Shipping Jobs Overseas: The Export of American Manufacturing Jobs and Lousy Education

I had a troubling encounter in the past few days. It was on Facebook and it was with a stranger. Here is how it went: I patronize several organizations’ and people’s Facebook pages, to stay informed and also to learn from them. There is a man, X, who is my Facebook “friend” and whose page I like because he is a libertarian, or a libertarian conservative like me, who knows useful things I don’t know. X has a talent for firing up debates on Facebook. In one debate a propos of I don’t remember what, one person, followed by several others, kept referring to the de-industrialization of America, its putative loss of manufacturing industries specifically.

I intervened calmly and politely to point out that there was no such thing. I remarked that the height of American industrial production was either 2008 or 2007, or maybe even 2006, not 1950 as they seemed to believe. I directed the debate participants to a couple of government sources. One woman responded almost insultingly, alleging that I was trying to send her on a wild goose chase. She appeared to think that I was referring her to the whole Census with its thousands of pages of documents. I took the trouble – obligingly, if I say so myself – to direct her through Facebook to a source I though was easy to read, NationMaster. In addition I summarized what NationMaster had to say on the topic.

Here is the summary:

The total value of the production of American manufacturing keeps going up except for small annual variations.

The woman on Facebook answered with vulgar statements including: “… just poop off,” “I don’t do stupid.” The vulgarity is not what troubles me, obviously. (I am a married man, I have heard worse and much more personal, including regarding the sexual proclivities of my forebears.) What disturbs me is her demonstration of furious obduracy. The woman felt so much out of her depth that she could not even begin to consider the possibility that my statement was correct, or at least, arresting enough to be worth looking into.

These tiny events struck me as a dramatic demonstration of the failure of our educational system. First, let me grant that it’s possible that the woman is not a college graduate, not even perhaps a high-school graduate. I can’t tell because her Facebook profile is masked and because, well, in general, I can’t tell. Her faulty grammar leads me to suppose she is not well educated. Her active interest in politics, as evidenced by her participation in political debate on Facebook, argues against her being very young. I am sure she is not an immigrant. (Don’t ask; it takes one to tell one.) I think she is a normal person with above-average capacity for self-expression. As such, she must have had some schooling.

[…]

Let’s see what I think underlies her obduracy, her close-mindedness.

First, a confession: Finding and putting together figures on the simple topic of American industrial production over recent years is not easy. It may take an untrained person several hours. I blame the laziness of the specialized press for accrediting – passively – the false myth of American de-industrialization. I blame my Facebook correspondent for not paying attention when someone gives counterintuitive information that is both important if it’s correct, and verifiable. The fact that is is verifiable is an assurance of good faith. The fact that the announcer’s credentials are all over the Internet- as mine are – is another assurance of good faith and, possibly, of competence.

I blame the schools for three things:

  1. Not instilling in people the idea that beliefs not backed by facts are worthless or dangerous because they lead to bad policies;
  2. Not giving regular people the tools required to work through complex issues whose components are themselves simple. Craftsmen with a primary school education used to know how to do this not so long ago, as  with the problem of long-sawing an irregular tree trunk into well-shaped boards.
  3. Failing to give ordinary people an understanding of simple quantities used daily in ordinary life.

Here we go:

It’s true that many manufactured objects ordinary Americans purchase used to be made in this country and are now made somewhere else. That would be true for most tools, nearly all batteries, and almost all clothing, for example.

Nevertheless, the value of American manufacturing went up about 4.5 times (four and a half times) between 1963 and 2007. (Nothing magical about these two dates, they are just a convenience. Any other two dates more than five years apart would give you a similar picture.) Incredible as it sounds, the value of American manufacturing production even went up a tad between between 2007 and 2008. I would not be surprised if it went down between 2008 and today. (Those figures are not readily available yet.) This small, short-term event would not speak to the issue of a trend of massive de-industrialization I am addressing now anyway. (Ask for the technical appendix for sources and for my treatment of the information I found there.)

