A producing renaissance within the US won’t create many roles, says Harvard economist

President Joe Biden has touted his policies to spice up U.S. production of chips and green energy technologies. Earlier this month, his administration pledged as much as $6.6 billion to assist Taiwanese Semiconductor expand its facilities in Arizona. And last month, the federal government reached a $19.5 billion financing cope with chip giant Intel for 4 latest U.S. plants.

However, in line with Dani Rodrik, a professor of international political economy at Harvard Kennedy School, data within the United States and other global manufacturing centers show that employment is a special matter.

In one (n Editorial published in Project Syndicate On Tuesday, the economist identified that labor productivity in U.S. manufacturing has increased nearly sixfold since 1950, while productivity in the remainder of the economy has doubled.

“The result has been a remarkable increase in the ability of manufacturing to produce goods, but also an equally dramatic decline in its ability to create jobs,” he wrote, with 6 million manufacturing jobs lost since 1980.

And despite an “America First” agenda and a trade war with China, U.S. manufacturing’s share of nonfarm payrolls fell from 8.6% to eight.4% while Donald Trump was president, Rodrik said.

That share has fallen further to eight.2% under Biden, despite the federal government doling out billions to firms and the U.S. private sector committing greater than $200 billion to latest manufacturing projects following the passage of its Inflation Reduction Act and the CHIPS and Science Act.

“A skeptic might argue that Biden’s policies have not yet borne full fruition and are not yet reflected in official statistics,” Rodrik added. “But the fact is that highly capital-intensive semiconductor factories create few jobs relative to the physical investment required.”

The company is planning to accomplish that in TSMC’s latest factories in Arizona, for instance 6,000 jobs A job will likely be created, which in line with Rodrik could be greater than $10 million per job. And even when tens of hundreds of additional jobs were created at TSMC’s suppliers, “that’s a paltry return on employment,” he said.

The share of producing in total employment has also fallen in Germany and South Korea, Rodrik continued. And in China, factory jobs have been declining for greater than a 12 months, each in absolute terms and as a percentage of total employment.

“Automation and skills-based technology have made it extremely unlikely that manufacturing will return to the labor-intensive activity it once was,” he said. “Whether we like it or not, services such as retail, care and other personal services will continue to be the main driver of job creation.”

To ensure, the CHIPS Act and similar measures to spice up domestic manufacturing aren’t necessarily flawed, as they may still spur innovation, but “rebuilding the middle class, creating enough good jobs, and revitalizing declining regions requires a very different approach.” guidelines,” he concluded.