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Productivity

More Productive Manufacturing Led To Job Decline

In the 1980s, some commentators alleged the manufacturing base of the economy was eroding, and this would lead to declining living standards. While manufacturing employment fell from more than 20 million workers in 1980, this figure fell to just over 18 million after the 1981-82 recession. In 1997, about 18.5 million people have been employed in manufacturing. Manufacturing employees as a share of all workers has fallen significantly, from more than 22 percent of all nonagricultural employees in 1980 to just over 15 percent currently. The cause of declining manufacturing employment has not been the decline of manufacturing generally: In fact, according to the latest data manufacturing is at its strongest position in the last 20 years. Manufacturing now accounts for 19.1 percent of real gross domestic product, a sharp increase from its low point of 17 percent in 1992 (see figure http://www.ncpa.org/pd/gif/realgdp.gif). Also, there was no trend toward declining output in the manufacturing sector in the 1980s. When output remains steady or rises while employment falls, this means that productivity is rising. Higher productivity, in turn, is what leads to higher wages and allows highly-paid American workers to compete successfully with low-paid Third Worlders. In short, the decline of manufacturing employment is actually a sign of the strength of U.S. manufacturing, not its weakness. Source: Bruce Bartlett (senior fellow, National Center for Policy Analysis), December 29, 1997.

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