Posted on 09/30/2005 11:54:00 AM PDT by SirLinksalot
The Great jobs switch
Sep 29th 2005
The fall in manufacturing employment in developed economies is a sign of economic progress, not decline
THAT employment in manufacturing, once the engine of growth, is in a long, slow decline in the rich world is a familiar notion. That it is on its way to being virtually wiped out is not. Yet calculations by The Economist suggest that manufacturing now accounts for less than 10% of total jobs in America. Other rich countries are moving in that direction, too, with Britain close behind America, followed by France and Japan, with Germany and Italy lagging behind (see article).
Shrinking employment in any sector sounds like bad news. It isn't. Manufacturing jobs disappear because economies are healthy, not sick.
The decline of manufacturing in rich countries is a more complex story than the piles of Chinese-made goods in shops suggest. Manufacturing output continues to expand in most developed countries—in America, by almost 4% a year on average since 1991. Despite the rise in Chinese exports, America is still the world's biggest manufacturer, producing about twice as much, measured by value, as China.
The continued growth in manufacturing output shows that the fall in jobs has not been caused by mass substitution of Chinese goods for locally made ones. It has happened because rich-world companies have replaced workers with new technology to boost productivity and shifted production from labour-intensive products such as textiles to higher-tech, higher value-added, sectors such as pharmaceuticals. Within firms, low-skilled jobs have moved offshore. Higher-value R&D, design and marketing have stayed at home.
All that is good. Faster productivity growth means higher average incomes. Low rates of unemployment in the countries which have shifted furthest away from manufacturing suggest that most laid-off workers have found new jobs. And consumers have benefited from cheap Chinese imports.
Yet there is a residual belief that making things you can drop on your toe is superior to working in accounting or hairdressing. Manufacturing jobs, it is often said, are better than the Mcjobs typical in the service sector. Yet working conditions in services are often pleasanter and safer than on an assembly line, and average wages in the fastest-growing sectors, such as finance, professional and business services, education and health, are higher than in manufacturing.
A second worry is that services are harder to export, so if developed economies make fewer goods, how will they pay for imports? But rich countries already increasingly pay their way in the world by exporting services. America has a huge trade deficit not because it is not exporting enough, but because American consumers are spending too much.
A new concern is that it is no longer just dirty blue-collar jobs that are being sucked offshore. Poor countries now have easier access to first-world technology. Combined with low wages, it is argued, they can make everything—including high-tech goods—more cheaply. But that's only partly true. China's comparative advantage is in labour-intensive industries; and a basic principle of economics, proven time and again, is that even if a country can make everything more cheaply, it will still gain from specialising in goods in which it has a comparative advantage. Developed economies' comparative advantage is in knowledge-intensive activities, because they have so much skilled labour. For years to come, China will be more likely to assemble the best computers than to design them.
Employment in rich countries will have to shift towards higher skilled jobs to maintain economic growth. Countries that prevent this shift taking place risk being left behind. Rather than block it, governments need to try to ameliorate the pains which change inflicts by, for example, retraining or temporarily helping those workers who lose their jobs.
People always resist change, yet sustained growth relies on a continuous shift in resources to more efficient use. In 1820, for example, 70% of American workers were in agriculture; today 2% are. If all those workers had remained tilling the land, America would now be a lot poorer
Good observation. If a business is to remain in business, someone has to keep the books. If it were not for the accountants, the factory workers or the engineers would have to take time from what they do best (making or designing things) to keep the books. So the accountants do participate in the creation of wealth.
Likewise, the janitors, the receptionists, the secretaries, and the sales people all participate in the creation of wealth by freeing up the factory workers and the engineers to do the work of production.
Can't see the sense in this, but I'm sure some "Uber elite" will be along to tell me the error of my ways.
Manufacturing going to other countries is good?
Not bay a LONG shot.
What if we are at WAR with the country that supplies us our Military Armaments.
Someone needs to get a serious reality check before we are permanently, militarily and economically destroyed without firing a shot.
Oh my word! Ross Perot words that actually make sense. 'scuse me while I check the trees for pigs. ; )
Yea - but keep in mind the fact that things are bad in terms of outsourcing is not only that the quality overseas is bad. That may very well improve but I have doubts of the rate at which it will. The problem is you may have the best offshore team on the planet and if you don't send them a good design of what you want, you'll still get a tire hung on a branch instead of a lacquered swing. And that issue is with the companies using outsourcers, only compounding the effects.
No kidding. That'd probably be as close as one could come to receiving a blank check.
Know of any good "chinese on tape" programs ? :)
"No kidding. That'd probably be as close as one could come to receiving a blank check.
Know of any good "chinese on tape" programs ? :)"
Judging by how well some of them speak english, I suppose we could just go over there and mumble and maybe get by!
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