ECON 1 Lecture Notes - Lecture 18: Tippingpoint, Third Doctor, Human Capital
#18 Thursday 4/5 (NGOJ)
Recall: The Three Americas
1. At one extreme are the brain hubs: SF, Boston, Seattle, DC, Austin, Raleigh
a. Strong innovation sector, making new things, may outsource to other countries
2. At the other extreme are cities with an unskilled labor force: Detroit, Cleveland, Flint, Buffalo, St Louis
3. In the middle, most US cities: they could evolve either way
The Great Divergence
The three Americas are growing apart at an accelerating rate.
In the Brain Hubs
- Higher wages (both for skilled and unskilled workers)
- More job growth
- Higher labor productivity
- More innovation
- Better health, less divorce, more political participation
Gains in Earnings of College Graduates Since 1980
What Explains the Great Divergence?
● Over the past 30 years, the engine of the US economy has shifted from manufacturing to innovation
The Decline of Manufacturing
Jobs in Manufacturing
Manufacturing Employment Share in US, Sweden and Germany
All advanced economies are losing manufacturing jobs at the same rate.
Clicker Question
● The decline of manufacturing employment reflects
A) Decline in labor supply: young people do not work in factories
B) Unionization: unions keep wages high but lower employment
C) Decline in labor demand: people consume manufacturing goods (clearly wrong, we consume twice as
more manufactured goods than in the 1980s in terms of value)
D) Decline in labor demand: globalization and new technologies
Reasons for the Decline
● Demand for manufacturing goods is strong. US manufacturing companies are doing well
○ The value of output has doubled sin 1980
● Labor Demand has declined:
○ Automation
○ Globalization
These trends will continue in the coming years
● The myth of the “renaissance of US manufacturing”
Document Summary
In the middle, most us cities: they could evolve either way. The three americas are growing apart at an accelerating rate. Higher wages (both for skilled and unskilled workers) Better health, less divorce, more political participation. Gains in earnings of college graduates since 1980. Over the past 30 years, the engine of the us economy has shifted from manufacturing to innovation. Manufacturing employment share in us, sweden and germany. All advanced economies are losing manufacturing jobs at the same rate. The value of output has doubled sin 1980. These trends will continue in the coming years. The myth of the renaissance of us manufacturing . Blue collar jobs have declined even in high tech. Even in the tech sector, manufacturing jobs are declining. Employment of highly educated workers has increased in us manufacturing. Number of engineers employed in manufacturing has more than doubled in 1980-2012. No part of the production process takes place in the us, most parts.
