June 16, 2023
People routinely tout Biden’s efforts to bring back manufacturing jobs as a way to rebuild the middle class and reduce inequality. Whatever the motives, there is not much reason to believe that it will have this effect.
When the United States opened up its market to freer trade in manufactured goods, through trade deals like NAFTA and admitting China to the WTO, manufacturing workers had a substantial pay premium over workers in the rest of the private sector. This was largely because manufacturing was much more highly unionized than other parts of the private sector.
However, this is no longer true. In 2022, 7.8 percent of manufacturing workers were unionized, compared to 6.0 percent for the private sector as a whole. As a result, the pay premium for workers in manufacturing has largely disappeared.
This means that there is little reason to believe that manufacturing jobs will be good-paying jobs, unless they are unionized. While the Biden administration has tried to push measures that increase the probability that the jobs created by his policies will be union jobs, it is not clear that they will be effective. In that case, the manufacturing jobs created producing semiconductors or clean energy may be little better than other jobs that workers might have taken.
The other side of this picture is that the owners of the companies getting the subsidies, in addition to well-placed high-end workers, are likely to put lots of money in their pocket as a result of Biden’s policies. Moderna provides an excellent example of what can happen. The government paid for the company to develop a Covid vaccine, and then allowed the company to maintain control of the vaccine. The result was that we created five Moderna billionaires by the summer of 2021.
Elon Musk is another great example. Tesla benefitted hugely in its early days from Obama administration loans at below market interest rates. It is also benefitting hugely from subsidies to electric cars. As a result, we have made Elon Musk the richest person the planet.
For whatever reason, maintaining control of the technology that the government funds is literally never mentioned in discussions of industrial policy and inequality. While it would be possible for the government to make the technology open-source (no government-granted patent monopolies or non-disclosure agreements for technology) as a condition of getting the money, this is not on anyone’s agenda in Washington.
Perhaps it is good that people are at least talking about inequality these days, but it doesn’t seem like there is much interest in doing anything about it.
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