The two facts above are not incompatible. In reality, they are predictably linked. That’s the way it would be in a good, productive, capitalist world: Americans are doing more of what they do well. Others are doing more of what they do well. Everyone ends up richer. Others have more money to buy what we still make. We have more money to buy what others now make.

We are all richer for two simple and connected reasons:

If I stop doing what I am doing badly (not so well, or frankly horribly) and I focus on what I do well, I will be more productive. I will earn more, as a result. If others do the same, we will all be more productive that is, richer.

Note that this happens even if greater specialization does not result in improvement of the quality of one’s performance. That will probably take place too, providing additional benefits

By and large producers in other countries have also specialized in what they did well. They have more money than before to buy whatever we make. That would be true if we made only one item, as long as others made all the things we and others need (clothing, batteries, tools).

But, US employment in manufacturing has been declining for many years. That is true and in no way incompatible with bigger production. American manufacturing keeps improving its productivity. (Productivity is the average value of production per worker, in this essay. There are other kinds. They are all rising.) Manufacturing is doing exactly what American agriculture did before. (Overall, American manufacturing probably has the highest productivity in the world. If it does not, it’s very close to the top. Not that it’s either here or there. This interesting fact plays no part in my argument. I am only testing your attention span.)

As a result of their ever-rising productivity, American industries (manufactures, I am using the old fashioned concept of “industry”) make more with less. “Less” includes fewer workers.

Employment in manufacturing has been declining steadily as a result of this increase in productivity: If one worker can turn out $150 worth of widgets in one hour when two workers used to produce only $120 together, one of the workers is gone. He is not needed. Of course, he and his family may well be pissed off. That’s true although everything they can still afford to buy is cheaper than it used to be.

Note what I have not spoken about: the “export of jobs.”

Manufacturing employment would decline if no American factory ever moved any part of its production overseas.

In fact, as we all know, some do. When they do, specific workers lose their jobs; there is no denying it. This leaves open two questions: First, to what extent is this purported “export” of jobs responsible for the shrinkage of industrial jobs in America? Second, do the same factors that contribute to the shrinkage of certain jobs also contribute to the expansion of other jobs?

The answer to the first question is: Not much. The answer to the second question is: Yes. I am not going to explain why here. First, you would not have the patience and second, I am only trying to convince you to think things through. I just wish to undermine determined ignorance.

Let me just say that my understanding of this complex issue leads me to the following policy position: If we stopped American manufacturers from moving any of their operations overseas, American unemployment would grow and wages would decline.

The impression of a de-industrialization of this country is further aggravated by the fact that many people don’t seem to understand simple arithmetic. How percentages are made is one striking example of this deficiency.

Imagine a small country where many young people suddenly start making children, for whatever reason. It could be new government economic incentives, or a shortage of contraceptives, or something added to the water. In that situation the % of old people in the population will decline. That does not mean the old are dying faster than before. They might die less than they did before. Here is another example: I have two jobs. I get a raise of 2% in one job and a raise of 4% in the second job. When that happens, the second job will contribute more to my income than before both raises took place. The percentage share of the second job in my income will rise. This does not mean that my pay rate on the first job has been lowered. It has only been raised: plus 2% more is more, not less. Period!

People keep hearing from the mouths of lazy or ignorant media personalities that services now account for 70% of the total production of the country, of its Gross Domestic Product. (See the link “Dr J’s List of Words….” […] explaining simply GDP and other economic terms.) That percentage is more or less correct. It does not mean that the value of manufacturing is not also growing.

The value of America manufactured products keeps going up and the value of services delivered in American goes up even faster.

This is pretty much what you expect if the country is prosperous: I can only have so many cars in my garage (manufactured product). After the seventh car, it all gets old. But there is almost no limit to how much I can use of some services. Services include plumbing, surgery, and education, for example. I have a limited interest in plumbing and only so many organs that can be replaced. So, plumbing and surgery are somewhat like cars and other manufactured products. However, I can absorb almost infinite amounts of education, another “service.” By the way, that’s pretty much how Americans have been acting: Education forever, at any price!

