Manufacturing (Dis)Employment

 RedSt8r: The following is my comment regarding the letter from Professor Don Boudreaux to the Wall Street Journal

“Picking Winners” by Making the Rest of Us Losers [Please read his entire post]

by Don Boudreaux on February 9, 2010

Below are two letters [ RedSt8r: I’ve only reprinted one letter ] that I sent yesterday to the Wall Street Journal.  Both are in response to this essay whose author argues that America needs an “industrial policy.”  (This essay has many flaws beyond those that I highlight in my letters.)

John Hofmeister builds his case for a U.S. industrial policy on a foundation of falsehoods (“The U.S. Needs an Industrial Policy,” Feb. 8).

The most notable falsehood is Mr. Hofmeister’s assertion that American manufacturing is faltering.  In fact, America remains the world’s leading manufacturing country, one whose manufacturing output continues to increase.  For example, in inflation-adjusted dollars, the value of U.S. manufacturing output in 2007 was 8 percent higher than it was in 2000, 69 percent higher than it was in 1990, and 184 percent higher than it was in 1980.

And while it’s true that the Chinese will one day produce more manufacturing output than do Americans, that eventuality is hardly surprising given that China is home to one-sixth of the world’s population.  Moreover, the fact that manufacturing outputs in newly industrializing nations such as China are growing faster than American output no more means that American manufacturing is in poor health than does the fact that a two-year-old girl is growing faster than her ten-year-old brother mean that the brother is shrinking, is in poor health, or is in need of a ‘height’ policy.

REDST8R:

Professor Don,

Your recent letter to the Wall Street Journal continues a theme of yours, to wit, that manufacturing in the United States is alive and well. To buttress this claim you provide statistical evidence showing that the dollar amount of manufactured products is high and rising. I will stipulate that your statistics are valid, that your math is accurate and that as far as it goes your conclusions valid.

 But from the hinterlands I see a wholly different picture. Out here in non-tenured land I see manufacturing employment as seriously ill and getting worse. The chart below is based on data obtained at www.bls.gov/cps. It shows the percentage of workers employed in manufacturing versus the total employed work force.

Manufacturing Employment as a Percent of Employed

As this chart demonstrates the manufacturing employed are dropping in a rather precipitous manner and have been doing so ever since the WWII peak. I concede that this is not all bad as many such workers were able to find alternative employment and the cost of manufactured goods was minimized. I do not believe this to be the case any longer.

You provided a cute analogy to a 2 year old girl growing “faster” than her 10 year old brother. I suggest a more accurate analogy is the 2 year old growing “faster” not just while she is young but throughout her life. Surely at some point, when she is 12 for example,  the now 20 year old brother who may now be smaller than his 12 year old sister should be examined for some pathological issue. That is the case today with manufacturing in the United States.

I don’t really care that the dollar value of manufactured items has risen as you indicate. That only tells me that lower value manufacturing and the jobs that go with it has been transferred overseas. Please explain to me why that 2 year old girl – China – who should be eating more (relatively) than her older brother – America – is in fact not doing so? Shouldn’t the newly developing, rapidly growing, third world nation such as China be importing vast quantities of raw materials and finished goods to fill the growing demands of her population? And shouldn’t that be confirmed by a current account deficit as she buys more goods from overseas and consumes more internally? Yet that is clearly not the case. In fact the older brother, your analogy, is consuming more and growing less than his younger sister. Something is clearly wrong and yet you persist in following ideological paths rather than the evidence in front of you.

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