Fratto: Dispelling Manufacturing Myths…Again
Every now and then we hear about the demise of U.S. manufacturing. This morning’s Washington Post implies the same as editors sound a hopeful note for a “renaissance” in the sector. The myth of U.S. manufacturing simply won’t die, and so we bring back a standard chart to help explain (again):
If U.S. manufacturing is in need of a “renaissance”, as the Washington Post asserts, it’s hardly apparent from the data. Excepting periods of recession, U.S. manufacturing output has been doing just fine, and appears on track to resume its century-long upward growth path. The common mistake in Washington salons (and halls of Congress) is to confuse manufacturing employment and manufacturing output.
Manufacturing employment, as the chart shows, has been on a steady decline for decades, a result of historic achievements in manufacturing productivity growth – rather than a “hollowing out” of the U.S. manufacturing base. Manufacturing productivity growth is what is allowing the United States to remain a global manufacturing leader – and to retain any jobs in the sector.
The source of Washington Post editorial hand-wringing is…you guessed it…the rise of China, and they note:
Over the past 20 years, China overtook the United States as the world’s leading manufacturer, surging from 3 percent of global factory output in 1990 to 19.8 percent in 2010, just ahead of the U.S. share, 19.4 percent.
It will take a much longer post to dispel China worries, so I’ll save that for another day. But I’ll make my own assertion: we can’t be complacent: China remains a greater economic opportunity for U.S. than a threat.
As someone who hails from Pittsburgh, PA, I have great empathy for communities dealing with the decline in manufacturing employment – the transition to manufacturing production less reliant on labor is painful. But at a national level, efficiencies in manufacturing output are always good, as higher productivity is the source of higher standards of living.
Manufacturing productivity in the manufacturing sector actually pales in comparison to achievements in agriculture. In 1900, more than 40% of Americans were employed in agriculture; today, agriculture accounts for less than 3% of employment, all while the U.S. is the global leader – by far – in food production. Why don’t we see newspaper editors encouraging more Americans to return to the farm?