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Home Publications Blogs Beat the Press If Manufacturing Jobs Aren't Coming Back, Will We Be Able To Produce Manufactured Goods Without Workers?

If Manufacturing Jobs Aren't Coming Back, Will We Be Able To Produce Manufactured Goods Without Workers?

Wednesday, 17 October 2012 13:48

That what people who saw this NPR Planet Money piece must be wondering. The problem is that the United States, as a result of its loss of manufacturing production, now has a large annual trade deficit of $600 billion or 4 percent of GDP. If were closer to full employment it would likely be around 5 percent of GDP, or $750 billion.

At the moment we are able to run these deficits because countries like China are willing to subsidize their exports to the U.S. by spending hundreds of billions of dollars every year to buy U.S. bonds and other assets. This keeps up the price of the dollar relative to their currencies, which makes their goods cheap for people in the United States.

While it is very generous of these countries to subsidize our consumption, it is unlikely they will do so forever. These subsidies keep up demand for their products in the United States, but they could also use the same money to subsidize the purchase of goods and services by their own people. This could lead to substantial improvements in the living standards of the people in the countries who are sustaining the over-valued dollar.

If these countries stopped propping up the dollar then the dollar would presumably fall to a level that it is roughly consistent with balanced trade. This would almost certainly mean a large increase in manufactured exports as well as increased domestic production to replace imports of manufactured goods. Roughly 70 percent of U.S. trade is in goods, and most of these goods involve some degree of manufacturing (as opposed to raw agricultural products or mining output).

It is difficult to imagine an adjustment to more balanced trade that doesn't involve a large increase in production of U.S. manufactured goods. While our trade surplus on services can increase, it seems unlikely that it could go too far towards filling this gap. Also, it is not clear how many more people in the United States will want to work as housekeepers and table servers, since tourism is by far the largest category of service exports, accounting for more than a quarter of the total (travel plus passenger fares).

If we moved to balanced trade and manufacturing adjusted in accordance to its share of total trade, it would imply an increase in manufacturing output of close to 30 percent. Unless we have extraordinary gains in productivity, this would mean considerably more employment in the sector.

Comments (7)Add Comment
When smart people miss the boat
written by skyman123, October 17, 2012 3:30
This conversation always amazes me when seemingly intelligent people say really dumb things. Let's start here: given the improvements in technology and the ubiquitous nature of the internet, please describe the effects on traditional manufacturing. In your discussion please theorize about the ascendance of using machines to do most of the work of humans in the past (parts deliveries, ordering, stocking, robotic and the like). Given that it is possible with current communications technologies now to locate people anywhere in the world, how does this affect downstream job formation? What is the size of the average factory workforce in 2012? In 1980? In 1952? What percentage of these jobs, can you demonstrate, are loss do to increased technological advancement? Extra Credit: name 3 auto factories opened from scratch in the last 10 years. How many people do they employ? In 1955, how many people would a similar plant employ and why the difference?
written by Floccina, October 17, 2012 4:14
If we moved to balanced trade and manufacturing adjusted in accordance to its share of total trade, it would imply an increase in manufacturing output of close to 30 percent. Unless we have extraordinary gains in productivity, this would mean considerably more employment in the sector.

Depends on how fast we move to balanced trade if it is slow it can be covered by growth in productivity.
written by Jack, October 17, 2012 6:30
Two points. First, when Asian countries decide to start basing their economies on domestic demand instead of subsidizing exports to the US, our exports to them won't necessarily increase. It would be rational for them to construct high protectionist barriers.

Second, if the US does indeed have increased manufacturing in the future, why wouldn't we see the same thing thing that happened to the construction and service industries: labor demand stimulating an illegal migration. For the purposes of improving the lives of American workers it's completely meaningless to discuss getting the dollar down without discussing how to seal the border.
written by mel in oregon, October 17, 2012 7:19
interesting that the us bureau of economic analysis shows a loss of 4 million manufacturing jobs since 2002. we now have about 11 million manufacturing jobs. china has well over 10 times that, with a population only 4 times as large as ours. why is this? well trade agreements allow manufacturers to offshore their labor. so what the democrats fail to tell you is new employment is deadend jobs, caregivers, janitors, motel maids, convenience store clerks which all pay minimum wage with no benefits. so the american worker is in a pickle, underemployed if employed at all. probably owes more on his home than it's worth, if he isn't in foreclosure. what people did when wages stopped growing with inflation was the wife would go to work too. when this wasn't sufficient, people took out a second mortgage. then they put everything on credit. but today 150 million americans are tapped out. our economy is based on consumption. but if you have 150 million americans behind the 8-ball, they can't consume. no matter which dummy is elected 11-6, the economy won't improve, it's mathematically impossible given today's circumstances.
Re 1952 v. 2012 : how many iphones, cell phones and treadmills were made in 1952?
written by Alex Hamilton, October 18, 2012 12:02
A better set of questions than how many workers were in a 1952 auto plant compared to today is:

1. How many home treadmills were made in 1952?
2. How many automatic supermarket teller systems were produced?
3. How many iphones? LED big screen televisions? How many self-cleaning ovens? What about plug-in air fresheners?

The point: the ever increasing diversity of manufactured goods will more than make up for the increases in efficiency from individual plants. To see America's future, check out South Korea..... a number of the streets of Seoul have been converted to marble.
written by skyman123, October 18, 2012 11:57
Actually my point was that, even if we manufactured treadmills, iphones, tvs, and anything else here the cost of labor would dictate a mostly automated assembly/construction process NOT manual. So even if we had Foxconn plants right here, they'd employ a fraction of the workforce they do in China because, with wages so cheap, there is no incentive to mechanize. Here there is. Car plants were an example, so you would have failed my exam by being too narrow-minded. The broader discussion is that we're fetishistizing manufacturing when, in reality, it will NEVER employ the people it used to even if everything we consume is made here. Furthermore, the downstream employment effects will not be as great either. Get into 2012.
written by urban legend, October 18, 2012 2:08
Nevertheless, skyman, while it is true that manufacturing productivity growth has been reducing employment in the sector across the globe, manufacturing employment declined much faster in the U.S. in the 2000-2011 period than in most other industrialized countries. Call it a fetish if you want, but it is still an unnecessary loss of 2-3 million good jobs.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.