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Is the US manufacturing sector really in serious decline?

Aug 03, 2017 | 08:00 PM | Thomas C. Graham

Out with the old . . . It’s time to rethink, invent and adopt a new approach to measuring the health of the American manufacturing sector

The question is a popular one these days among government economists, think tanks, academics, and business men, all of whom declaim on the subject; some with high minded motives, others for narrow, selfish reasons.

Conventional approaches to measuring the health of U.S. manufacturing fall short of adequately capturing the full dimension and complexity of the sector. The percent of GDP created by the manufacturing sector has remained relatively stable over time, for instance, while the number of individuals employed in manufacturing activity has declined significantly. 

Trade agreements resulting in international manufacturing regimes—such as those represented by the transplant automotive industry—have proven beneficial while other trade practices have backfired and inflicted damage. It is apparent that the computer industry has enjoyed major growth in productivity while the rest of American manufacturing has experienced only sluggish growth at best.

Given the wide variation in the forces at work in Silicon Valley and the computer manufacturing industry versus, say, the production and distribution of natural gas, any discussion and analysis of the umbrella concept of “manufacturing” must be broken down into the component parts of the catch-all term.

One measure common to all of the subsectors that comprise manufacturing is productivity. And there is, of course, a long-established relationship between improving productivity and a rising standard of living.

Perversely, this improvement, which is measured in man-hours-per-dollar of GDP, leads to and results in diminished employment. It is this inverse relationship between rising productivity and job elimination that is creating concern over mounting unemployment. And it is doing so at a time when businessmen are actually projecting a shortage of trained employees against a background of rising unemployment.

Politicians who campaign on the notion that “everyone” should be entitled to a college education are not addressing or helping to solve the underlying problem.

You need look no further than the local college campus. Students graduating with degrees in anthropology—and $50,000 in student loan debt—are finding employment as a barista at Starbucks, while employers are searching for welders and electricians.

It will be difficult for the federal government to avoid prescribing an antidote for this ailment; some bureaucrat will undoubtedly suggest the creation of a vocational school under federal auspices.

History has taught us, however, that the best training for prospective employees occurs under employer directive and at employer cost. As important and desirable as expanding the pool of trained candidates for future employment is, we should resist the temptation to accept government “help.”

The federal bias against for-profit universities interferes with the development of technical skills needed in today’s modern production facilities, which rely increasingly on automation.

More to the point, we should encourage and seek understanding of the forces at work that are causing wide variation in the rate of productivity improvement being achieved and delivered in the various and different subsectors of manufacturing.

If we could identify and calibrate the cause and effect by industry, we would be in a position to prescribe the proper treatment, if and when appropriate. That is important priority work and it is being pursued today by a group based at Indiana University at Bloomington, Ind.
Such an effort surely warrants the support of the American steel industry.


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