The Midwest’s Era of Discontent
The Midwest is having a moment in Silicon Valley. There’s a pro-Midwest movement, and it’s notable enough to have attracted the inevitable backlash of an anti-pro-Midwest movement.
This spring break, we — a group of MBA students, along with one dedicated professor — decided to join in and see it for ourselves. The trip’s purpose was to investigate the effects of automation on labor displacement and communities. We went to Pennsylvania, Ohio, Michigan, Indiana, Wisconsin and Illinois, and had 17 meetings over 7 days — in mayor’s offices, manufacturing plants, and a secret vault room built by a billionaire.
I went because I grew up between New York City and San Francisco. I wanted to explore a significant part of the country that I have not been to that has contributed to the economy, and to meet with top leaders in the region to learn more about its potential. I was also especially curious to visit the four states that flipped from blue to red states during the 2016 election.
But a curious question arose: Why did we have an “economic anxiety” election in the middle of a recovery? Everyone we met with painted a rosy picture of the economy with needing more workers with not enough jobs.
I have a hypothesis about the Rust Belt’s era of discontent: The debate should not be about jobs vs. no jobs, but the nature of the job and how that affects the psyche of those working in changed jobs within factories. Jobs, just like an American flag, can be seen as symbols of our identity.
The Rust Belt cannot find enough workers to operate machinery
You might have heard this story before: the United States is undergoing a new revolution. Researchers have found that the effects are potentially 2x/3x larger in terms of lost jobs than the agricultural and information revolutions (even after adjusted for population growth). Manufacturing has been especially hard hit. These jobs have dropped by 50%-60% from 1954 to 2002 gradually within the Rust Belt.
Given this narrative, which is ubiquitous in Silicon Valley, I thought that the job loss due to automation and globalization was a trigger for many voters within Rust Belt states to support Trump. I expected to hear a lot of resentment about automation and machinery.
Yet we heard a very different perspective on the ground while talking to politicians, investors and workers. They love automation, and do not have enough people to operate them.
We first heard this in the offices of Drive Capital, a new venture capital fund based in Columbus, Ohio. The firm is headed up by former Sequoia Capital investors who exclusively invest in the Midwest. The first words of their presentation: “The Midwest is the Opportunity of a Lifetime.”
Robert Hatta, a partner at the firm, mentioned that factories loved robots, and that they were filling in for labor that was hard to find. I was surprised to hear about this and challenged him on it.
Ben Gibbs, founder of Ready Robotics, who was there at the meeting, chimed in. He agreed; robots were helping factories automate very manual tasks, such as taking products off a conveyor belt.
Their sentiment was echoed at the P&G plant a few hours away in Lima, Ohio — which happens to produce two thirds of Tide detergent supply in North America. Lonnie, a line operator who has been working there for over thirty years, concurred. Their plant had long been experiencing automation over the past thirty years. They would, simply put, not be able to make half of what they make if they tried to do it all with humans.
Tom Balanoff, the CEO of the SEIU union relayed a similar story to us about a local Chicago manufacturing plant. After they invested in machinery, they maintained the same total labor force, but their output increased by 4x.
Automation is only so successful as the other side of the equation: available labor to operate the machinery.
Reports by the Labor Department support their claims. A recent article in the Wall Street Journal as of April 2018 found that manufacturers are not finding enough employees for their plants. The Midwest is the only region where openings outnumber unemployed workers.
It’s unclear where the dearth of human workers is coming from. Mike Swick, the president of Lima Memorial Health System, presented to us about the decline in population growth in Lima, Ohio and presented a few reasons: the fertility rate is dropping, many are not passing required literacy tests and drug screenings, and there is a brain drain towards cities.
Overall, the U.S. unemployment rate has been dropping and is at the lowest that it has been in a decade (Source: United States Department of Labor). And the unemployment rate in many Midwestern states is currently below the national average of 4.1% (Source: United States Department of Labor).
So, where is this discontent coming from?
Symbols of strength?
An answer emerged within a conversation at the offices of Mayor Pete Buttigieg, in South Bend, Indiana. He’s being closely watched as future Presidential nominee. A Rhodes Scholar and a Harvard graduate, he is also an openly LGBT mayor in a red state.
He gazed at us from his table that overlooked South Bend. There wasn’t much to see from the window: a lot of land with a river that lazily snaked through. He leaned in and told us that it’s not about just jobs, but the nature of the job. Later on in the same conversation, Mayor Pete comment that he was “not a big symbols person.” But when he has started working as Mayor, he’s realized that they matter. The American flag. Showing up to an event and cutting the ribbon. He couldn’t measure the impact of these. But they do matter.
Symbols. They have power. More than we realize.
Land is a symbol. A few days later, we went to Detroit and met with Dan Gilbert, or also known as the self-made billionaire after starting Quicken Loans, and subsequent owner of the Cleveland Cavaliers. He’s embarking on a grand project to revitalize Detroit and created an empire by investing in 15MM square feet, and counting. He sees land as a symbol of remaking cities.
People are symbols. We met Jason Duff, a developer in Bellefontaine, Ohio. He stressed the importance of foot traffic, and how he is deliberate about making sure that he invests in businesses that have an outdoor seating area: “People outside mean there is activity going on inside. And that we’re an exciting place to be.”
Houses are symbols. Many Americans lost a lot of homes in the recession (about 4MM each year). What does that do to the national psyche? House ownership is a uniquely American notion. I’ve always been puzzled by why so many see it as the culmination of the American Dream. Yet a house is not just a house. It’s a statement outward that the homeowner is progressing. A stake in the ground. That they have a place in this world. And the national discourse has never really considered the impact of the loss of the house has on their identities.
And of course, jobs are symbols. They are part of our identities. There is a reason why we ask “what do you do” when we first meet someone.
The United States is in the middle of an identity crisis. The economy has slowly been driven more and more by service jobs rather than manufacturing jobs. These are heavier on emotional labor, which is a very different skill to learn and train workers for.
When we visited McDonalds, they commented that when they invested in automation, workers were reallocated to jobs that required interacting with customers. That’s a very different role.
This trip to the Midwest has raised more questions than answers for me. But I have learned to look beyond the numbers for something deeper and exploring the underlying psychology and impact of work. And finally, to look for the symbols, and what they represent: whether it’s a home, a flag, or a job.
