Podcast Summary

Podcast: LSE: Public lectures and events
Episode: How to help left behind regions and workers
Date: October 28, 2025
Host: Peter Trubowitz (LSE)
Guest Speaker: Gordon Hanson (Harvard Kennedy School)

Overview

This episode, part of the LSE US Center's Wenger Distinguished Lecture Series, features Professor Gordon Hanson, a leading expert on labor markets, globalization, and regional economic disparities. Hanson delivers a wide-ranging, data-driven lecture examining the economic, social, and political ramifications of globalization, automation, and trade shocks—especially for regions and workers left behind in high-income countries. He draws on decades of research, discussing both the underlying causes of regional decline and potential policy interventions, especially place-based policies. The Q&A probes further into practicalities, limitations, and future challenges.

Key Points and Insights

The Creation of "Left Behind" Regions

• Martinsville, Virginia serves as a microcosm for the issue—a former "sweatshirt capital" that underwent severe economic decline with globalization and automation ([04:14]).
• Economic shocks from global trade (especially the "China shock"), technology, and consumption shifts away from manufacturing have concentrated job losses geographically.
• Persistent joblessness: Two-thirds of displaced workers in Martinsville did not move to new jobs but instead dropped out of the labor force.
• Scarring effects: Job loss leads not just to immediate unemployment but long-term income declines, poorer health, and social disruption—even in countries with strong safety nets ([20:53]).

"Work confers dignity. And when you take work away, you take dignity away. And the absence of dignity has deleterious consequences for communities."
– Gordon Hanson ([08:50])

Economic, Social, and Political Consequences

• Regional decline feeds political upheaval: Areas most exposed to trade shocks and joblessness showed higher support for Brexit, Trump, the French National Front, and German AfD ([12:24]).
• Joblessness for non-college men (and women) has become regionally concentrated—a "geography of joblessness" not just in the U.S. but internationally ([29:45]).
• Disparities between workers with and without university degrees have widened, as college graduates cluster in “superstar” cities and access new knowledge-economy jobs, while non-college workers struggle ([23:06]).

Diagnosing Job Loss and Failed Transitions

• Regions have failed to "transition" after losing core industries, resulting in persistent joblessness rather than revitalization or mobility.
• Decline in manufacturing has uniquely undermined good jobs for non-college workers.

"The magical thing about manufacturing was that it provided good jobs to everybody… Now, you come to 2021, that share has fallen to 20% for non-college workers."
– Gordon Hanson ([23:15])

Standard Policy Responses and Limitations

1. Letting markets work: Relies on long-term outmigration, often not feasible for low-mobility populations.
2. Targeting individuals: Safety nets (e.g., unemployment benefits) help short-term hardships but don’t create new jobs.
3. Place-based policies: Interventions targeting distressed areas via investment incentives, workforce development, or direct intervention. These face challenges with implementation quality and capture by vested interests ([35:49]).

Place-Based Policies: Successes, Failures, Lessons

What Works

• Rigorous, rules-based incentives:
  • The UK's enterprise zones and California's COMPETES Tax Credit incentivized genuine job growth by targeting investments strictly to distressed areas with clear performance standards ([38:20]).
• Active and competitive grant processes:
  • Outlined in California's improved model, where proposals compete and ongoing performance is measured.

"When you incentivize investment in low-income areas and you’re really rigid about the application of those rules... you get job growth in those areas, and that job growth isn’t being stolen from neighboring areas."
– Gordon Hanson ([37:48])

What Fails

• Zero-sum subsidy races:
  • Kansas and Missouri spent hundreds of millions poaching companies from each other, producing no net gain ([40:06]).
• Lax, poorly designed schemes:
  • Early US and UK efforts lacked sufficient oversight or were too easily gamed by firms or local political actors.

"Between 2011 and 2019, the two states spent $335 million incentivizing firms to cross state boundaries. It was just all-out war, complete zero sum game."
– Gordon Hanson ([40:15])

Policy Implementation Challenges

• Local vs. national coordination:
  • Without scaled-up, over-arching agreements (analogous to a “WTO for regions”), zero-sum competition persists. However, "rule-based" systems show promise ([42:09]).
• Political capture:
  • U.S. systems are especially prone; evidence shows that both Democratic and Republican efforts have struggled to ensure neutrality and effectiveness ([52:05]).
• Immigration policy:
  • Properly channeled, immigrants can revitalize both rich and poor regions, but immigration remains a political third rail in the U.S. ([54:43]).

