York’s economy would be about 20% larger than California’s. (I’m using data from Wikipedia, if you want to play with the numbers yourself).

Now, unless you’ve been living under a rock, you know that the United States has a new President who’s rather controversial.   However, one of his campaign promises is that he’ll bring manufacturing and mining back to the US, and much of his appeal is in the so-called “Rust Belt,” where over the past twenty years millions of jobs have been lost.

Part of the argument is that the various free trade agreements made over the past forty years have destroyed manufacturing and mining, by making it easier to ship jobs.  That’s probably true, though almost every economist who’s studied trade has concluded that it also generates quite a lot of jobs here.  Again, the problem from the ground is that the jobs it generates are very different from the jobs that disappear:  It’s little consolation to a steelworker than the financial services industry is booming.

I’m going to take a look at one very specific industry, that seemed to support the new President very strongly:  coal.  In fact, one of the very first things the new government has done is ease regulations on coal mining companies regarding what they can dump into streams; this is being hailed as a way to re-open mines and get more miners to work.

Sounds good, right?  Except there’s a problem:  Productivity.

  • In 1985, the US coal industry produced about 900 million tons of coal, and employed about 180,000 workers.
  • In 2015, the US coal industry produced about 900 million tons of coal, and employed about 65,000 workers.

What should be clear from these figures is that coal mining jobs haven’t disappeared because they’ve been shipped overseas:  we’re producing as much coal as we did thirty years ago.  But we’re using one-third as many workers.  So what does this mean?  Reopening mines and restarting coal production will produce a bump in employment.  But the vast majority of coal jobs are never coming back.  

This problem is true across the spectrum:  technology is being used to get more done with fewer people.  We can bring back coal mining…but not the jobs.  We can bring back auto production…but not the jobs.  We can bring back textile manufacturing…but not the jobs.  The vast majority of manufacturing jobs are never coming back.

So what can be done?  We can revive the industry…but the jobs won’t be there.  We can take consolation in that other industries are booming…but that doesn’t help the displaced workers.

The only viable solution is education and retraining.  Rather than waste time, money, and effort trying to rebuild an industry that won’t employ many workers, it would be far more useful to spend that time, money, and effort to retraining our workers so they can build their own industries.

 

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