The recent spate of encouraging data notwithstanding, questions persist about the true health of the Minnesota and U.S. economies.
Are we better off due to enlightened government policies? Or, are we are worse off because those policies weren't enlightened after all? Will there be opportunities for those who do not achieve a four-year college degree? And, will those who do receive such a degree earn enough money to pay off ever-escalating student loans?
Often, politics and not facts shape our discussions of these important questions. Scapegoats can be found in all political camps. Nonetheless, political leaders and the citizens they represent may wish to reflect upon the dramatic changes that have taken place over the past several decades and how these changes impact the opportunities and threats we have before us.
Change No. 1: An unfavorable shift in employment.
From 1939 to 2013, the United States added 105 million jobs. That's good, but the breakdown is more frightening. Of these 105 million, 19 million were in trade, transportation and utilities. Another 18 million were in government, and 80 million in private sector services. However, only 5 million jobs were added in construction, 2 million in manufacturing and virtually none in mining. Thus the share of goods-producing jobs of U.S. nonfarm employment declined from more than 40 percent at the end of World War II to less than 14 percent in 2013.
This dramatic shift away from tangible production to less direct activities (finance, insurance, real estate, services and government) means that we have created an economy plagued by a substantial burden of indirect costs.
Over a 50-year period, a disproportionately large share of the nation's productivity improvements have occurred in manufacturing, mining and agriculture, three sectors where employment is declining. Additionally, almost all of our exports come from agriculture and goods-producing sectors and imports arrive daily to replace the production capabilities which were once pre-eminent in the United States. Several unfavorable results occur when tangible production is neglected. Trade balances worsen, deficits grow and opportunities for younger people are less favorable.
Many of our developed industrial competitors have less overhead. Germany, for instance, still has about 22 percent of its employment in manufacturing. The U.S. has about 9 percent. German wages are not low — averaging $40 per hour. Yet that country enjoys an annual $250 billion trade surplus vs. the $700 billion deficit we experience in the United States.
Moreover, the U.S. has experienced a gradual transition away from the more technological to less technical manufacturing. We produce fewer super computers and instruments, not as many machine tools, but more potato chips, soft drinks and junk mail — all classified as "manufacturing." We still have some meaningful state-of-the-art products, of course. But, we are not quite as prominent as we once were.
The declining prominence of U.S. technology is evident on several fronts: shrinking shares of world patents, world-class machinery, scientific instruments and even in some chemical products. We are still prominent in paper production, however.
Change No. 2: Emerging jobs pay less than disappearing jobs.
From 1998 to 2012, the United States added about 9 million jobs. Some sectors expanded and some declined. But here is the problem. The declining sectors paid an average of nearly $17,000 per year more than the expanding sectors. Many of the jobs we have created are temporary, part time, low in compensation and fringe benefits or in low value-added industries.
Our situation is problematic even within higher education. Only about 15 percent of U.S. college graduates major in science, technology, engineering or math vs. 22 percent in the U.K., 28 percent in Germany and 35 percent in Korea. Humanities and the liberal arts are of utmost importance and I am proud of the fact that the University St. Thomas requires a full complement of the liberal arts for degrees in science and engineering. But we should wonder if we are encouraging some of our young people to invest heavily in illusory non-substantive educational programs that are yielding credentials mismatched to the needs of a prosperous society.
We still have some good jobs, of course. But the United States is now conferring roughly three times the number of college degrees as in 1970. Progress, to be sure. But our pace of good, solid, high value-added job creation has not kept pace with the people who are attending college at this time.
Meanwhile, the U.S. continues to waddle along with massive public debt, enormous trade deficits, volatile financial markets, problematic student loans and a central bank keeping interest rates low by the excessive purchasing of low-grade securities other banks do not want.
We could be doing much better. Hopefully, our recently elected or re-elected public officials will realize that the attenuated fortunes of America's middle class have less to do with class warfare than the slow structuring of a society that is far more oriented to busywork than it is to the creation of good quality jobs aimed at the production of the goods and services that will enable broadly based prosperity.