Professor Mark J. Perry's Blog for Economics and Finance
According to BEA data on manufacturing output (value added) and manufacturing employment, there has been a decline of more than six million manufacturing jobs from the peak of 20 million in 1979 to fewer than 14 million jobs in 2007 (see blue line in top chart above). During that same period, manufacturing output (value added) has increased by more than three times, from $544 billion in 1979 to $1.63 trillion in 2007 (see red line in top chart), not adjusted for inflation. Because of the significant increase in manufacturing output accompanied by the huge decline in employment, the manufacturing output per worker increased more than four times, from $27,175 in 1979 to $115,750. The increase in worker productivity is one of the main contributing factors to the elimination of six million manufacturing jobs in the U.S. Simply put, we're producing more and more manufacturing output with fewer and fewer workers. With that in mind, consider this re-write of a recent news story about China: "The continuing trade imbalance with China increases in productivity has have contributed to the loss of over 5.3 million U.S. manufacturing jobs in the last decade, 300,000 of those in New York State. The Capital District manufacturing sector has declined by 28 percent during that same period, losing approximately 10,000 jobs, and 2,000 last year, said Schumer. "There is no bigger step we can take to promote U.S. job creation, particularly in the manufacturing sector, than to confront China's currency manipulation, our productivity improvements due to technology advances" Schumer said. "This is not about China technology bashing. It's about defending the people of New York and the United States." "We have a job crisis in upstate New York and in America," Schumer said. "China Technology is fanning the flames." The legislation Schumer proposes would impose new penalties on countries who manipulate their currency, manufacturers who introduce productivity-enhancing technologies as a way to save American jobs. Bottom Line: There's really no difference between: a) being able to produce more manufacturing output in the U.S. due to productivity increases that allows us to take advantage of technology advances and employ fewer workers, and b) being able to increase our manufacturing output in the U.S. by taking advantage of low-cost labor in China and employ fewer American workers. It follows that imposing penalties on low-cost Chinese manufacturers because some U.S. jobs are eliminated makes as much sense as imposing penalties on American companies that introduce technology (e.g. robotics) and in the process eliminate some U.S. jobs.
5 Comments: At 4/05/2010 10:37 PM, Benny The Man said...The output of $115,750 per industrial worker is remarkable, and a tribute to man's ingenuity.In general, worker output per hour in the USA has tripled since 1970. The minimum wage is lower today than in 1960s, adjusted for inflation.
At 4/05/2010 10:44 PM, juandos said..."there has been a decline of more than six million manufacturing jobs from the peak of 20 million in 1979 to fewer than 14 million jobs in 2007"...Hmmm, how much of the loss can be laid at the feet of the federal government and its excessive interference in the jobs market place?For instance its well past time to get rid of the minimum wage...What Causes Unemployment?by Thomas Sowell (November 14, 2005)
At 4/05/2010 11:31 PM, gettingrational said...Robotics, process improvements, just in-time inputs, faster working and more skilled humans etc. conbine to increase in productivity.Assembling foreign inputs with robotics, process improvements and just in-time inventory etc. is also better producitivty.Value-added manufacturing is subject to debate. The high value jobs to make inputs for the final product is where the high paying jobs are. That is why foreign countries work so hard to gather and keep value-added manufacturing jobs. The final product can be sinmply the assembly of the expensive parts at key distribution points.The assembly of ever more foreign inputs is resulting in higher productivity numbers and less income for the workers and the country.
At 4/05/2010 11:40 PM, Lyle said...If you look at it one way the plot proved Ned Ludd right. Machines are the enemy of people. This is also true in Ag where machines are being developed to do more and more harvesting all the time. For a long term example cotton is not picked by hand any more. Should we create jobs by banning the cotton picking machines? Combines? Tractors?...Note that the minimum wage is really an issue in fast food and service businesses and the like, not in an environment where value added is $115k per worker.
At 4/06/2010 12:29 AM, bobble said...MP:". . .our productivity improvements due to technology advances . . ."you are asserting that most of the productivity increase comes from technology advances.i don't know myself, but isn't it possible that the most of the productivity increase comes from using parts obtained cheaply offshore? in that case your analogy is irrelevant.can you substantiate your assertion?
