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Isn't This A Measurement Problem?

September 4, 2007, 10:19 am

I often see the stat that US manufacturing employment has shrunk substantially over the last 50 or so years, usually accompanied by much wailing from the left (yes, the same people who criticized manufacturing work as dehumanizing 40 years ago).

The WaPo, via Hit and Run, says that US manufacturing output is at an all time high, and that the only way to reconcile these two is with technology and productivity.  Which is certainly part of the story, and its refreshing to see someone telling this story and not trying to cast the manufacturing numbers as a reason to slam the borders closed against imports.

But isn't there also a measurement problem here?  Eighty years ago, if a Ford Motor factory needed the windows cleaned, a Ford employee did it.  If it needed the parking lot striped, Ford workers did it.  When it needed the bathrooms cleaned at night, Ford janitors did it.  Today, the same Ford factory needs its windows and bathrooms cleaned, but an outside service contractor likely does the work.  In the economic statistics, haven't these workers migrated from "manufacturing" to "service" without anything real on the ground changing?

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Category: Economics
  • Max

    That certainly is one point mentioning, but I don't know if these jobs really counted into manufcaturing, in the first place?

    However, automatisation of manufacturing and the competition with low-wage neighbours certainly has led to a decline in manufacturing jobs. However, the pressure on quality has increased quality control and again opened jobs in those quarters. It is not easy to judge whether laying off manufacture workers really causes any unemplyoment, but it certainly shifts jobs around.

    I can only speak for Germany hear (which has even worse competition factors than the US), and here we seee a constant employment.

    1970: almost 1.2 Million employees in mechanical engineer
    2003: around 0.9 Million employees
    (Source: VDMA, 2003)

    So, it was almost horizontal line between those two dates and 0.3 Million lay-offs is not that much, even if it is due to automatisation.

  • http://comuse.blogspot.com Allen

    Excellent point. Reminds me of when Northwest Airlines had their mechanics union go on strike. It turns out something like 2/3 - 3/4th of the union members were actually people that cleaned the planes!

  • Iblis

    If that's true then one thing has changed. Specialization has increased, which in turn does improve productivity.

  • markm

    I think that measurement problem is real, but limited in effect. It was only a few percent of the Ford workforce that did these jobs to begin with, so switching them from "manufacturing" to "service" doesn't go far in explaining the huge drop in "manufacturing" jobs. Automation is probably most of the story; American factory workers expect better than minimum wage pay by American standards, which is very high pay by world standards - so if you are going to manufacture in this country, you'll automate out every job you can, or you'll lose your customers to lower-cost foreign goods.

    But there is another factor here, too. The American manufacturing plants that I know of that are surviving do so by providing service that you won't get from a Chinese factory. E.g., an electronics plant that accommodates customers who frequently have crises where they've got to change the product a little right now to correct a just-discovered defect or compensate for a part going out of production - and can get the change made, complete with ISO-9000 paperwork, while you'd still be trying to arrange a conference call with manufacturing engineers in China. Other electronics plants that specialize in meeting the FDA's massive paperwork requirements. Or a tiny little shop near here that makes automotive gauges - not ordinary gauges, they'll make a gauge that looks just like the original one in that 1940 Ford you are restoring (although it's electronic on the inside), and ship it within a week or two. For $800. How much of that is manufacturing and how much is service?

    There is one reason to be concerned about our manufacturing output. Remember WWII? We won that and saved half the world from totalitarianism because we could outproduce the Germans, Italians, and Japanese put together. We couldn't outsource tanks, airplanes, rifles, and ammo, but we made them here, and we made several times as many as our enemies could. But losing manufacturing jobs doesn't mean we've lost that capability. I think it is likely that we've got nowhere near the steel-making capability we had then, but modern war-making needs less steel and more of other things, such as aluminum, kevlar, and especially electronics. As far as electronics goes, I think that if we re-allocated resources in the face of a challenge such as WWI now, we'd have plenty of domestic assembly capability, but I'd worry about the basic components, which mostly seem to come from the Pacific Rim - except that we've got such a lead in military technology that I don't see how anyone could cut us off from Taiwan and Singapore again.

  • Mark

    Actually, it is not a measurement problem, but a classification problem. Employees are not classified by the function that they work in each company, but rather by the type of work the company does. Therefore, eveyone in a "manufacturing" company is a "manufacturing employee" even if they did a "service" function.

    Back in the olden days, before computers, companies had much more administrative staff than today.

    My company has 400 employees. The work that my payroll program does in literally 45 seconds or so in calculating gross and net pay would have taken several clerks 20-30 hours to do. If my company would be a manufacturing company (it isn't) then any losses in the payroll department would have been "manufacturing job losses".

  • http://www.manufacturethis.org Steven Capozzola

    The big problem is that we're simply losing our higher paying manufacturing jobs. The U.S. must start enforcing its trade laws.