US Manufacturing Is Not Dead

Industrial+Production-1
Excellent article – US Manufacturing Is Not Dead

US Manufacturing is alive and well. The real issue is manufacturing employment, which is dropping like a stone. And the reason for the drop is an increase in productivity.

Read the entire article… or skip to the end…

Here are some general conclusions.

1.) The US still manufactures goods. In fact, the US still manufactures plenty of goods. Take a look at the types of exports in the latest trade data from the Census. It includes exports of industrial supplies, capital goods, autos and consumer goods.

2.) While outsourcing does happen — that is, companies do go overseas to open new factories at the expense of US employees — it is not the primary cause of manufacturing job losses.

3.) Going back to the recent post on employment remember that in this recession the unemployment rate of specific groups was heavily influenced by education level. In fact, according to the BLS, higher education levels (college graduates and above) were remarkably untouched in the latest recession while lower education levels (high school graduates, high school with some secondary education) had higher rates of unemployment. Lower levels of education are typically associated with manufacturing and construction employment — the two areas of jobs that account for the largest percentage of job losses in this recession.

US manufacturing would be greatly helped by two developments.

First, China needs to float its currency. A country that has 10% GDP growth but little currency appreciation is obviously manipulating its currency’s value to a high degree. Given China’s growth rate, investors should be flocking to China driving up the yuan’s value. That is not happening. A real free-floating currency would cure a lot of the trade deficit problems.

Secondly, there have been calls for a US industrial policy — that is, for Washington to essentially “pick winners and losers” by promoting some industries that they feel have a high probability of success. Asian countries have been doing this for years with remarkable success and it is a policy which we clearly need to copy. I’m a big promoter of nano-technology, alternative energy and stem cell research, but those are just my choices. There are plenty others out there that would also make sense.

12 thoughts on “US Manufacturing Is Not Dead

  1. Industrial policy was a success in Asia? Japan has been in an economic slump for about twenty years now.

  2. I recently ordered a bunch of screws from McMaster-Carr, but I never got them. When I looking into why they never arrived the official answer was:

    “Thank you for your order. Unfortunately, due to the ever increasing complexity of United States export regulations, McMaster-Carr will only process orders from a few long-established customers in Canada. We sincerely regret any inconvenience this causes you.”

    I placed another order and had them dropped shipped to another location and now have my screws. Both to my surprise and pleasure 90% of the box contents were marked “Made in the USA”.

    McMaster-Carr should be ashamed of themselves, the economy is hurting but they can’t take the time to add an export document to the box and sell more American products!

  3. The article seems, unfortunately, to start with the conclusion that critics of “free trade” are wrong, and then selects statistics to back this up. I don’t have time to go through point-by-point, but the assertion that “…manufacturing employment…is dropping like a stone. And the reason for the drop is an increase in productivity” makes it sound like we’re just getting too darn good. In fact, it may also be that we are shipping, specifically, the labor-intensive manufacturing jobs overseas. That would result in an analysis that rates the remaining manufacturing jobs as being “more productive.” (Frankly, I get very annoyed by the way “productivity” is always cited as inherently good in mainstream economic news. If I cut your salary in half and expect you to do the same amount of work, I have just doubled your productivity. Yay.) Thus, one could just as easily say that shipping jobs overseas IS directly responsible for the decrease in manufacturing jobs in the US.

    Monetary policy is a little out of my league, and the thing about China’s currency is probably correct. Also, the “picking winners” thing may be a good idea. However, I think we need to do more to ensure that our imports and the manufacture thereof live up to certain baseline environmental and labor standards. Tariffs or outright bans shouldn’t be considered based on the simple fact that something is imported, but using them to enforce what we have, as a society, decided are fundamental ethical principles seems reasonable. (Of course, transparency is a big part of this, too. China, for instance, has nominal standards but lax enforcement and minimal transparency.) I’m so tired of the free-trade arguments that we need to relax our own standards to stay competitive. One can level the playing field in different ways and it’s time to stop the race-to-the-bottom method.

    -John

  4. I didn’t like this article at first. Too political in nature, and with too much emotional fallout. Just ask anyone in the (too) numerous towns who have lost major portions of their economies due to factory shut downs / move outs. We may not be losing overall manufacturing output, but we sure are losing factories and jobs.

    Then, in googling about this issue, I found several posts by Robert Reich on his (old) blog. Google “The Future of Manufacturing, GM, and American Workers”, read all 3 parts. I agree that routine, repetitive work is going away, and good riddance. Anyone who wants it back should go read “Rivethead”, by Ben Hamper.

    Just as I decry the loss of well paying manufacturing jobs, I also decry the low pay of many of the jobs available to those who have lost such jobs. Education and training are needed to raise such workers earning power. This is where MAKE can help, many of the skills learned from within MAKE can be applied to new jobs and new work.

    See if your local library has MAKE. If they don’t, ask them to carry it.

  5. I really don’t like the idea of the government trying to “pick winners and losers” among different developing technologies, because it doesn’t work. In Asia, governments didn’t pick developing technologies, they picked very well-established fields where they felt they could compete. For example, Japan’s government made a deliberate effort to boost auto manufacturing for the American market in the 1960s and 70s. That involved no new technology, just an understanding of Japan’s existing technological infrastructure. My first car, a 1980 Datsun 210, was a brilliant copy of the best American and German designs. India did something similar with its software industry, building up an infrastructure and labor pool over a period of two decades in order to become the world’s favorite cut-rate programming shop.

    Government should certainly fund technology research, particularly the long-term high-risk projects that industry is notoriously reluctant to bankroll. However, when those technologies start to mature, industry excels at figuring out which ones are winners and getting them to market.

    In any case, I doubt there’s any government policy that will bring back high-paying jobs for Americans without college degrees. That was an unsustainable situation in a global economy, and those jobs are gone from this country forever. John V. hits this on the head above – “productivity” is not the relevant measure here.

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