{"id":303,"date":"2012-03-27T16:29:31","date_gmt":"2012-03-27T23:29:31","guid":{"rendered":"http:\/\/savingusmanufacturing.com\/blog\/?p=303"},"modified":"2012-03-27T16:29:31","modified_gmt":"2012-03-27T23:29:31","slug":"american-manufacturing-has-declined-more-than-most-experts-have-thought","status":"publish","type":"post","link":"https:\/\/savingusmanufacturing.com\/blog\/outsourcing\/american-manufacturing-has-declined-more-than-most-experts-have-thought\/","title":{"rendered":"American Manufacturing Has Declined More Than Most Experts Have Thought"},"content":{"rendered":"

A new report<\/a> released by the Information Technology & Innovation Foundation (ITIF) presents a strong case that manufacturing has declined more during the last decade than it did during the Great Depression of the 1930s.\u00a0 It\u2019s gratifying to finally see a well-respected non-partisan \u201cthink tank\u201d release a report based on empirical data that corroborates what those of working in the manufacturing industry have experienced, about which I have been speaking and writing since 2003.<\/p>\n

One of the main points of the report is that during the Great Depression, we lost 30.9% of manufacturing jobs, but in the decade of 2000-2010, we lost 33.1% of manufacturing jobs.\u00a0 It becomes more serious when you realize that in the Great Depression, manufacturing accounted for 43% of jobs lost and 34% of all jobs at the time, but now manufacturing only represents about 11% of all jobs, but nearly one-third of the job loss.\u00a0 This percentage loss represents 5.7 million manufacturing jobs.<\/strong> The report states, \u201cOn average, 1,276 manufacturing jobs were lost every day for the past 12 years.\u00a0 \u00a0A net of 66,486 manufacturing establishments closed, from 404,758 in 2000 down to 338,273 in 2011. In other words, on each day since the year 2000, America had, on average, 17 fewer manufacturing establishments than it had the previous day.\u201d<\/p>\n

When you understand the multiplier effect of manufacturing jobs, creating 2-3 supporting jobs, this loss of manufacturing jobs represents 11 to 17 million jobs.\u00a0 The report states, \u201cIn fact, in January 2012 there were more unemployed Americans (12.8 million) than there were Americans who worked in manufacturing (just under 12 million).\u201d\u00a0 No wonder we have the high local, state, and federal deficits that we are experiencing ? there are fewer taxpayers and more benefit collectors.<\/p>\n

The two million manufacturing jobs we lost during the Great Recession was added to the over 3.7 million we had already lost.\u00a0 After the recession ended, the report states \u201cjust 166,000, or 8.2 percent, returned. That leaves 91.8 percent of jobs to be recovered. \u00a0At the rate of growth in manufacturing jobs in 2011, it would take until at least 2020 for employment to return to where the economy was in terms of manufacturing jobs at the end of 2007.\u00a0 \u00a0In reality\u2026U.S. manufacturing has been in a state of structural decline due to loss of U.S. competitiveness, not temporary decline based on the business cycle.\u201d<\/p>\n

It\u2019s obvious that with unemployment at 8.3 percent, \u201call those jobs have not been recreated in other industries.\u201d\u00a0 If manufacturing declines further, there are no guarantees that other jobs will appear to replace those lost in manufacturing.\u00a0 The authors validate what I\u2019ve written in my book and previous articles:\u00a0 \u201cmanufacturing jobs pay more; manufacturing is a source of good jobs for non-college-educated workers; and manufacturing is the key driver of innovation\u2014without manufacturing, non-manufacturing innovation jobs (for example, research and design) will not thrive.\u201d<\/p>\n

For years, most economists, experts, and government officials have said that the decline in manufacturing is a natural outcome of our transformation from an industrial society to a post-industrial society. \u201cThis decline is often cited by defenders as \u201cnormal\u201d and in line with what is happening in other countries. In this \u201cpost-industrial\u201d view, advanced nations are transitioning from factories to services; the greater and faster the loss of manufacturing, the more successful nations are in mastering the transition.\u201d<\/p>\n

The authors concede that there is \u201csome truth to the post-industrialists\u2019 view.\u00a0 Advanced economies naturally see manufacturing jobs contribute to a smaller share of total employment, since manufacturing productivity is typically higher than non-manufacturing productivity.\u00a0 But normally the loss is modest and gradual, in contrast to the United States where in the last decade it was sudden and steep.\u201d\u00a0 In addition, \u201cadvanced nations do lose some lower-value-added, lower-skill, commodity-based manufacturing to lower-wage nations.\u00a0 \u00a0But \u2026they also increase their demand for the higher-value-added products that developed nations should naturally produce\u2026the process of global integration does not and should not naturally lead to the deindustrialization of developed economies, but rather to the transformation of their industrial bases toward more complex, higher-value-added production.\u201d<\/p>\n

