While there continues to be concern and controversy over the loss of manufacturing jobs in the US and Europe to low-cost countries, especially China, the real "villain" in this manufacturing employment trend is automation and productivity gains, not offshoring.
So says Brian Wesbury, an economist at First Trust Partners.
Wesbury constructed the graphic below for an article he recently wrote in The Wall Street Journal, which compares the growth of US manufacturing output from 1950 to today with the number of manufacturing jobs as a percent of total US employment.
Since 1950, US manufacturing output has grown seven fold, and has continued to grow strongly, while during the same time, the percent of manufacturing jobs has fallen from 30% of the US total to 10%. That number continues to decline.
Offshoring may now be exacerbating the trend, but the real drivers are investments in automation and resulting productivity gains. Wesbury notes that in the consumer durables sector of the economy, for example, productivity has risen at a strong annual rate of 4.8% for the past 10 years.
"In other words, if real growth is less than 4.8% [which it has been, we note], the sector needs fewer workers year after year," Wesbury writes. Over many years, that cumulatively adds up to huge job losses, even as manufacturing output grows.
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