NCPA - National Center for Policy Analysis

Manufacturing is not in Trouble

August 18, 2003

Although there has been a decline in manufacturing employment, in terms of output, productivity, profits and wage rates, U.S. manufacturing is doing well, says Bruce Bartlett.

Obviously, U.S. manufacturing workers are paid much more than their counterparts in China and Mexico. But what really matters for employers is not absolute wages, but unit labor costs -- how much the labor costs to manufacture a given product. If a U.S. worker is five times as productive as a Mexican worker making one-fifth as much, they are exactly equal from the point of view of a producer.

The best measure of comparative productivity levels is real Gross Domestic Product (GDP) per employed person. According to the Bureau of Labor Statistics, in 2002 the United States continued to lead the world in this category:

  • All U.S. workers produced $71,600 in output each (in 1999 dollars).
  • The next highest country was Belgium, where each worker produced $64,100.
  • Japanese workers -- renowned for their productivity -- produced just $51,600. Korean workers produced even less: $34,600 each.
  • There's no data for China or Mexico, but both are probably far below Korea in terms of productivity, says Bartlett.

In short, manufacturing output is very healthy. There is absolutely no evidence whatsoever that we are becoming a nation of "hamburger flippers." We are producing more "things" than we have in almost every year of our history for which we have data. The decline in employment, therefore, is a good thing, because it means that manufacturing productivity is very high, says Bartlett. (See the figure.)

Source: Bruce Bartlett (National Center for Policy Analysis), "Overblown Ogre of 'Outsourcing,'" Washington Times, August 18, 2003.

 

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