Is burger-flipping a heavy industry?

Is cooking a hamburger patty and inserting the meat, lettuce and ketchup inside a bun a manufacturing job, like assembling automobiles?

That question is posed in the new Economic Report of the President, a thick annual compendium of observations and statistics on the health of the United States economy.

The latest edition, sent to Congress last week, questions whether fast-food restaurants should continue to be counted as part of the service sector or should be reclassified as manufacturers. No answers were offered.

In a speech to Washington economists Tuesday, N. Gregory Mankiw, chairman of the president's Council of Economic Advisers, said that properly classifying such workers was "an important consideration" in setting economic policy.

Counting jobs at McDonald's, Burger King and other fast-food enterprises alongside those at industrial companies like General Motors and Eastman Kodak might seem like a stretch, akin to classifying ketchup in school lunches as a vegetable, as was briefly the case in a 1981 federal regulatory proposal.

But the presidential report points out that the current system for classifying jobs "is not straightforward." The White House drew a box around the section so it would stand out among the 417 pages of statistics.

"When a fast-food restaurant sells a hamburger, for example, is it providing a 'service' or is it combining inputs to 'manufacture' a product?" the report asks.

"Sometimes, seemingly subtle differences can determine whether an industry is classified as manufacturing. For example, mixing water and concentrate to produce soft drinks is classified as manufacturing. However, if that activity is performed at a snack bar, it is considered a service."

The report notes that the Census Bureau's North American Industry Classification System defines manufacturing as covering enterprises "engaged in the mechanical, physical or chemical transformation of materials, substances or components into new products."

Classifications matter, the report says, because among other things, they can affect which businesses receive tax relief. "Suppose it was decided to offer tax relief to manufacturing firms," the report said. "Because the manufacturing category is not well defined, firms would have an incentive to characterize themselves as in manufacturing. Administering the tax relief could be difficult, and the tax relief may not extend to the firms for which it was enacted."

David Huether, chief economist for the National Association of Manufacturers, said he had heard that some economists wanted to count hamburger flipping as manufacturing, which he noted would produce statistics showing more jobs in what has been a declining sector of the economy.

"The question is: If you heat the hamburger up are you chemically transforming it?" Mr. Huether said.

You just have to love government BureaucRATS. One little change in the BMI (Body-Mass-Index) standards and instantly - the majority of Americans are sigificantly overweight or obese. One small change in a manufacturing category and PRESTO! - a miraculous recovery in manufacturing employment.

Bush would do well to fire this slimy sleight-of-hand clown - before Democrats have a field day with this.

Here is the whole relevant section:

Box 2-2: What Is Manufacturing?
The value of the output of the U.S. manufacturing sector as defined in official U.S. statistics is larger than the economies of all but a handful of other countries. The definition of a manufactured product, however, is not straightforward. When a fast-food restaurant sells a hamburger, for example, is it providing a “service” or is it combining inputs to “manufacture” a product?
The official definition of manufacturing comes from the Census Bureau’s North American Industry Classification System, or NAICS. NAICS classifies all business establishments in the United States into categories based on how their output is produced. One such category is “manufacturing.” NAICS classifies an establishment as in the manu-facturing sector if it is “engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products.”
This definition is somewhat unspecific, as the Census Bureau has recognized: “The boundaries of manufacturing and other sectors… can be somewhat blurry.” Some (perhaps surprising) examples of manufac-turers listed by the Bureau of Labor Statistics are: bakeries, candy stores, custom tailors, milk bottling and pasteurizing, fresh fish packaging (oyster shucking, fish filleting), and tire retreading. Sometimes, seem-ingly subtle differences can determine whether an industry is classified as manufacturing. For example, mixing water and concentrate to produce soft drinks is classified as manufacturing. However, if that activity is performed at a snack bar, it is considered a service.
The distinction between non-manufacturing and manufacturing industries may seem somewhat arbitrary but it can play an important role in developing policy and assessing its effects. Suppose it was decided to offer tax relief to manufacturing firms. Because the manu-facturing category is not well defined, firms would have an incentive to characterize themselves as in manufacturing. Administering the tax relief could be difficult, and the tax relief may not extend to the firms for which it was enacted.
For policy makers, the blurriness of the definition of manufacturing means that policy aimed at manufacturing may inadvertently distort production and have unintended and harmful results. Whenever possible, policy making should not be based upon this type of arbitrary statistical delineation.

The Economic Report of the President
(PDF opens in new window 4.9MB)

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