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If you’re having your doubts that the woes of U.S. manufacturing can translate directly into a weaker overall economy, shakier finances, and more hardship for individual Americans and their families, take a look at today’s New York Times feature on the decline of Pottstown, Pennsylvania. Just as important, take a look at the Keystone State overall – whose troubles and closely related de-industrialization mirror those of Pottstown.

As reported by correspondent Thomas Edsall, this once-thriving community in the southeastern corner of the state, has since the 1970s seen the manufacturing that fueled its economy “collapse in the face of foreign competition.” Largely as a result, although its population has remained stable going back to 1950, its employment base has contracted by more than 23 percent during those decades. Nowadays, it suffers from a poverty rate that’s a staggering 27.7 percent.

But don’t get the idea that Pottstown is an island of misery in an otherwise prospering Keystone State. Research cited by Edsall claims that 27 of Pennsylvania’s cities are “financially distressed,” and that they contain 40 percent of the state’s population. Indeed, Pennsylvania is heading towards its second straight state budget crisis, as its leaders grapple with a deficit expected to hit $1.8 billion.

No doubt, Pennsylvania’s woes stem from many sources, but flagging manufacturing looks like it’s taken a big toll – along with misguided trade policies. Let’s see what’s happened since the end of 2001, when China was admitted into the World Trade Organization, thereby essentially became immune from U.S. (and other foreign) actions meant to retaliate against its protectionist practices, and began flooding American markets with job- and growth-killing exports.

Between 2002 and last year, manufacturing shrank slightly as a share of the U.S. economy in real terms from 11.98 percent to 11.93 percent. And especially important for the nation’s tax base and therefore financial health, just over 3.3 million manufacturing jobs – which pay above average wages – were eliminated (though not all because of Chinese competition). That came to 21.18 percent of the January, 2002 national manufacturing workforce.

Moreover, those manufacturing wages have gone practically nowhere when you adjust for inflation. We don’t have figures for white collar manufacturing employees going back to 2002, but the data for production workers and other non-supervisory workers shows that real wages rose less than one percent during that 13-year period!

From 2002 through 2015, Pennsylvania manufacturing fared even worse – shrinking in absolute terms by 13.40 percent, and declining from 16.50 percent of the state economy in constant dollars to 12.14 percent. On the employment front, the state lost 27.36 percent of its manufacturing jobs. I wasn’t able to find a time series for Pennsylvania’s inflation-adjusted manufacturing wages. But in pre-inflation terms, since 2007 (the earliest figures available) they’ve been rising more slowly for all manufacturing workers than manufacturing wages nation-wide, according to the Labor Department. This industrial contraction and its employment fallout certainly hasn’t made it any easier for Pennsylvania to pay for state services in a financially responsible way.  

Pennsylvania is often described as a state with special problems – especially a population that’s both old and aging faster than the nation’s as a whole, and high individual and corporate tax rates.  But there can’t be any doubt that the shrinkage of manufacturing, a source of disproportionate productivity gains and innovation, as well as high wages, has made its challenges far more formidable.  And it’s hard to imagine that the same doesn’t hold for the nation as a whole. 

 

  

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