Manufacturing, Again

In addition to agreeing with Ryan Avent one last thing I wanted to say about “manufacturing jobs” is that the available statistical series on this subject doesn’t really mean what I think people think it means. As Bruce Bartlett pointed out to me in an email, if manufacturing firm decides to outsource its payroll management to a specialist payroll management firm then that counts as the economy losing “manufacturing jobs” and gaining “service jobs” even if we have the exact same number of factory workers and accountants. There may or may not be something distressing about this trend (on balance, I think it highlights the need for labor law reform but it’s basically good) but that’s different from a structural shift in occupational category.

At any rate, at a certain point it becomes unclear to me what this is really a debate about. If the point is that the undervaluation of China’s currency is a big problem for the global economy, then I agree one hundred percent. As it happens, I doubt that resolving this problem will end the long-term trend toward manufacturing employing a smaller share of the population—automation, not China, is the main driver here—but it’s still a real problem (especially, one should note, for average Chinese people who experience a lot of unnecessary material deprivation as a result of this policy). If the idea is that we need more “industrial policy” then I guess it depends on what policy is actually being proposed. But generally I think the American economy needs more demand in the short-term, more productivity in its health and education sectors in the medium-term, and more education and better management of our land resources in the long-term.