TCS Daily

Manufacturing a Crisis

By Arnold Kling - September 3, 2003 12:00 AM

"30 years from now, instead of growing a tree, cutting down the tree and building this wooden table, we would be able to just place some DNA in some living cells, and grow the table."
--Rodney Brooks



"I want you to understand that I understand that Ohio manufacturers are hurting, that there's a problem with the manufacturing sector. And I understand for a full recovery, to make sure people can find work, that manufacturing must do better. And we've lost thousands of jobs in manufacturing... So I told Secretary Don Evans of the Commerce Department, I want him to appoint an assistant secretary to focus on the needs of manufacturers, to make sure our manufacturing job base is strong and vibrant. In other words, any part of a good recovery for the state of Ohio and other manufacturing states has got to be for the manufacturing sector to come around."
President George Bush


The 2004 election season has started, and apparently the first order of business is to solve the manufacturing crisis. Or to manufacture a crisis for government to solve.


This week, President Bush appointed one bureaucrat to deal with the manufacturing crisis. Perhaps eventually we will have an entire department -- like the Department of Agriculture -- doling out subsidies to an ever-shrinking population that claims to be of the manufacturing sector.


The proportion of the work force employed in manufacturing has been declining for decades. Below is a table showing total employment and production workers in manufacturing. The source is the Bureau of Labor Statistics.



Total Nonfarm Employment

Manufacturing Production Workers



48.9 million

12.8 million

26 %


55.7 million

12.0 million

22 %


73.8 million

13.5 million

18 %


89.7 million

12.3 million

14 %


108.7 million

12.0 million

11 %

2002 130.4 million 10.8 million 8 %


What is happening to manufacturing is the same thing that happened to agriculture during the industrial revolution. From 1850 to 1950, resources were released from the agricultural sector to meet new consumer needs -- for transportation, appliances to increase the comfort and reduce the work of the household, and electronic entertainment.


In any given sector, when productivity increases faster than demand, employment declines and workers move into other fields. That is what has been happening in manufacturing. As Bruce Bartlett and others have pointed out, manufacturing output remains high. However, we can produce the same output with less input, and the workers not needed in manufacturing are going into other sectors, primarily services, where demand is increasing more rapidly than productivity.


What About China?


With the political season upon us, you will hear that we are losing manufacturing jobs to China. The new Commerce bureaucrat will be tasked with looking into this. I wonder how the assistant secretary will decide what is the "correct" number of manufacturing jobs that belongs in the United States. I wonder how he or she will decide which of those jobs China ought to give back. It used to be that China had central planners who would do that sort of analysis. But they did away with central planning in their manufacturing export sector, and that is what enabled them to begin to compete. I doubt that we have anything to gain by turning to central planning -- or to any form of government management of trade.


When other countries, including China, try to manipulate trade, they mostly hurt themselves. We should not follow suit.


In the long run, the right number of manufacturing production workers in the U.S. economy could approach zero. If in our lifetimes we witness the disappearance of Dickensian factory labor, would that be such a horrible thing? If my daughters never get to operate a rivet machine or stuff containers with fiberglass, as I did for two summers, will they grow up deprived?


David N. Thompson and Gregory K. Ottosen, of Crossroads Research, have written a book called The Real New Economy. They describe the world as consisting of developed countries, cheap-labor competitors (like China), and non-modernizers. They point out that countries like Japan and South Korea have made the transition from cheap-labor competitors to developed countries. They now have to compete, as we do, by coming up with innovative products. Eventually, the authors argue, China's income will rise until it, too, will have to compete on the basis of brainpower.


Thompson and Ottosen believe that as China passes through the cheap-labor competitor phase, the countries that today are non-modernizers will become cheap-labor competitors. When they in turn pass through that phase, some time before the end of this century, we may face a shortage of unskilled labor, so that wages of unskilled workers could rise.


Robotic Nation?


Or maybe unskilled labor will not be scarce later in this century. I doubt that unskilled labor would be scarce in the world envisioned by Rodney Brooks, in which we have the ability to manipulate DNA well enough to grow a table.


In an essay that is based on solid technological analysis but weak economics, Marshall Brain wrote,


"there will be huge job losses by 2040 or 2050 as robots move into the workplace. For example:


  • Nearly every construction job will go to a robot. That's about 6 million jobs lost.
  • Nearly every manufacturing job will go to a robot. That's 16 million jobs lost.
  • Nearly every transportation job will go to a robot. That's 3 million jobs lost.
  • Many wholesale and retail jobs will go to robots. That's at least 15 million lost jobs.
  • Nearly every hotel and restaurant job will go to a robot. That's 10 million jobs lost.


If you add that all up, it's over 50 million jobs lost to robots. That is a conservative estimate. By 2050 or so, it is very likely that over half the jobs in the United States will be held by robots. All the people who are holding jobs like those today will be unemployed."


The last sentence is what reveals Marshall Brain's economic ignorance. As economist James Miller pointed out, the existence of robots is not inconsistent with full employment of humans. On the contrary, it means that we will enjoy high levels of well-being while having jobs that are much less unpleasant to perform.


Bound to Fail


We are in an effervescent economy. The rate at which skills become obsolete is already mind-boggling. (Just think of how many computer operating systems you have learned to work with.) Going forward, however, the pace of change will accelerate further. The need for skill refreshment will affect a broader spectrum of the work force.


In this dynamic environment, the new Commerce Assistant Secretary in charge of trying to keep production workers on the assembly line is bound to fail. I just hope that he or she does not try too hard.


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