Thursday, August 23, 2012

97% of job creation is local non-tradable sectors

Most new jobs in the last twenty years have been in non-tradable sectors, especially education and healthcare, says the Atlantic.

About half of the jobs created between 1990 and 2008 (before our current downturn) were created in education, health care, and government. What do those sectors have in common? They're all local. You can't send them to Korea. As Michael Spence has explained, corporations have gotten so good at "creating and managing global supply chains" that large companies no longer grow much in the United States. They expand abroad. As a result, the vast majority (more than 97%, Spence says!) of job creation now happens in so-called nontradable sectors -- those that exist outside of the global supply chain -- that are often low-profit-margin businesses, like a hospital, or else not even businesses at all, like a school or mayor's office.

That helps explain middle-class stagnation. There is a link to this report by (Nobel Laureate) Michael Spence. I'll have to read it in full.


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