Bruce Bartlett

In short, manufacturing output is very healthy. There is absolutely no evidence whatsoever that we are becoming a nation of "hamburger-flippers." We are producing more "things" than we have in almost every year of our history for which we have data. The decline in employment is, in effect, a good thing, because it means that manufacturing productivity is very high. That is also a good thing, because it means that employers can afford to pay high wages to manufacturing workers while still competing with low-wage workers in places like Mexico and China.

Remember, what really matters for employers is not absolute wages, but unit labor costs -- how much the labor costs to manufacture a given product. If a U.S. worker is five times as productive as a Mexican worker making one-fifth as much, they are exactly equal from the point of view of a producer.

The best measure of comparative productivity levels is real GDP per employed person. According to the Bureau of Labor Statistics, in 2002 the United States continued to lead the world in this category. All U.S. workers produced $71,600 in output each (in 1999 dollars). The next highest country was Belgium, where each worker produced $64,100. Japanese workers -- renowned for their productivity -- produced just $51,600. Korean workers produced even less: $34,600 each. (There's no data for China or Mexico, but both are probably far below Korea in terms of productivity.)

It is also important to note that virtually every other major country has seen declines in manufacturing employment. Between 1992 and 2002, U.S. manufacturing employment fell by 3.7 percentage points. In Britain, it fell 4.7 percent, in Japan it fell 5.2 percent, and in Germany it fell 6.1 percent. Only Canada and Italy showed any increase over this period.

Finally, it is important to note that much of what is going on here is not "real" in some sense, but definitional changes in job classifications. It used to be that big companies tended to do everything in-house, so people like janitors and accounts were classified as "manufacturing" workers simply because they worked for manufacturing companies. Over the years, such companies discovered that it was more economical to contract out such work. That is why "business services" is one of the fastest rising categories of employment in the United States.

Stanford economist Robert Hall recently told the Senate Finance Committee, "There is no sign in the data on output of the onset of chronic ill health in manufacturing." All the hand wringing is simply unjustified by careful analysis.

Bruce Bartlett

Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.

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