This is something I've held to a long time (I've posted on this in conversation with Rick Michael, I think, but can't remember where this was on DP). Looking at long run trends, I am concerned about the relative strength of manufacturing v. service sectors in the U.S. In my mind, it isn't enough to say the economy is doing well, or not doing well - it matters what is going on with the sectoral division. Here's one starting point, I hope, for some fruitful conversation: Manufacturing v. Service Thoughts?
It stands to reason that the manufacturing industry will tail off. I'm not 100% aware of the exact situation in the US, but the impression I get is that protectionist policies have kept foreign imports relatively expensive and preserved the domestic manufacturing industry. In the UK the consumer manufacturing industry is almost dead (with a few exeptions) there are still some specialist and high-tech industries that do well, but the majority of companies have either shut down completely or outsourced overseas. It's become a necessity to survive. At the same time the service industry has flourished, with London being almose exclusively based around finance services and retail. I'm not sure overall if it's a good or a bad thing, though from a purely economic perspecive it makes sense.
One reason the USA is in deep debt, government and consumer, is the fact that manufacturing has been largely shifted offshore. China is now our banker because of this trend and is financing not only our national debt (large purchasers of Treasury Bonds), but they also own a large majority of mortgage backed securities, if they were to pull out, the banking system would go into a major crisis. But it has been said they are like a drug dealer, having to keep their best customer strung out to stay in business, so they will keep the game going until we are on the brink of default and most of our largest corporations have major footholds and investments in the mainland, then they will lower the curtain on us.
It's actually the exact opposite. Our completely ignorant tax system makes importing goods much cheaper than manufacturing them and it makes exporting good almost impossible. We have very few policies which can be called protectionist. We really are a nation of importers. As for manufacturing vs. services, it doesn't matter one whit as long as you are adding value.
Interesting points. Good reference article. Also good comments from Britain, which probably has less manufacturing as a percentage of the economy than the US and has experienced this change in a more pronounced way than the US. I always thought that loss of manufacturing jobs was all about wages and benefits than about tax issues. Those same average wages in the high teens/hour for manufacturing jobs have often come with heavy corporate benefits ..... and I can't speak for all the industries...but the low paying retail and leisure industry jobs don't come with the same ammount of benefits. One other thing about manufacturing is that it comes with associated manufacturing jobs. When you lose one industry...you lose associated manufacturing jobs that support and/or complement the original jobs.
Interesting points, everyone. I have strong opinions on this, but (for once), wanted to reserve them in favor of listening, rather than posting. Earl, I can't resist one thing, however - and that is that the heart of my concern lies in your last paragraph: I was once heavily influenced by John Zysman, Co-Director of Berkeley Roundtable on the International Economy. Though I was really nothing more than a glorified fact checker, I provided early research assistantship on Manufacturing Matters: The Myth of the Post-Industrial Economy. Dr. Zysman and his work brought me to a new understanding of the role and importance of manufacturing in the economy. The main thrust of the book wholly concurs with your assessment, Earl. Keep them coming. I appreciate the contributions so far.
Good article...Things are changing obviously. If you can't adapt...you will be out in the cold. In my field, telecom, there are still some older people that are practically computer illiterate. While at certain tasks, there are expert...they are useless in almost all the newer technologies that would be close to intuitive to anyone posting on this site. I could only imagine that being true in almost every industry sans the "you want fries w. that?" Basic to advanced computer literacy and you should be ok.
Many economic development experts claim as many as 20-23 support jobs are added in a region for each manufacturing job created. These support jobs include employees of raw material suppliers, packaging, trucking, service sectors including construction and utility, IT and any other support to a manufacturing facility, this could include outside White collar jobs that professionals fill including medical, legal and accounting.
I know manufacturing adds associated jobs into the economy...I don't know about that stat that AC cited...but there may some of that with some of the other stuff. I'm sure medical jobs create more jobs. I doubt that retail and hospitality do much of that and to the extent that they do they aren't high paying. Some parts of finance probably add associated work.--don't know about the numbers. No doubt that factory growth adds a lot to an economy. One reason is because a big factory adds lots of salary money into a local region--like all those Japanese car manufacturers in the south. But some types of businesses/industries naturally create a multiple on associated jobs and that has a positive effect. On the other hand the MSNBC article points to retraining people and helping them find other work. That is an expensive/painful and difficult process. Dave
One reason economic developers that work for Governors in their respective states are so aggressive for plastics manufacturing companies is because of the great expenditures on capital equipment, molds, plastic resins, colorants, flame retardants, factory automation and so on. Alabama has won major Auto plant expansions in recent years for providing tax abatements on real estate and personal property taxes (inventory taxes), in the end it is a trade off, giving major tax breaks for the wage taxes and associated jobs that come along with major industrial development projects.
I'm a believer that automation will do away with more jobs than outsourcing will in the long-run. http://en.wikipedia.org/wiki/Automation I know retail will be highly effected by this in the near future. As for whether I think it's positive or not....well, I think all productivity is good as long as it's done over a long coarse of time....not dramatically.
You may be right, but it also takes humans to create closed loop automated manufacturing plants, some plastics molding plants are so automated they are called lights out facilities. Since there are no humans in the plant, there is no need for illumination.
Lights out manufacturing has been going on for over 20 years in highly automated operations, machines do not need lights on to operate!