U.S. Manufacturing: Politicians Get it All Wrong
Politicians often use the state of manufacturing in the United States as a benchmark for the economy as a whole. And they tend to focus on the supposedly declining number of manufacturing jobs as an indication of economic weakness.
It’s just a small step from there, as we have seen in the current presidential race, to blaming trade and globalization for the current state of affairs.
But, as a recent report from the Center for Strategic and International Studies, a Washington think tank, points out, much of this information is taken out of context.
It’s true that manufacturing employment has dwindled since its peak of 19.5 million workers in 1979 to 12.3 million in May 2016. But the latter figure represents an increase of nearly one-million manufacturing jobs since its low point in 2010.
“While some of this rebound is due to a broader economic recovery,” the report said, “there’s also evidence that more companies—such as Ford and Caterpillar—are insourcing jobs back to the United States from countries such as Japan, China and Mexico.” A 2012 report indicated that the U.S. has become more attractive to global manufacturers thanks to low energy prices, intellectual property protections, and rising production costs in China.
In fact, the report, notes, the U.S. is the world’s second largest manufacturer when it comes to the total value of manufacturing output. Output has also been growing since 2010. Manufacturers are showing gains in productivity, as automation increasingly replaces human labor. It is the rise of automation that largely explains the U.S. manufacturing employment picture.
Manufacturing jobs are shifting from low-skilled to high-skilled and wages reflect that fact. Today’s manufacturing workers are likely to be operating complex machinery—not standing on assembly lines. The share of manufacturing workers with a bachelor’s degree is increasing while those with less than a high school diploma is declining. And, manufacturing workers’ pay averaged $33.93 per hour in 2013.
In fact, the industry compains of a shortage of workers—as many as two-million unfilled positions—because of the lack of workers with the right skills and the desire in to pursue manufacturing as a career. In other words, if U.S. workers more appropriately trained, manufacturing—and manufacturing employment—would be growing at more robust levels.
Finally, services, and not manufacturing, drive the U.S. economy today, so it’s unfair and inaccurate to rely on manufacturing as a proxy for the economy as a whole.
“The vast majority of U.S. economic output is services—including knowledge-based sectors such as information technology, financial services, logistics and distribution, education, marketing, legal, and a host of other high-end professional services where America has no equal,” said the report. “The United States is far and way the global leader in services exports and in fact enjoys a trade surplus when it comes to services. In 2013, America accounted for 14 percent of total global services exports, compared to four percent for China.”
It’s true that these shifts in the U.S. economy have taken their toll on workers. Men with a high school diploma earn less today than they did in 1973.
“But the right approach,” the report concluded, “is not to turn back the clock and attempt to revive a 1950s-style economy. This task is not only impossible but undesirable. Rather, the right solution is to help all workers invest in the skills and education they need to compete in the changing economy.”