Carpe Diem

Technology and Manufacturing Productivity Improvements Have Destroyed 6 Million Jobs

Update: This BEA link shows that real manufacturing output (in billions of chained 2000 dollars) almost doubled in the 20 years between 1987 and 2007, from $866 billion in 1987 to $1,618 billion in 2007.

Update: Real output per worker (2007 dollars).

According to BEA data on manufacturing output (value added) and manufacturing employment, there has been a decline of more than six million manufacturing jobs from the peak of 20 million in 1979 to fewer than 14 million jobs in 2007 (see blue line in top chart above). During that same period, manufacturing output (value added) has increased by more than three times, from $544 billion in 1979 to $1.63 trillion in 2007 (see red line in top chart), not adjusted for inflation.

Because of the significant increase in manufacturing output accompanied by the huge decline in employment, the manufacturing output per worker increased more than four times, from $27,175 in 1979 to $115,750. The increase in worker productivity is one of the main contributing factors to the elimination of six million manufacturing jobs in the U.S. Simply put, we’re producing more and more manufacturing output with fewer and fewer workers.

With that in mind, consider this re-write of a recent news story about China:

“The continuing trade imbalance with China increases in worker productivity has have contributed to the loss of over 5.3 million U.S. manufacturing jobs in the last decade, 300,000 of those in New York State. The Capital District manufacturing sector has declined by 28 percent during that same period, losing approximately 10,000 jobs, and 2,000 last year,” said Sen. Charles Schumer, D-N.Y.

“There is no bigger step we can take to promote U.S. job creation, particularly in the manufacturing sector, than to confront China’s currency manipulation, our productivity improvements due to advances in technology like roboticsSchumer said. “This is not about China technology or productivity bashing. It’s about defending the people of New York and the United States from the ongoing increases in worker productivity taking place in America’s factories that have contributed to the loss of millions of manufacturing jobs.”

“We have a job crisis in upstate New York and in America,” Schumer said. “China Technology and increased worker productivity is are fanning the flames.” The legislation Schumer proposes would impose new penalties on countries who manipulate their currency, manufacturers who introduce productivity-enhancing technologies as a way to increase output with fewer workers.

Bottom Line: There’s really no difference between: a) being able to produce more manufacturing output in the U.S. due to productivity increases that allow us to take advantage of technology advances and employ fewer workers, and b) being able to increase our manufacturing output in the U.S. by taking advantage of low-cost labor in China and employing fewer American workers.

The first example substitutes more efficient capital for labor, and the second substitutes low-cost labor for high-cost labor, but the net result is the same: more output with fewer workers. Imposing penalties on low-cost Chinese manufacturers because some U.S. jobs are eliminated makes as much sense as imposing penalties on American companies that introduce technology (e.g. robotics) and in the process eliminate some U.S. jobs.

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