We have become richer in all manufactured products, including those we make and the many more we don’t make. We have become richer, even faster, in services. This country is no becoming de-industrialized.

Incidentally, if you look at dramatic upsurges in unemployment such as took place between Fall 2008 and now (Fall 2010), you will find that they don’t seem to have anything to do with the “export of jobs” or with anything in or around our manufacturing sector. Pretty much everyone, Left and Right, agrees that they are mostly caused by crises of confidence located mostly in the financial sector, more or less helped by government action.

18 thoughts on “Shipping Jobs Overseas: The Export of American Manufacturing Jobs and Lousy Education

  1. True, US manufacturing has not declined, but it could be greater if not for punitive taxation and restrictions such as prohibiting exports to Cuba. Europeans deduct VAT from exports, but the US adds taxes to export costs.

  2. So,inflaton-adjusted manufacturing production has increased is what I think you are saying here, that manufacturing jobs are down, and overall manufacturing productivity has risen. That all fits logically. In the good old days when it was easy to get a manufacturing job at entry level for good pay, the skill level was basically a high-school education. Being economists, has the skill level risen dramatically for the new economy entry level jobs? If so is the reason for the angst in the land the fact that education is actually the culprit not keeping up to produce the workforce the American economy needs.

    • Randel,

      Thanks for the thoughtful questions. I am not sure how often Dr. Delacroix gets on here, but here is my two cents:

      Skill level is largely irrelevant. Most skills that are required for manufacturing jobs come from on-the-job training or apprenticeship programs, not the classroom. The decline of manufacturing jobs is due to the fact that manufacturing is getting more and more efficient. This is a good thing, as this efficiency gives us more (and better quality) products at a cheaper price, which in turn increases our purchasing power.

      The “angst in the land” comes from the fact that manufacturing jobs are not just dwindling, but they’re disappearing. One thing manufacturing jobs are not doing is going overseas. Manufacturing output is increasing everywhere, but manufacturing jobs are decreasing. This is true as true for the United States as it is for Germany, China, Mexico, etc.

      Again, this is because, as Dr. Delacroix stated:

      American manufacturing keeps improving its productivity. (Productivity is the average value of production per worker, in this essay. There are other kinds. They are all rising.) Manufacturing is doing exactly what American agriculture did before. (Overall, American manufacturing probably has the highest productivity in the world. If it does not, it’s very close to the top. Not that it’s either here or there. This interesting fact plays no part in my argument. I am only testing your attention span.)

      As a result of their ever-rising productivity, American industries (manufactures, I am using the old fashioned concept of “industry”) make more with less. “Less” includes fewer workers.

      Employment in manufacturing has been declining steadily as a result of this increase in productivity: If one worker can turn out $150 worth of widgets in one hour when two workers used to produce only $120 together, one of the workers is gone. He is not needed. Of course, he and his family may well be pissed off. That’s true although everything they can still afford to buy is cheaper than it used to be.

      The “angst” you speak of is very real, but like agriculture before it, the rise in productivity in manufacturing is going to be a very huge boon for the world. Everybody on the planet will be much better off than we were even forty years ago. Just think of all the things we can do with cell phones now. Just think of the relatively minor damage caused by massive earthquakes in industrially-developed societies. Just think of the rising life expectancy rates around the world.

      What people will do who were once employed in manufacturing is a great question, of course. I often answer it with another question (that I borrowed from Dr. Delacroix): what did all those people who were previously employed in agriculture do?

      Great question Randal!

    • Education could be a culprit.That’s if we need a culprit. Personally, I think nothing happened and the angst is another manifestation of silly longing for good old days that never were. Being say, a programmer, beats being a foundry worker any day, in my book.

      Fred Folvary is right, of course. If you want more manufacturing jobs, there are easy way to get them.

