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Manufacturing Migration: Who Will Move for Low-Skill, Low-Pay Jobs?

What the "Made in America" rebirth looks like.
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Spinning room at Helmshore Mills Textile Museum. (PHOTO: UNHINDERED BY TALENT/WIKIMEDIA COMMONS)

Spinning room at Helmshore Mills Textile Museum. (PHOTO: UNHINDERED BY TALENT/WIKIMEDIA COMMONS)

Do you need a job? Move to Minneapolis. The reshoring of textile production to the United States finds a scarcity of labor. The tale of the sewing tape:

Last year, there were about 142,000 people employed as sewing machine operators in the United States, according to the Bureau of Labor Statistics. In the Minneapolis-St. Paul metro area, which had almost 1.75 million workers last year — and where the unemployment rate as of July was 4.9 percent — only 860 were employed in 2012 as machine sewers. ...

... In the various waves of American textile production, dating to the 1800s, the problem of an available and willing work force solved itself. ...

... Puerto Ricans, who were given citizenship on the eve of American entry into World War I, and black migrants from the South rounded out the work force until the 1960s, when Chinese and Dominican laborers took over, Mr. Katz said.

Prior to 1965 or so, migrants typically lacked education and were low-skilled. Those who most needed to move, did so. Today, the opposite is true. I'm playing around with different theories as to what explains the flip-flop in pattern. Providing one clue, U.S. immigration policy shifted in the 1960s (1965 Immigration Act) toward the highly skilled. The term "brain drain" supposedly got its start in the prior decade with the space and arms races against the Soviet Union heating up:

The term "'brain drain" was first popularized in the 1950s with reference to the immigration to the United States of first-rank scientists from countries such as the United Kingdom, Canada, and the former Soviet Union; it is now used in a more general sense to designate the international transfer of human capital (people with higher education) from developing to developed countries. During the 1970s, there was a great deal of passion around this issue; everybody took for granted that the emigration of highly skilled people was detrimental to the country of origin—and, after all, this would seem to be a piece of acquired wisdom. A number of prestigious academic economists were part of this consensus, notably Jagdish Bhagwati and his followers, who delivered more or less the following message: 1) the brain drain is basically a negative externality imposed on those left behind; 2) it amounts to a zerosum game, with the rich countries getting richer and the poor countries getting poorer; and, 3) at a policy level, the international community should implement a mechanism whereby international transfers could compensate the sending countries; for example, through a "tax on brains" to be redistributed internationally.

In the United States this meant the concentration of college graduates in a few winning cities, usually those benefiting from the federal largess from defense contracts or government labs. Both Richard Florida and Enrico Moretti have expressed concern about the growing talent gap between places. The suggested fix is counter-intuitive. Moretti thinks the low-skilled should move to the regions with the highest real estate costs:

The United States is a large and diverse nation. Economic differences across American cities (for example, unemployment rates and salary levels) are very large and keep growing. These growing differences mean that the economic returns to economic mobility have never been higher. But not all American workers are equally mobile. College graduates have the highest mobility of all, workers with a community college education are less mobile, high school graduates are even less, and high school dropouts come at the bottom of the list. (In total, almost half of college graduates move out of their birth states by age 30. Only 27 percent of high school graduates and 17 percent of high school dropouts do so.)

This fact matters enormously for inequality, as the relative lack of mobility of less educated Americans has large economic costs. Differences in geographical mobility, coupled with increasing polarization among American cities, exacerbate income differences across education groups. Indeed, if the less educated people were more able and willing to move to cities with better job opportunities, the gap between college graduates and high school graduates would shrink.

Government policies are part of the problem. The unemployment insurance system does not provide any incentive for unemployed workers to look for jobs in places with better labor markets. If anything, it discourages mobility from high-unemployment areas to low-unemployment ones, because it does not compensate for the difference in cost of living. If you are living off an unemployment check in Flint, you do not have a lot of incentives to move to San Francisco to look for a new job, because your housing expenses would triple, but your check would still reflect the cost of living in Flint. The unemployment insurance system should be adjusted to reflect the vast and growing differences in economic fortunes among American cities. Unemployed people living in areas with above-average unemployment rates should receive part of their unemployment insurance check in the form of a mobility voucher that would cover some of the costs of moving to a different area. In other words, instead of encouraging out-of-work residents to remain in Flint, the federal government could help them relocate to Texas (or wherever they might choose to go) with financial support that covers a portion of their moving expenses. This would help those who would like to move but are stuck because they lack cash.

The low-skilled jobs attached to the Innovation Economy (e.g. food and beverage industry) will command higher wages in Washington, D.C., than they will in Indianapolis. However, the openings at the textile factory mind a global labor market. There isn't a disposable income dividend. Would you move a few states over to Minneapolis for a job that pays from "$9 to $17 an hour"?

So stuck they stay in Flint, Michigan. That leaves immigrants to fill the gap, who can also get a better return on their labor in D.C. Refugees have less choice in the matter and comprise a captive talent pool for the textile factory to exploit. Regardless, unemployment is still low. There will be a tug of war between employers who hire workers in the lowest income bracket:

The Ethiopian men, who ranged in age from 21 to 42, had been in this country several years. A couple were students, one was a former custodian who had moved from another state to be close to his college-bound son, and a fourth, Abdulhakim Tahiro, had been laid off from his job at an airport car rental kiosk.

This is what the "Made in America" rebirth looks like. Reshore companies still have to compete with the offshore sites. The low-skilled are the least geographically mobile. Unemployment remains stubbornly high in areas such as Central California. And that story about the decline of upward mobility in the United States gets replayed each and every week.