NCPA - National Center for Policy Analysis

The State of U.S. Manufacturing

September 17, 2003

Falling manufacturing employment in the United States has led to a widespread impression that the industrial sector of our economy is declining, says Bruce Bartlett. But few economists would judge the health or sickness of any industry based solely on employment.

Industrial health is better measured by output, productivity, profitability and wages. Considering total goods production (including things like mining and agriculture in addition to manufacturing), real goods production as a share of real (inflation-adjusted) Gross Domestic Product (GDP) is close to its all-time high.

Furthermore, according to the Bureau of Labor Statistics, in 2002 the United States continued to lead the world in productivity:

  • U.S. workers produced an average of $71,600 in output (in 1999 dollars), followed in a not-so-close second by Belgium, where each worker produced $64,100.
  • Japanese workers -- renowned for their productivity -- each produced just $51,600 and Korean workers produced even less: $34,600.

The decline in manufacturing employment signals that manufacturing productivity is very high and that manufacturers can afford high-wage U.S. workers while still competing with low-wage workers in the developing world, says Bartlett.

Source: Bruce Bartlett, "The State of U.S. Manufacturing," Brief Analysis No. 456, September 17, 2003, National Center for Policy Analysis.

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