Links to this post: See links to this post posted by @ if (typeof BL_addOnLoadEvent == 'function') { BL_addOnLoadEvent(function() { BL_writeBacklinks(); }); }About Me Name: Mark J. Perry Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. Perry is currently on sabbatical from the University of Michigan and is a visitor at The American Enterprise Institute in Washington, D.C.
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Previous Posts 756 Bad Things Attributed To Global Warming Computers Then and Now Work-Sharing Works for Germany, Netherlands March ISM Business Activity Reaches 4-Year High Markets in Everything: Outsourced Grading Tax Deadline Approaches: Bring Us Back to 1913 Economic Lessons on Free Trade from the Auto Indus... The Biggest Fiscal Issue in America Today: More P... Happy Easter: Enjoy the Cheap Eggs and Food! Increase of 1 Million Private Sector Jobs This Yea... var gaJsHost = (("https:" == document.location.protocol) ? "https://ssl." : "http://www."); document.write(unescape("%3Cscript src='" + gaJsHost + "google-analytics.com/ga.js' type='text/javascript'%3E%3C/script%3E")); try { var pageTracker = _gat._getTracker("UA-10045229-2"); pageTracker._trackPageview(); } catch(err) {}The output of $115,750 per industrial worker is remarkable, and a tribute to man's ingenuity.In general, worker output per hour in the USA has tripled since 1970. The minimum wage is lower today than in 1960s, adjusted for inflation.
"there has been a decline of more than six million manufacturing jobs from the peak of 20 million in 1979 to fewer than 14 million jobs in 2007"...Hmmm, how much of the loss can be laid at the feet of the federal government and its excessive interference in the jobs market place?For instance its well past time to get rid of the minimum wage...What Causes Unemployment?by Thomas Sowell (November 14, 2005)
Robotics, process improvements, just in-time inputs, faster working and more skilled humans etc. conbine to increase in productivity.Assembling foreign inputs with robotics, process improvements and just in-time inventory etc. is also better producitivty.Value-added manufacturing is subject to debate. The high value jobs to make inputs for the final product is where the high paying jobs are. That is why foreign countries work so hard to gather and keep value-added manufacturing jobs. The final product can be sinmply the assembly of the expensive parts at key distribution points.The assembly of ever more foreign inputs is resulting in higher productivity numbers and less income for the workers and the country.
If you look at it one way the plot proved Ned Ludd right. Machines are the enemy of people. This is also true in Ag where machines are being developed to do more and more harvesting all the time. For a long term example cotton is not picked by hand any more. Should we create jobs by banning the cotton picking machines? Combines? Tractors?...Note that the minimum wage is really an issue in fast food and service businesses and the like, not in an environment where value added is $115k per worker.
MP:". . .our productivity improvements due to technology advances . . ."you are asserting that most of the productivity increase comes from technology advances.i don't know myself, but isn't it possible that the most of the productivity increase comes from using parts obtained cheaply offshore? in that case your analogy is irrelevant.can you substantiate your assertion?
About Me Name: Mark J. Perry Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. Perry is currently on sabbatical from the University of Michigan and is a visitor at The American Enterprise Institute in Washington, D.C.
View my complete profile
Previous Posts 756 Bad Things Attributed To Global Warming Computers Then and Now Work-Sharing Works for Germany, Netherlands March ISM Business Activity Reaches 4-Year High Markets in Everything: Outsourced Grading Tax Deadline Approaches: Bring Us Back to 1913 Economic Lessons on Free Trade from the Auto Indus... The Biggest Fiscal Issue in America Today: More P... Happy Easter: Enjoy the Cheap Eggs and Food! Increase of 1 Million Private Sector Jobs This Yea... var gaJsHost = (("https:" == document.location.protocol) ? "https://ssl." : "http://www."); document.write(unescape("%3Cscript src='" + gaJsHost + "google-analytics.com/ga.js' type='text/javascript'%3E%3C/script%3E")); try { var pageTracker = _gat._getTracker("UA-10045229-2"); pageTracker._trackPageview(); } catch(err) {}