As Goes Janesville
By Luigi Zingales
Saturday I had the chance to see a screening of the much awaited documentary film As Goes Janesville (http://371productions.com/what-we-make/documentaries/as-goes-janesville/ ) by Brad Lichtenstein. The documentary follows the life of a small town (Janesville, Wisconsin, 63,479 inhabitants) as a GM plant, the major employer in town, closes. The film has gained instant attention because Janesville is the hometown of Congressman Ryan, the Republican vice-presidential candidate. Yet, the real reason should be in what the title implies, “As Goes Janesville, … so does America”
The reason why this is so symbolic is because the much touted resurgence in US manufacturing (half a million from the trough in 2010) is nothing but a miniscule positive blip in an otherwise pretty dramatic decline. During the 1980s and 1990s, when we experienced the two longest economic expansions, the US economy shed roughly 1.5 million manufacturing jobs. In the 2000s before the financial crisis and the onset of the Great Recession we lost 3.8 million manufacturing jobs. The Great Recession caused a loss of another 2.4 manufacturing million jobs.
Why should we care? – ask many economists. As long as other jobs in construction and services are created and the economy grows, we should not worry. This is true, but it is missing a big problem: for the large part the new jobs are not suitable for the people whom the decline in manufacturing is leaving behind. The movie makes this point in a very salient way. Cindy Deegan, one of the movie’s heroes, is struggling to transform herself from an autoworker to a lab technician. She goes back to school and she struggles with studying and tests. At the end she succeeds, but barely and not before her unemployment insurance has run out. At the last second she dodged the bullet, but not everybody else is so lucky.
Movies often sacrifice the statistical evidence to a good story. “As Goes Janesville” does not. As the recent work of some of my colleagues (http://faculty.chicagobooth.edu/erik.hurst/research/charles_hurst_noto_manufacturing.pdf) shows the decline in manufacturing has very negative effects for high school graduates, who once represented the American middle class. Decline in manufacturing is strongly related to the decline in the rate of employment among non-college males (male between 21 and 55 with at most two years of college). This percentage has gone from 77% in the mid1980s to close to 70 % today. The decline in manufacturing is also highly correlated with the drop in real wages of this group, which has lost more than 25% in thirty years.
An enduring aspect of the movie is the attempt of Janesville inhabitants to cope with the crisis. The business community sets up a campaign to promote the benefits of the area and attract new employment. Yet, the main outcome of this campaign is quite disappointing. It translates in a $9 million incentive package to a startup that promises to bring 125 jobs to Janesville in the distant future. As one savvy citizen complaints at the local town meeting, at $70 K per job the deal does not seem a very good one for the inhabitants of Janesville and smells of cronyism. Is it possible that the only thing that pro market forces are able to do is to lobby for subsidies from the government?