Manufacturing and jobs

A reader responded to a post I wrote on manufacturing with the following:

The bottom line is JOBS. The U.S. lost 46,000 manufacturing jobs in August 2007. More significantly, the ongoing losses are taking a cumulative toll on communities throughout the country. We need to adequately enforce our trade laws, and hold countries like China accountable for illegal trading practices such as currency manipulation. Otherwise, we’ll continue to shed manufacturing jobs.

www.manufacturethis.org

In the manufacturing sector we see increased production combined with reduced employment. This reduction in employment is presented as evidence of the sector's decline, despite the fact that more stuff is being produced. Of course, prior to the rise of manufacturing most people worked in the agricultural sector. As technology improved fewer people were required to perform the same amount of work -- and I'm not sure anyone cried about being forced to leave the fields for the factory.

The same is occurring now, as manufacturers can do more with less. That's a good thing. The more that each person can produce the more than they can get paid. Now, just as a shift in employment occurred away from agriculture, now the same is occurring with manufacturing as people move towards jobs in the service sector (having worked in both sectors I can say the service sector is very much preferable). This is why we do not see a net increase in unemployment. Indeed, for all the hang-wringing about lost jobs it helps to remember that unemployment has been safely under 5% for most of the past decade.

Trade is part of this process of shifts in employment. But that doesn't impact the amount of employment, but rather its composition. This is perhaps best symbolized by the iPod, which says "Designed by Apple in California, Made in China." Americans get the high-paying service jobs designing the iPods while the Chinese have the lower-paying jobs actually producing them.

That's not to say that the anger and despondency over the loss of manufacturing jobs isn't understandable. These are jobs that paid a solid, if not spectacular amount, and required only a high school education in many instances. Taking a job with Apple designing iPods requires a higher level of knowledge that many American workers lack. For that we should blame our education system, rather than the Chinese. As Alan Greenspan argues:

A dysfunctional U.S. elementary and secondary education system has failed to prepare our students sufficiently rapidly to prevent a shortage of skilled workers and a surfeit of lesser-skilled ones, expanding the pay gap between the two groups. Unless America's education system can raise skill levels as quickly as technology requires, skilled workers will continue to earn greater wage increases, leading to ever more disturbing extremes of income concentration.