NCPA - National Center for Policy Analysis

Manufacturing is not Endangered

August 29, 2003

Efforts to stir up "public agitation" about loss of manufacturing jobs to China are based on lies, says Alan Reynolds (Cato Institute).

China accounts for only 18 percent of our imports of merchandise. However, Chinese imports seem bigger, he explains, because they are concentrated in clothing and consumer goods, which are far more visible than more costly industrial supplies and equipment:

  • Apparel accounts for only about 6 percent of U.S. imports, industrial supplies and equipment for 55 percent.
  • Major industrial countries supply almost 48 percent of U.S. imports of manufactured goods, while all newly industrialized Asian countries account for 9.3 percent.
  • The level of value-added per Chinese worker in 1999 was only 8 percent of U.S. worker productivity, according to the International Labor Organization (it takes a dozen Chinese manufacturing workers to match one American).
  • The ILO says real wages in Chinese manufacturing industries rose 80 percent form 1990 to 1999, or 8.9 percent a year; roughly comparable figures for productivity show slower gains of 6.8 percent.

That means Chinese unit labor costs are rising at a much faster rate than in the United States - a trend that ultimately caused a loss of 15 percent of South Korean manufacturing jobs in the 1990s, when U.S. manufacturers shed 3 percent.

Source: Alan Reynolds, "Manufacturing Endangered? It's Not Fading Away in U.S.," Investor's Business Daily, August 29, 2003.

 

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