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During 1950 one in three U.S. workers had a high-paying manufacturing job.
Now it’s one in twelve. The reasons for the plunge prevent us from moving back.
According to economic research, we cannot blame China for most of our manufacturing decline.
Let’s take a look.
The Decline in Manufacturing
We can start with manufacturing employment and output. Essentially, we observe fewer people and more output.
Jobs
Since 1940, the number of manufacturing jobs has remained within a range of 11 to 20 million. Now, we are hovering close to 13 million:
However, looking at the share of employment in the U.S., then we see the decline of manufacturing:
But because manufacturing output outpaced the slip in employment, we can conclude that productivity caused the job losses:
Our Bottom Line: Structural Change
Economists hypothesize that, much more than China, the structural change in the U.S. economy caused the decline in manufacturing. Defined most simply, structural change is the shift in land, labor, and capital to new tasks and new technology. The auto brought a ripple of structural changes to the U.S. economy as did the computer. To graph a history of structural change, we can use an inverted “U” with manufacturing jobs as our Y-axis. Moving up the “U,” first we have workers shifting from agriculture to manufacturing. But then, as affluence ascends, the change takes us from manufacturing to services. Making it all possible, productivity rises although jobs disappear. According to one study from Ball State University, productivity caused 88% of the manufacturing jobs decline while trade was 13% between 2000 and 2010.
Whereas the following table is dated, still, it gives an accurate picture of how productivity diminishes jobs:
Also related to affluence, in richer countries, consumers spend their rising income on services. By contrast, poorer populations spend relatively less on food and more on manufactured goods. We could say that the richer we get, the more we de-industrialize.
So, it’s not China; it’s affluence that prevents us from moving backwards.
My sources and more: Thanks to The Economist for inspiring today’s post. Their article alerted me to this paper and the World Economic Forum. And of course Our World in Data came in handy.
3 Comments
The loss of high-paying manufacturing jobs is due mainly to the decline of unions. There are plenty of manufacturing jobs in America today; but they are not high-paying.
The profound misunderstanding of unions today is that they are, or should be, moral actors, a misunderstanding that stems from the legacy of support for unionization by progressives. Instead, unions are and should be selfish actors in the economic sphere. Unionization promoted middle class prosperity by decentralizing economic power away from the concentrated power of unions of capital (corporations). It was the severe handicap in management-union bargaining that used to hold back the explosion of upper management pay.
Rick–what about the role of technology? Automation? Robotics?
Those are just another name for increased productivity. Continual productivity growth during the first 2/3 of the twentieth century is what created wealth, creating the potential for general prosperity. But, averaged over time, manufacturing jobs did not decrease. It was the decentralization of economic power from unionization that made those jobs “high-paying manufacturing jobs”. Those jobs have evaporated due to increased corporate concentration (the result of neo-liberal adoption of Posner’s pro-trust ideas) and abandonment of government support for unionization.