cawacko
Well-known member
Opinion piece in today's journal. Find it interesting because you would never know listening to Trump/Vance and Biden/Harris and many members of the public. I'm sure one might try to respond with 'supply chains' and 'national security'. But I like what this professor is saying.
Politicians of all stripes promise to restore manufacturing to its historic role as a source of good jobs for Americans. They blame trading partners like China, Germany and Mexico for unfairly stealing those jobs. They blame corporations for outsourcing those jobs. They blame unions for hampering manufacturing companies’ growth. Democrats blame Republicans. Republicans blame Democrats. Voters pine for a golden age in our immediate rearview mirror when most Americans had high-paying, stable manufacturing jobs.
The facts tell a different story. According to the Bureau of Labor Statistics, manufacturing’s share of nonfarm employment declined from roughly 32% in 1947 to approximately 8% at the end of 2023. Yes, there was a slight increase in the rate of decline around 2001, when China entered the World Trade Organization. But you have to stare pretty hard to see the effect. In any event, that effect is trivial compared to the long, slow, inexorable decline in the importance of manufacturing as a source of U.S. jobs.
Has the decline in manufacturing been the catastrophe portrayed by various politicians? Hardly. Inflation-adjusted gross domestic product per capita increased from around $15,000 in 1947 to about $66,000 in 2023. Real per capita disposable income rose by a similar rate. So it isn’t true that our prosperity depends on having most people work in the manufacturing sector—quite the opposite. Technology has dramatically raised labor productivity in manufacturing. Automakers here and abroad need far fewer employees now than they did in 2000 to make better cars than they used to. That’s a powerful force reducing employment in the auto sector—and the same is true in many other industries.
Per capita income couldn’t have risen so dramatically if most of the workers who left manufacturing landed up working in fast-food restaurants. Americans moved from manufacturing to other types of jobs in which their labor is needed and their level of productivity allows their employers to compete. Financial services, medicine, biotech and higher education are all examples of industries that have grown dramatically over time and powered our prosperity. The icing on the cake is that banking and software are huge U.S. exports.
Change does inflict cost on some people. I started my career teaching at Carnegie Mellon University in Pittsburgh. There was real suffering when manufacturing declined in that area. Retraining a 45-year-old steel worker to become a biotech engineer is hard. Proponents of free markets sometimes forget that there are real political consequences of ignoring the human cost of change.
The right answer to the challenge of change involves at least three initiatives. First, the government must materially help the people who are affected and help them find jobs in which they can take pride. Second, parents and educators must provide children with the skills they need to thrive in a constantly changing world. Third, politicians must remove unnecessary regulations and other barriers to growth in emerging sectors of the economy.
The wrong answer is to pine for a mythical golden age that never existed. Pittsburgh is now a thriving center of education, research and health services. It didn’t get there by trying to bring back the 1950s.
Mr. Eichenbaum is an economics professor at Northwestern University.
Factories Aren’t the Future
America has grown many times more prosperous as manufacturing has been declining for decades.
Politicians of all stripes promise to restore manufacturing to its historic role as a source of good jobs for Americans. They blame trading partners like China, Germany and Mexico for unfairly stealing those jobs. They blame corporations for outsourcing those jobs. They blame unions for hampering manufacturing companies’ growth. Democrats blame Republicans. Republicans blame Democrats. Voters pine for a golden age in our immediate rearview mirror when most Americans had high-paying, stable manufacturing jobs.
The facts tell a different story. According to the Bureau of Labor Statistics, manufacturing’s share of nonfarm employment declined from roughly 32% in 1947 to approximately 8% at the end of 2023. Yes, there was a slight increase in the rate of decline around 2001, when China entered the World Trade Organization. But you have to stare pretty hard to see the effect. In any event, that effect is trivial compared to the long, slow, inexorable decline in the importance of manufacturing as a source of U.S. jobs.
Has the decline in manufacturing been the catastrophe portrayed by various politicians? Hardly. Inflation-adjusted gross domestic product per capita increased from around $15,000 in 1947 to about $66,000 in 2023. Real per capita disposable income rose by a similar rate. So it isn’t true that our prosperity depends on having most people work in the manufacturing sector—quite the opposite. Technology has dramatically raised labor productivity in manufacturing. Automakers here and abroad need far fewer employees now than they did in 2000 to make better cars than they used to. That’s a powerful force reducing employment in the auto sector—and the same is true in many other industries.
Per capita income couldn’t have risen so dramatically if most of the workers who left manufacturing landed up working in fast-food restaurants. Americans moved from manufacturing to other types of jobs in which their labor is needed and their level of productivity allows their employers to compete. Financial services, medicine, biotech and higher education are all examples of industries that have grown dramatically over time and powered our prosperity. The icing on the cake is that banking and software are huge U.S. exports.
Change does inflict cost on some people. I started my career teaching at Carnegie Mellon University in Pittsburgh. There was real suffering when manufacturing declined in that area. Retraining a 45-year-old steel worker to become a biotech engineer is hard. Proponents of free markets sometimes forget that there are real political consequences of ignoring the human cost of change.
The right answer to the challenge of change involves at least three initiatives. First, the government must materially help the people who are affected and help them find jobs in which they can take pride. Second, parents and educators must provide children with the skills they need to thrive in a constantly changing world. Third, politicians must remove unnecessary regulations and other barriers to growth in emerging sectors of the economy.
The wrong answer is to pine for a mythical golden age that never existed. Pittsburgh is now a thriving center of education, research and health services. It didn’t get there by trying to bring back the 1950s.
Mr. Eichenbaum is an economics professor at Northwestern University.
