I’ve been doing some additional research on the theme I started on Myths of Manufacturing that drew several comments.
The next blog on bringing the middle class back was meant to be a companion piece.
Harry Moser from Reshoring argued that the real culprit of lost manufacturing jobs was the offshoring craze. He referenced ITIF as a source without providing a link. I had forgotten about that organization. It is the The Information Technology & Innovation Foundation. I had found it while researching a similar topic 10 or 11 years ago. It bills itself as a think tank. As you know, most think tanks, much like some organizations in our space, publish research that just happens to support its point of view. The hot button I was researching back then was whether we needed more green cards issued to programmers as business leaders wanted, or whether we had plenty of programmers but we just didn’t call them that.
Federal Reserve Economist
Some ideas I had developed over years. But others were highlighted by a talk I attended by William Strauss, Senior Economist and Economic Advisor, Federal Reserve Bank of Chicago.
Take a look at these slides.
Manufacturing employment as a share of national employment has been declining for over 60 years
The number of jobs in manufacturing has been relatively stable over this period, edging lower on average by -0.3% per year since 1947.
While manufacturing employment growth has been edging lower over the past 63 years, manufacturing output increased by 3.1% per year.
The increase in output can be attributed to strong productivity growth experienced by the manufacturing sector.
The divergence in productivity appears to have occurred around the mid-1970s. By the way, do you know what happened in the mid-1970s? That’s when we first started automating manufacturing!
This takes me back to last year's Automation Fair (Manufacturing Perspectives) in Chicago where we had the two speakers talking about US manufacturing. One of them, ITIF’s Robert Atkinson, was arguing that increasing productivity was not the primary cause of manufacturing employment decline but rather more to do with things like taxes and training and trade policy, while the other one (economist William Strauss) was arguing that productivity was the major cause.
At the time, I was quite intrigued to see the economist's own chart indicating declining manufacturing productivity growth (for the first time ever) from 2000 onwards. I checked out the figures again recently and indeed, annualised manufacturing productivity growth in 1990s was 4.1 percent (an all-time high), but in the 2000s it fell to 3.7 percent. (I asked Strauss at the time why productivity growth was falling in the face of more and more technology, but he seemed to struggle somewhat wiith his answer.)
The US lost mfg jobs at the rate of only 0.2 pecent a year during the 1990s productivity boom. But this figure actually increased to a whopping 3 percent a year in the 2000s, even though productivity growth was falling.
So there must be other factors aside from productivity behind the significant declines in US manufacturing jobs..?
I remember you and I discussing that at the time. There was a bit of a stagnation of productivity, but I'm not surprised given the depth of the downturn. It's hard to be productive when you're not producing as much.
ITIF has a point of view. It is one of those organizations that needs to support a membership and therefore looks for statistics to support its members' objectives. There is no doubt that some jobs were sent overseas.
Given the management of the time, the jobs would have probably been lost anyway. We have gone through 10 years or so of financial manipulation rather than manufacturing as a corporate orientation. You see Jeffrey Immelt replacing Jack Welch's financial machinations with a focus on core strength and manufacturing.