  3. My editor kept getting blocked from some WordPress garbage, so I was not able to proof my response. The last sentence is a question, and I was looking at whether the education system at all levels is not preparing young folks for entry level jobs that do have high wages. Is a technical education post high school, the new required minimum? Here in Wisconsin, manufacturing is looking for folks with advanced welding skills, supposedly thousands of job openings. But welding is not what is once was, and is frowned upon by folks, although a decent honest job.

    • Randal,

      When Dr. Delacroix spoke of education, I don’t think he had re-training programs in mind. I think he was speaking of the failure of the educational establishment to teach concepts well.

      Check it out. He said:

      I blame the schools for three things:

      1 Not instilling in people the idea that beliefs not backed by facts are worthless or dangerous because they lead to bad policies;

      2 Not giving regular people the tools required to work through complex issues whose components are themselves simple. Craftsmen with a primary school education used to know how to do this not so long ago, as with the problem of long-sawing an irregular tree trunk into well-shaped boards.

      3 Failing to give ordinary people an understanding of simple quantities used daily in ordinary life.

      You, of course, have grasped the components Dr. Delacroix was speaking about, but sometimes it is good to kick back and really let his words sink in.

  4. Great question. Covering it is long overdue. I am frustrated that I cannot do it right now. I will give you the short answer. I warn you that it’s not adequate. It’s like a snack before dinner. And, by the way, I was not trained as an economist. That’s why my essays sometimes make sense to normal human beings!

    Number One: People’s historical sense is mostly bad. They tend to confuse history with what they first became aware of in childhood. Sometimes, they think history begins in their parent’s lifetime. The good old days, when people with a high school diploma could earn $40 an hour of today without much effort were a historical anomaly. They corresponded to the post-war period where most developed economies had been undeveloped, reduced to rubble. In 1955, the US GDP accounted for half of the joint GDPs of the whole world. Then, Americans were working for nearly everyone and they could command high wages because they had little competition. The statement goes for firms and for individuals, both. If you want to understand how well ordinary workmen werereally paid in the olden days, you should travel back in time, jump over the Great Depression and the abnormality of WWI both and look at the 19th century. You will find no echo of 1955 general prosperity there.

    Second, I suspect, (I am not sure; I would easily make a u-turn on this) that most of our educational system has become antiquated. I am not quite sure it’s worse than it used to be, as many conservatives seem to think. I think both its contents and techniques are based on 19th century ideas. (I have a good story on this, another time.) So, it’s not that the educational systems of other countries are much better than US education. I am very skeptical of all the claims I see advanced on this topic, in part because I am very well informed about education in one another country. Rather, the products of other countries’ education, also based on 19th century ideas and technique, are just as useful employable as Americans.

    Number three: Until four years ago (I think) unemployment was under 5% nation-wide. At the time, those employed were earning significantly more real money, had a significantly higher standard of living than their parents and their grandparents ever did.

    We need more economic growth worldwide. The fact that many politicians including conservatives, and all labor unions, continue to see other parts of the world as competitors rather than as customers does not help.

    And, I still can’t afford a plumber unless it’ a real emergency. And no one has offered in years to clean my upstairs windows.

  5. From a historical perspective you raise an interesting perspective. I grew up in a blue chip blue collar family in the 60’s 70’s where all the high school graduates had a great living right away after school as I slogged through college and was laughed at for driving an old car. It is hard, but I guess I have to accept that I just grew up as a teen in a blue collar family at just the right time in American history. Thank you for taking the time to address my questions. And, I look forward to your views on the direction American education should take because I believe the combo of student loans and universities without competitive cost constraints are bankrupting the kids’ futures.

    • I am often in alligators up to my ass so it takes me time to answer interesting questions like yours. He is a simple answer to a big problem that is probably correct: In third-payer systems, prices always spiral up. Between different kinds of subsidies and huge student loans, American tertiary education has become a third payer system, You should know that there is no, zero justification for tuition inflation, not even vegan options in the cafeteria. universities raise tuition because they can.

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