New Zealand’s economic productivity has been low for decades now, in both the pre and post-Rogernomics era.

Jokes like ACT’s Productivity Commission have predictably not helped, and neither will the insanity of other government ideas like their new energy policies, especially renewable energy, which, judging from the experience of other nations, are going to result in a more unstable and expensive power system that won’t meet demand. Given that our technological and industrial world relies on having plentiful amounts of relatively cheap energy this is yet another marker of serious problems ahead.

Even a difference of 1% per annum between us and other nations productivity growth will, over years and decades, add up to large gaps in GDP, translating into us being outspent by those other nations on all manner of things – like doctors and nurses. In fact it already has, hidden by the cheap products churned out by China’s economy in the last twenty years.

With younger people fleeing the country as soon as the C-19 border controls were lifted, and possibly hundreds of thousands soon to follow, plus the current problems with staffing our healthcare system, with much talk of immigration problems with Phillippine nurses, it should be obvious that those who focus on the future are thinking that New Zealand’s is not so bright. In another twenty years we may not be able to afford those foreign nurses, for the Developing world will be able to pay more.

I’ve already covered some of the basic economic things that could be done to kick-start the NZ economy after our lockdowns and general malaise, using the lessons from Germany in 1948 (A different economic starter motor)

But in the superb web site, City Journal, is a recent article that suggests ideas aimed at something other than theories about economics, taxes and spending. A Heartland Manufacturing Renaissance looks at recent growth in businesses and jobs in the American Mid West, which had the crap kicked out of it decades ago:

Out in the rolling country just east of Columbus, Ohio, a new—and potentially brighter—American future is emerging. New factories are springing up, and, amid a severe labor shortage, companies are recruiting in the inner city and among communities of new immigrants and high schoolers to keep their plants running.
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Not long ago, Ohio was a classic Rust Belt state, with high unemployment, massive outmigration, and a prevailing sense that time had passed it by. Between 1990 and 2010, Ohio lost more than 420,000 factory jobs. Then things started to turn around, as the state gained back nearly 100,000 industrial positions over the next decade, until the pandemic interrupted that growth.

It’s not just Ohio either:

Almost all the states with the fastest industrial growth are outside the coasts, led by Texas, Michigan, Florida, Kentucky, Tennessee, Arizona, Ohio, Minnesota, and North Dakota.
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In Ohio, new plants are popping up in numbers second only to Texas. To put this in context, Ohio is booking new capital projects on a per capita basis at a rate almost 14 times that of California, 

Notably this success does not include the old industrial centres like Detroit and Chicago. There are many factors involved here, starting with governments that don’t treat business and business people as greedy, grasping assholes that need to be regulated on every aspect of their existence.

The Buckeye State, notes Rick Platt, president and CEO of the Heath-Newark-Licking County Port Authority, “never skipped a beat on funding development.” More than 60 such authorities in Ohio work to attract industry with capital financing, infrastructure investment, land preparation, and speculative building development. Such efforts often tend to be largely expensive money-wasters, but in Ohio they have proved more successful.

Many companies created as a result including the world’s first organic baby food company. I thought New Zealand was into organics, and baby food? Why weren’t we the first on this?

There are other factors involved of course and at least two of them should be applicable to New Zealand:

Many Ohio firms, like TDK and Ariel, use cutting-edge technologies like 3-D printers, robots, and computer-controlled machine tools that allow them to produce better and often cheaper products. John Wilczynski, executive director of America Makes, a manufacturing consortium funded by the U.S. Air Force and based in Youngstown, says that these “additive manufacturing” processes open new possibilities for companies to lower costs and craft parts that, in many cases, were previously available only in China or other countries. Wilczynski believes that “digitally distributed manufacturing” is key to helping U.S. firms compete more effectively.

But no matter how clever the technology there’s also the people needed and how they’re educated and then trained.

“We really need practical skills more than anything for our business,” notes Andrew Lower of TDK Manufacturing, which makes components for Tesla as well as for semiconductor and medical-equipment firms. 

As in the USA there has been far too much emphasis in NZ on university education, with frequent reference made to the lifetime income of university graduates being much higher than those who merely finish high school. Those references too often looked at the past, ignoring the rapidly increasing cost of university, leaving young people mired in debt for years:

The up-front investment of college is extraordinarily high—tuition has increased 213 percent in the last 30 years—and returns for many students are not guaranteed.

There’s also the reduction in standards caused by universities aiming for government funded bums-on-seats, with the degradation showing most clearly in qualifications so esoteric that they could only end in low-paid work, with Welfare For Families as a never-ending, dead-end supplement to try and keep the whole creaking structure working.

The conventional wisdom among pundits and politicians is that the big labor shortages are concentrated in fields employing well-educated professionals. President Biden has talked about having factory workers and oil riggers “learn to code.” But companies are crying out most for skilled, dependable workers who can act as drivers, machine-tool operators, and welders. 
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Due largely to an aging workforce, as many as 600,000 new manufacturing jobs this decade will go unfilled. The shortage of welders alone could grow to 400,000 by 2024. By May 2021, amid a mild economic recovery, an estimated 500,000 manufacturing jobs had no takers. Overall, manufacturing jobs pay over 20 percent more than typical service or retail jobs.

And that’s before we consider the demographic problems that we’re about to hit, as others are also being hit:

One of the main obstacles to reindustrialization is a massive labor shortage. U.S. population growth between ages 16 and 64 has dropped from 20 percent in the 1980s to less than 5 percent in the past decade. The shortage is afflicting most industrial economies worldwide. China, with a population expected to shrink by half in less than a half-century, is already seeing a decline in its under-60 population. A lack of new workers is slowing Germany’s formidable manufacturing sector.

Fewer workers means increasing wages as competition for skilled people rises. Young people need no economics knowledge to see this, only the employment advertisements in Australia and further afield, and often enough it’s for jobs that have seemingly little connection to what they studied here in school.

We need a better emphasis on training for skills and the next National-ACT government could do worse than to take a look at things like this:

The Ohio Association for Career and Technical Education boasts a 98 percent graduation rate, and the vast majority of its graduates find jobs or advance to higher education. Local efforts are important, too. C-TEC (Career and Technology Education Centers) of Licking County collaborates with local companies, high schools, and colleges to train skilled workers. Students who often struggled in high school study subjects such as medical technology and welding and learn to operate complex machinery, including 3-D printers and robotic arms.

We all knew kids like this in high school. They weren’t dumb, they just weren’t interested in academic crap. The same kids now are buried in even more of it, and right through to Year 13 (the old Form 7) which was once the world only of those likely to go on to university but which now consists of almost the entire wing that started high school in Year 9. There’s also this:

Skills-education programs like these do more for working-class families, minorities, and immigrants than any array of “diversity” initiatives. 
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Terrence Hayes, who runs Ariel’s 125-person operation in Licking County, suggests that the biggest struggles tend to be not at the top—after all, foreign engineers are plentiful—but closer to the factory floor. “There’s been a period of at least twenty years where we have moved away from practical skills,” he notes. “We would have been better off if there were machine shops in schools like when I was a kid.”

Education has been treated as a backwater by successive governments, with tweaking on qualifications like NCEA and never ending fights about funding being the main topics – yet with increasing truancy rates as high as 40% and significant percentages of people leaving school with little or no qualifications, plus the free market of seemingly endless numbers of “Higher Education” places producing empty qualifications.

It can’t go on as it is and it needs the same focus and energy applied as does Healthcare – and the lessons from places like Ohio. Read the whole thing.