Unemployment & Tech Boom, Passing in the Night

Like ships passing in the night, two big economic stories of our time are the continuing tragedy of rust-belt stagnation - epitomized by Michigan's high unemployment rate - and the resilient national economy thanks to the buoyant effect of technology. Two stories today symbolize the disconnect.

First, Michigan in BusinessWeek:

Michigan, once the center of America's industrial heartland, now holds a more dubious distinction: It leads the U.S. in joblessness. The state's unemployment rate hit 8.5% in May. That's up 2 percentage points from April, and compares with a figure of 5.5% for the whole U.S. in May. ...

One of the bright spots, if you can call it that, for Michigan is the health-care industry. With baby boomers aging and their parents living longer, hospitals, nursing homes, clinics, and medical laboratories have the most jobs to offer in Michigan today. But the cruel irony is that there is a shortage of trained professionals. So Canadian nurses, for example, have to be imported from the other side of the Detroit River.

Second, Technology Sector booms in 2006

Recent data show the tech sector is "climbing back to 'pre-bubble-bursting' levels of employment and activity," Hansen said. The bubble of the late 1990s was the product of "an exuberance of investment" in companies that often lacked solid fundamentals, but the current growth is being driven by a more stable industry that has become integrated into the broader economy, he added.

Wages in the tech sector are 87 percent higher than average, and the big problem is a shortage of qualified applicants (Ed: those two facts may be related, huh?). Sadly, in a few cities the tech sector is shrinking, including Detroit.

Before you get totally depressed, check the Atlantic's great story on the Volt. Despite the stereotype of big companies being too bureaucratic to innovate, GM seems to be doing something truly radical, and not just the car, but the whole strategy of openness as development and PR. Jonathan Rauch has written one of the finest business articles in years:

Perhaps most audacious of all was a decision to allow unusual public access to the Volt program. The industry’s standard procedure is to develop new products, especially risky ones, out of sight, unveiling them only when proven. GM decided to do exactly the opposite. The PR department flung open the doors. GM executives discuss the program’s progress as publicly as if it were a bill in Congress. They show off photos of batteries under development. They promise to let reporters ride in test cars. They lead them through the labs and design centers and even into the wind tunnel. They run ads, for instance in this magazine, touting the Volt in the present tense, as if it already existed. By earlier this year, expectations were so high that President Bush was commending the car, and it had developed a national grassroots following. This article is itself a product of the fishbowl strategy.

Will Michigan get it right?

Comments

[Charles Johnson]

In one of the more famous pieces of Reason Magazine entitled, "What Detroit Can Learn From Bangalore," Shikma Dalmia quotes a politician who quips that the reason India had won numerous beauty pageants as its IT industry took off is that the "state had stayed out of both."

Unfortunately, in the U.S. we have serious regulation that impedes the kind of IT like revolution in the automotive industry that we're seeing in India.

I love the idea of a car, built as if it were a wiki entry, but I have to wonder whether the levels of bureaucracy built up by Big Labor in Michigan will ever allow GM to build the next Nano.

[Mike Hunter]

Wages in the tech sector are 87 percent higher than average, and the big problem is a shortage of qualified applicants (Ed: those two facts may be related, huh?).

True, but you're missing an important part of the story. Though out the tech boom, and for a long period afterwards the government was issuing a huge amount of visa's specifically targeted at foreign tech workers; at the request of big business; in order to keep wages for Network Administrators / Network Engineers from going too high.

The result of that policy of government intervention is that people such as myself, and I had extensive previous information systems experience though the military; stopped going after tech jobs and either transitioned to another field, or decided not to become a tech in the first place.

After all who wants to have a job in which the government screws you during the good times [from your point of view] by importing skilled foreign workers. And then turns it's back on you during the bad times?

The effects of this policy and the later unintended consequences are amplified by the fact that you can't "outsource" the job of a Network Admin. He has to be in the same physical location as the network.

So if natives' refuse to train for an in-demand job field because historically they've gotten the short end of the stick if they do, courtesy of Uncle Sam; and the current political climate doesn't allow politicians to import a large number of skilled foreign techs; then businesses are stuck with a bunch of high tech positions that they aren't going to be able to fill.

[Mike Hunter]

Oops I forgot to put quotes around the part of the article that I was referring to. Sorry.

[Mike Hunter]

Oops I forgot to put quotes around the part of the article that I was referring to. Sorry.

[Max]

Mike nailed it.