Manufacturing Jobs Myth

From TJIC:

"America cannot be great if most of its workers are in the service
sector"¦" Senator Byron Dorgan (D-North Dakota) declares in his book
"Take This Job and Ship It,""¦

This typical reading of historic manufacturing and service jobs stats is ignorant.  My first rule of quoting a statistic, which I admit I sometimes violate, is to make sure you understand how it is calculated.  Nothing could be truer than with manufacturing jobs statistics.

The best way to illustrate this is by example.  Let's takean automobile assembly plant circa 1955.  Typically, a large manufacturing plant would have a staff to do everything the factory needed.  They had people on staff to clean the bathrooms, to paint the walls, and to perform equipment maintenance.  The people who did these jobs were all classified as manufacturing workers, because they worked in a manufacturing plant.  Since 1955, this plant has likely changed the way it staffs these type jobs.  It still cleans the bathrooms, but it has a contract with an outside janitorial firm who comes in each night to do so.  It still paints the walls, but has a contract with a painting contractor to do so.  And it still needs the equipment to be maintained, but probably has contracts with many of the equipment suppliers to do the maintenance.

So, today, there might be the exact same number of people in the factory cleaning bathrooms and maintaining equipment, but now the government classifies them as "service workers" because they work for a service company, rather than manufacturing workers.  Nothing has really changed in the work that people do, but government stats will show a large shift from manufacturing to service employment.

Is this kind of statistical shift really worth complaining about?  By complaining about the shift of jobs from manufacturing to services, you are first and foremost complaining about a chimera that is an artifact of how the statistics are compiled.  So if we were to correct for this, would manufacturing jobs be up or down?  I don't know, but given on the wailing about "shrinkage" of manufacturing in the US, I bet you would not have guessed this:

Considering total goods production (including things like mining and
agriculture in addition to manufacturing), real goods production as a
share of real (inflation-adjusted) Gross Domestic Product (GDP) is
close to its all-time high.

  • In the second quarter of 2003, real goods
    production was 39.2 percent of real GDP; the highest annual figure ever
    recorded was 40 percent in 2000. See the Figure.

  • By
    contrast, in the "good old days" of the 1940s, 1950s and 1960s, the
    United States actually produced far fewer goods as a share of total
    output, reaching 35.5 percent in the midst of World War II.

So manufacturing is close to an all time high as a percentage of the economy.  There is absolutely no way anyone who looks at this graph can, with a straight face, talk about the "shrinking" of America's manufacturing sector.   If manufacturing employment is somehow down vs. some historical "norm", then that means that manufacturing productivity has gone up faster than service productivity.  So what?  And to the extent there has been a shift, as TJIC writes, who cares?

Yeah, we hates the service sector.

Who needs lawn care, child care, food preparation, legal
services, stockbrokers, professors, blogs, actors, and contract
software engineers ?

Let's get everyone involved in good 19th century atoms-and-mortar activities like raising corn and smelting iron.

Sure, some flakes argue "those are jobs for machines", but we
aim to recapture the glory of our national greatness, when men were
men, women were women, America was strong, and the average life lasted
50 years and ended with pneumonia, a threshing accident, or a crushing
injury.

The same populists who complain today about the shift from manufacturing to services complained a hundred years ago about the shift from agriculture to manufacturing.  And I am sure all of us would much rather be waking up with the sun each day to push a plow.

  • William

    Hey. Nice blog. I stumbled across it quite by chance. It's refreshing to see a blog where a lot of reasonable thinking is done. I guess I'm a bit curious about the "real goods production" numbers that are shown in this article. How does this apparent growth in the production of "real goods" compare with that of other countries? Quite apart from that, what do these numbers really mean? And are current definitions of manufacturing health appropriate?

    I have a hard time not thinking that our jobs in the manufacturing sector are vanishing. Where are they going? For starters, manufacturing efficiency is increasing every year. More product is made with fewer employees. That's no fault of shipping jobs overseas, but it does show that the graph you've linked us to isn't a direct indicator of the number of people employed in the manufacturing sector.

    And let's not forget the intuitively obvious: people in far away lands are making the goods we purchase. It's not easy to find electronic gadgets that are made in America. Nor is it easy to find domestically produced clothing. Companies are laying off people in America and shipping the jobs to other nations. It all makes me wonder; just what are all these manufactured goods that we produce domestically in ever-increasing value? And did the Bush Administration successfully redefine hamburger assembly as a manufacturing job? ;)

    Seriously, though, when I was a kid in the 70's, my clothes were mostly made in the good ol' USA. Imports were readily available in terms of electronics gadgets, bicycles, etc, but finding something made in America was easy. It isn't so any longer, and I don't believe there's a strong argument out there showing that our exports have grown nearly as fast as our imports. If we show our "real goods production" numbers against other nations and the rate of growth is similar, then I'll be inclined to believe things aren't as bad as they're being painted.

  • Ted Mittelstaedt

    Most manufactured goods today, both for consumer and for business, aren't built to last a long time, they are pieces of junk that break within 5 years. When they break they are replaced rather than repaired. So it isn't any wonder that we are producing more real goods in the US these days. We are also throwing out a lot more. The only people who benefit from this shift are the goods producers. The repair people don't as there's less need for them. And consumers don't since they have to deal with a lot more inconvenience of having to replace things all of the time, and the things they have being cheesier and not working as well after the first few years of use.
    As for the classification of workers in the auto plant. What you neglected to mention is the service people on staff of the auto plant got paid more than the service people working for the outsourcer. If they didn't then the cost to outsource would be higher than just retaining the service employees, that is after all why companies outsource.
    What you need to look at is the buying power of peoples take home pay. These days it is definitely worse. One obvious bit of evidence is that before the 60's a lot more families had only a single breadwinner, the father, out there working. The mother stayed home and watched kids. Today both of them have to work because they don't have the purchasing power to have one of them not work.
    The last bit you really ignored is that people in the US really don't have anyone else but themselves to blame. Every time a US citizen buys a new car that was produced by a foreign automaker, every time someone gets a cheap plastic dish at Target that was made in china instead of an expensive stoneware one produced here, every time a consumer buys bannanas at the grocery store instead of apples (there's not a single bananna plantation in the US, but there's plenty of apple growing) they are fueling the outsourcing of production jobs out of the US.
    Your criticizing the politicians for misusing statistics, but the real criticim that the politicians deserve is that not a single damn one of them are out there making the obvious and simple case that if you want to help the economy of the US get better, then by gum, buy American-produced goods! So many of the American manufacturers have been pushed out of business that it is a real myth that American produced goods are lower quality - the lower quality producers can only survive by undercutting everyone else on price, and because of that they are all operating out of China.
    Oh, and by the way, this Senator Byron Dorgan your quoting as being such a proponent of manufacturing - funny how his North American Manufacturer's voting record is only 35% (see http://bipac.net/nam/109c_VR_Senate.html ) Such a manufacturing champion!