The Future: Automation, AI, and New Shocks

• AI disruption is expected to impact white-collar and degree-holding workers, not just factory workers ([47:06]).
• The core challenge is to build systems (education, training, economic development) that offer "malleable" and transferable skills, with lifelong/stackable credentials responsive to evolving labor demand ([57:56]).
• There is currently little robust evidence on what makes skills genuinely malleable or training universally effective.

"It’s less about the job title and more about that bundle of skills. If we think about what we want out of a training system, it’s helping people construct the right bundle for their economic futures—not just the job they’ll get right out of school, but also five and ten years down the line."
– Gordon Hanson ([66:10])

Key Q&A Highlights and Notable Quotes

On Political Feasibility and Cooperation

• Real progress on regional development is broadly popular but has struggled to overcome actual partisan divides ([63:36]).

"We have scope for cooperation in these particular policy domains, but we don’t have a lot of evidence of that cooperation actually happening."
– Gordon Hanson ([64:13])

On Second China Shock & Strategic Trade

• China’s investment in high-tech will bring further disruption. Policymakers must choose strategic battles and learn from past innovation ecosystems ([69:48]).
• Federal, university, and philanthropic investment have been historically central to U.S. technological response—but such a coalition is currently lacking.

On Worker Training and Skill Development

• Training must start with local labor demand, involve employers, and provide a base for future augmentation ("stackable credentials"). Community colleges (U.S.) and Further Education colleges (UK) have central roles but currently lack ideal resources/incentives ([57:56]).

"You want to make sure your initial training is something you can build upon, then you need stackable credentials … The base that is expandable and then being able to provide that expansion."
– Gordon Hanson ([60:52])

On “Wraparound” Support

• Successful interventions combine technical skills, career advancement, job readiness, and personal development—addressing the full range of barriers faced, including transportation, childcare, and drug rehabilitation ([76:27]).

Notable Timestamps and Moments

• Martinsville, VA as illustrative case: [04:14] – [14:00]
• Scarring effects of job loss: [18:10] – [20:55]
• The rise of jobless geographies: [29:45]
• Limits of "market forces" and mobility: [31:15]
• Enterprise zones: what works and doesn’t: [35:49] – [40:06]
• The Kansas City “border war” story: [40:06]
• Analysis of AI/White-collar job shocks: [47:06]
• On “malleable skills” and lifelong learning: [57:56], [66:10]
• Wraparound workforce development in Appalachia: [76:27]
• Place-based policy and climate adaptation: [80:48]

Memorable Exchanges

• On the Problem with Retrospective Policy (“Bring manufacturing back”):

  "They're mythologizing that manufacturing era… that world is inaccessible. We need to be tuning for the world in which we live."
  – Gordon Hanson ([48:38])

• San Francisco as “the next Detroit” & need for dexterity:

  "You want to have the dexterity to reallocate your labor and capital to do new things when one of those three firms decides, or the market decides, that they should just do much less of it."
  – Gordon Hanson ([48:55])

• On Who Benefits from Place-Based Incentives:

  "In both cases, it goes to low income areas that are already growing, that are poor neighborhoods in richer cities. It’s not going to the lowest income areas."
  – Gordon Hanson ([52:05])

• On Scaling Successes—Challenges in Workforce Development:

  "We've known it for 25 years. The challenge has been how do you scale that up. We have a system that works for say the top 20% of folks who are unemployed but motivated… we're still working on how you extend that."
  – Gordon Hanson ([76:27])

Conclusion

Hanson’s central message: While the causal roots of regional and worker decline are now well understood (with globalization, technology, and policy failures all playing a role), solutions are harder—especially scaling up what works while resisting political and bureaucratic capture. Place-based, evidence-driven policies, coupled with robust lifelong learning systems and wraparound support, are the most promising paths forward. But if strictly implemented, and combined with a clear-eyed diagnosis of local needs, they must also be nimble enough to address new shocks—whether from China, AI, or the green transition.