![]() ![]() The managers of the auto parts factory in Factory Town have an interest in keeping their own factory workers, and factory-adjacent warehouse and transportation workers, happy so that resignations or strikes do not interfere with production and sales. But that outside money is distributed in Professional Town is a much less egalitarian way than in Factory Town. In Professional Town the global services sector, just like the manufacturing sector in Factory Town, acts as a siphon, pumping money into the local economy from clients elsewhere in the nation and the world. But in Professional Town, the traded sector workers are found in the global services sector: software writers, providers of insurance and legal and management consulting services to national and multinational corporations and government agencies and nonprofits, movie and television and video game producers and scriptwriters. Once again, 80 percent of the local workforce is in the nontraded domestic service sector and only 20 percent works in the traded sector. Meanwhile, in the local nontraded service sector where 80 percent of the workers in Factory Town are employed, the hair salon workers and restaurant workers of Factory Town, knowing how well-paid the factory, warehouse and transportation workers are, can charge more for haircuts. And the auto parts supplier can pay for them, because of the profits it rakes in from an ever-growing number of national and global customers far beyond Factory Town itself. Even if they are not unionized, these logistics workers, knowing how critical they are to the manufacturing and sales process, can demand decent wages and benefits from their employers, who in turn can pass their labor costs along in the form of higher bills to the auto parts supplier. Inputs to the auto parts factory, and finished products, are shipped in and out of Factory Town with the help of local warehouse, trucking, rail and port workers (if Factory Town is on a navigable river or canal or ocean). ![]() While directly pumping foreign money into the local economy, the auto parts supplier indirectly shapes the kinds of jobs available to the 80 percent of Factory Town workers who labor in the nontraded domestic service sector. The auto parts company acts like a siphon, draining money from Asia, Africa, the Middle East and South America and pumping some of it into the local economy of Factory Town, through the pay-checks of workers and managers and purchase orders for locally-provided goods and services. When cars and trucks that incorporate auto parts made in Factory Town are sold abroad by multinational automobile corporations, some of the money goes to the firm in Factory Town. As the global middle class grows, its members buy more cars and trucks. Although only one in five local workers is employed by the auto parts company, it shapes the economy of the city in two major ways.įirst, the auto parts supplier brings in money from other parts of the U.S. In each of these fictional local economies, 80 percent of the workers work in the local nontraded service sector, and only 20 percent of the workers work in the traded sector, whatever it might be.įactory Town is home to an auto parts supplier that makes mufflers for multinational automobile companies. To illustrate this all-important point, let’s imagine four cities, each with a different kind of traded sector: Factory Town, Professional Town, Resource Town, and Tourist Town. The nature and quality of jobs in a country are influenced by the nature of its traded sector. And the Dismissive Snorter also ignores the fact that high-value-added traded sector jobs like manufacturing jobs have important “spillover” effects that improve the kind and quality of jobs in the nontraded sector of the country-spillover effects that are not by-products either of traded sector jobs that are low value-added, like oil and gas drilling or tourist services, or nontraded sector jobs of all kinds. But the Dismissive Snorter ignores the fact that the industries with the greatest potential for market-driven growth tend to be in the traded sector, producing goods or providing services that can be consumed both at home and abroad. ![]() Following is an excerpt from Michael Lind's new book, Hell to Pay: How the Suppression of Wages is Destroying America.ĭoes manufacturing matter in a twenty-first century economy? A newspaper columnist or economics professor or business executive or politician will often snort and dismiss concerns about the health of the national traded sector in general, and manufacturing in particular, by snorting, “Most jobs in all modern economies are in the nontraded service sector.” ![]()
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