In a recent article in our local business weekly, Morton Marcus, an independent economist and writer (formerly with Indiana University’s Kelley School of Business) took some time to analyze the impact of this recession’s layoffs by industry sector, and his results are telling.
Between the first quarter of 2008 and the second quarter of 2009, unemployment compensation paid out equaled 30% of the loss in wages suffered by workers, both nationally and in Indiana. All told, Indiana earnings among workers and the self-employed fell by over $12 billion, offset, interestingly, by a $1 billion increase in federal and state governmental workers. The increases were disproportionately higher, says Marcus, in federal service than state or local – either because more such workers were added to payrolls, or they enjoyed higher wage growth than state and local workers.
Meanwhile, in the manufacturing sector, he notes, “workers’ earnings fell by 12% nationally, but by 18% in Indiana. The decline of $6.5 billion in manufacturing was 58% of the total loss in Hoosier earnings.”
While earnings in the financial sector declined somewhat (by 13.7% nationally, 10% in Indiana), and in real estate (10.5% and 8.3% respectively), the numbers confirm what many already suspected: that “manufacturing is our 800-pound gorilla.”
Some would say this augurs well for diversifying out of manufacturing. Others (like I) would say… to what? Gambling? More government-sector, taxpayer financed jobs?
How about recognizing the obvious? That manufacturing remains the key to long-term economic viability. That in this capital intensive age, money flows to the most profitable economic sectors. That the gadgets, gizmos, widgets and products we produce for consumption both here and abroad — from medical lifesavers and communication technologies to entertainment wonders and labor-saving conveniences — remain the most viable and profitable long-term source of jobs and prosperity that we can possibly pursue.
As we move, wisely I think, to the burgeoning knowledge-based economy, we would be wise indeed to apply more of that knowledge to manufacturing. Because, as Mr. Marcus wryly puts it: “Man cannot live by litigation alone.”