Sunday, March 19, 2017

There is a huge hole in Trump's promise to bring back US manufacturing jobs

That's the title of an article from Business Insider.

There is much I like about these articles. This one is better than most, as it at least plots data. However, I don't quite understand why they focus on robots and productivity gains, rather than the slowdown in the growth of real manufacturing output. Real manufacturing output from 2007 to 2017 has barely increased at all. This is for sure a major factor in the decline of manufacturing employment. The article focuses on "manufacturing output hitting record highs in recent years, even as manufacturing employment continues its steady decline." Sorry, but a 1 or 2% increase in manufacturing output over a 10 year period is not a cause for celebration, even if we are now reaching "record highs". One could alternatively frame this performance as approaching "record lows" in terms of the 10 year growth rate of real output. 

The other problem with the argument that booming productivity and robots have caused the decline in US manufacturing output, aside from the fact that productivity growth hasn't increased, is that the period since 2000 has also seen the US share of manufacturing exports fall dramatically. Why would booming productivity lead to fewer exports and rising imports? Inquiring minds would like to know. 

Yet another problem is that the composition of productivity growth has changed. Productivity for the median sector declined from 2000 to 2010, while the computer sector saw very rapid productivity amidst declining sales. 

2 comments:

  1. Just found your blog via Tyler Cowen. I appreciate the work you're doing.

    I've been in manufacturing for the last 13 years - certainly noticed a drop in investment across the board - both human and physical capital - and the impact that has had (anecdotally) on improving productivity. My plants have had just enough people to do the work, and often not even hitting replacement level for capital stock. Certainly, from my perspective, a hit on productivity and especially productivity growth. This is in heavy manufacturing (castings, machining, plastics industries).

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    1. Fascinating. You think the lack of new investment has hurt productivity? I would love to hear more about your experience. Does your industry compete internationally? Have you been hurt by the decline in industries that you sell to? Do you work for a multinational?

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