Big Cause Of Factory Job Losses? Efficiency

August 10, 2010

When discussing the health of the manufacturing sector, one major issue is whether we should be taking into account the number of people employed in the sector or looking at the amount of output created in manufacturing.  Interestingly, each leads to the opposite conclusion about the strength of manufacturing in the United States, says William A. Strauss, a senior economist for the Federal Reserve Bank of Chicago. 

According to Strauss, the United States still remains a manufacturing powerhouse.  The nation's factories, he says, are just more efficient: 

  • Between 1950 and 2007, manufacturing output in the United States increased by 600 percent.
  • Yet the nation today has only 14 million manufacturing jobs, roughly the same number as 1950. 

How can this be?  According to Strauss, automation and increased worker productivity are the keys: 

  • For instance, 184 workers in 2009 produced as much as 1,000 workers did in 1950.
  • Worker productivity is the main reason why manufacturing's share of gross domestic product (GDP) has declined; the greater efficiency of the manufacturing sector afforded either a slower increase or an outright decline in the prices of this sector's goods.
  • This allowed manufactured goods to be less costly to consumers and led to the manufacturing sector's declining share of GDP. 

Even as manufacturing jobs continue to decline in number, younger Americans will need a better education to compete for new high-tech jobs.  Education is the big key to continued advancement, says Strauss.  

Source: Jack Torry, "Big cause of factory job losses? Efficiency, says expert," Dayton Daily News, August 9, 2010. 

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