Manufacturing reality
Update: 2 July 2010, Don Boudreaux has an excellent letter to the editor that deals with the same topic and updated data. See Cafe Hayek
| At last week’s get together I reluctantly agreed to attempt explanation of the real values concerning the decline of manufacturing in the US. The difficulty in explaining lies largely in the fact that it not true. The manufacturing industry in the US is not shrinking. Far from it actually. Similar to sectors, manufacturing is in dip during the current recession but the industry is alive and vibrant. The top graph here shows the Federal Reserve index values since 1939 for manufacturing output. Manufacturing output has almost doubled in the just the last 20 years. Notice also that the rate of growth is actually better the last 20 years than during the preceding periods. |  |
| So what is the doom and gloom about? Well, the increase in output has been accompanied by a decline in the sector employment as you can see from the next chart. These values are from BLS and are available to everyone the same as the reserve’s data.
It’s import to look at both values together. It’s ‘common knowledge’ That US manufacturing moved overseas but that statement isn’t true. We produce more today than in the past. The reduced number of workers required to generate this production is due to productivity gains. This is similar to what occurred in agriculture earlier in the 20th century. Displacement of workers as an economic sector becomes more productive per worker is painful for those affected. The longer term impact however is extremely positive as those workers are now available to move into the newly emerging industries. Remember how manufacturing was able to grow only because of the ready supply of workers freed from farm labor. Rather than attempting to keep these jobs around we would be much better off to put that effort toward readying the displaced to step into new careers. |
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Note, reformatted the post to make it easier to read.
Author Roger Cuddy claims no special knowledge of subject beyond a strong interest and slight opinion. Your mileage may vary.