These same experts have denied that manufacturing has been in decline, arguing that manufacturing became incredibly productive just like agriculture did a century earlier so that fewer workers are needed in the industry.\u00a0 The authors state that \u201cVirtually everyone makes the argument that massive manufacturing job decline is a sign of success: manufacturers are using technology to automate work and to become more efficient\u2026Manufacturing is like agriculture\u201d has been the dominant story.\u00a0 The United States produces more food than ever, but because farming has become so efficient, it requires a very small share of U.S. workers to grow and harvest the food. So while manufacturing productivity growth may be tough on workers, job loss is seen as a sign of strength, not weakness.\u201d<\/p>\n

It\u2019s true that job loss could be result of increased productivity, but what these experts have ignored is that manufacturing\u2019s share of the Gross Domestic Product (GD) declined from 15% in 2000 to 11.0% in 2009.\u00a0 \u00a0While manufacturing has declined as a share of GDP in the United States and some other nations, such as Canada, Italy, Spain, and the United Kingdom,\u201d it is stable or even growing in many others (including Austria, China, Finland, Germany, Japan, Korea, the Netherlands, and Switzerland.)\u201d<\/p>\n

The ITIF report dispels the myth that increased productivity is the reason for the job loss with a review of the productivity of various manufacturing industry sectors, showing that in 2010, \u201c13 of the 19 manufacturing sectors (employing 55 percent of manufacturing workers) were producing less than they there were in 2000 in terms of inflation-adjusted output.\u201d<\/p>\n

In addition, the authors assert that \u201cthe government\u2019s official calculation of manufacturing output growth, and by definition productivity, is significantly overstated.\u00a0 \u201d Correcting for biases in the official data, ITIF finds that from 2000 to 2010, U.S. manufacturing labor productivity growth was overstated by a remarkable 122 percent. Moreover, manufacturing output, instead of increasing at the reported 16 percent rate, in fact fell <\/em>by 11 percent over the period.\u201d\u00a0 This was during a period when the U. S. GDP increased by 17 percent.<\/p>\n

Besides, the report states that \u201cit is not clear how productivity could be the culprit behind the large share of job loss in the 2000s when manufacturing labor productivity (as measured by the official value added data) was not substantially different in the 1990s than it was in the 2000s. \u00a0During the 1990s, manufacturing jobs fell by one percent, while labor productivity increased by 53 percent. In the 2000s, manufacturing jobs fell by 33 percent while productivity increased by 66 percent\u2026the 2000s productivity number is actually significantly overstated, even more so than the 1990s figure. Adjusting for bias in the data, the actual productivity growth in the 2000s was just 32 percent.\u201d<\/p>\n

The authors provide evidence that \u201cthere are serious problems with how the U.S. government measures manufacturing output that cause it to significantly overstate output and, by extension, productivity.\u00a0\u00a0 In order to see how productivity and output are overstated, it is necessary to understand both concepts.\u201d<\/p>\n

Their explanation is too complicated to consider in this short article, but is well worth reading in the report.\u00a0 They conclude \u201cthat there are substantial upward biases in the U.S. government\u2019s official statistics and that real manufacturing output and productivity growth is significantly overstated. The most serious bias relates to the computers and electronics industry (NAICS 334)\u2014its output is vastly overstated. Correcting for these statistical biases, we see that the base of U.S. manufacturing has eroded faster over the past decade than at any time since WWII, when the United States began compiling the statistics.\u201d<\/p>\n

I can substantiate this conclusion from my experience as a manufacturers\u2019 representative for American companies who perform fabrication services, such as plastic and rubber molding, metal stamping and casting, machining, and sheet metal fabrication for other American manufacturers.\u00a0 While many of the manufacturers in my sales territory of southern California may still be assembling their products in the U. S., many of the components and subassemblies they are using have been produced offshore.\u00a0 Obviously, it takes fewer American workers to produce the end product because part of the work was actually done by foreign workers.<\/p>\n

The problem is that there is no way for the government to track the value of the components and subassemblies that have been produced elsewhere from the value of the product that is sold by the American company. Therefore, the value of the whole product is counted as American productivity without deducting the value of the parts produced outside of the U. S.\u00a0 You can see how American productivity becomes inflated.<\/p>\n

I hope this report will convince the majority of economists, experts, and government officials recognize that manufacturing is truly in serious decline so that they will look at what are the main reasons:\u00a0 outsourcing manufacturing offshore and the economic warfare being waged by China against the U. S.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

A new report released by the Information Technology & Innovation Foundation (ITIF) presents a strong case that manufacturing has declined more during the last decade than it did during the Great Depression of the 1930s.\u00a0 It\u2019s gratifying to finally see a well-respected non-partisan \u201cthink tank\u201d release a report based on empirical data that corroborates what […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17,51,3],"tags":[58,46,56,57],"class_list":["post-303","post","type-post","status-publish","format-standard","hentry","category-economy","category-manufacturing","category-outsourcing","tag-gdp","tag-job-loss","tag-manufacturing-decline","tag-productivity"],"_links":{"self":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts\/303","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/comments?post=303"}],"version-history":[{"count":2,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts\/303\/revisions"}],"predecessor-version":[{"id":305,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts\/303\/revisions\/305"}],"wp:attachment":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/media?parent=303"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/categories?post=303"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/tags?post=303"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}