US Manufacturing Is Not Dead

http://www.fivethirtyeight.com/2010/02/us-manufacturing-is-not-dead.html

70 45 16 years ago

hga2• 16 years ago

In a nutshell, manufacturing != manufacturing employment and the trade deficit just doesn't seem to be linked to the latter.

mch929• 16 years ago

Worthless without context. What I'd really like to see is the change in US manufacturing as a percent of world manufacturing over time, and the trajectory of US manufacturing in comparison to the level of manufacturing in China.

hga2• 16 years ago

Why are either of them so interesting in the context of US manufacturing?

The single biggest thing to happen in the last few decades is a couple of billion people (re-)joining the world economy (the PRC, India, the former Soviet Union, etc.).

To the extent a lot of recent manufacturing is satisfying basic needs we take for granted, e.g. refrigerators, isn't that likely to be all to the better?

What I'm saying here is that this gets complicated. Economies of scale are likely to give the manufacturers in the PRC the edge in supplying the world's demand for refrigerators, but on the other hand their increased demand for say aircraft and especially jet and turboprop engines is directly to our advantage.

Or perhaps I should say, this isn't a simple matter of winners or losers at this gross a level (PRC vs. US, US vs. the world). I expect the share of US manufacturing vs. the world's to go down during this period and I expect the trajectory of PRC manufacturing to be wild compared to ours.

MikeCapone• 16 years ago

Krugman: "He was driven mad by Lester Thurow and Robert Reich in particular, both of whom had written books touting a theory that he believed to be nonsense: that America was competing in a global marketplace with other countries in much the same way that corporations competed with one another. In fact, Krugman argued, in a series of contemptuous articles in Foreign Affairs and elsewhere, countries were not at all like corporations. While another country’s success might injure our pride, it would not likely injure our wallets. Quite the opposite: it would be more likely to provide us with a bigger market for our products and send our consumers cheaper, better-made goods to buy. A trade surplus might be a sign of weakness, a trade deficit a sign of strength. And, anyway, a nation’s standard of living was determined almost entirely by its productivity—trade was just not that important."

http://www.newyorker.com/reporting/2010/03/01/100301fa_fact_...

bokonist3• 16 years ago

Krugman is wrong. In many circumstances, countries are competing with each other. For instance, imagine Kuwait produces oil, and Japan produces automobiles. Kuwait trades oil to country America for automobiles. Now imagine Japan enters the market and makes automobiles that are much better and cheaper than America's. Kuwait will now start buying automobiles from Kuwait instead of America. America will find the price of oil skyrocketing and it's standard of living collapsing, unless it can produce automobiles that match the quality and price of Japan's automobiles.

gscott• 16 years ago

I believe much of manufacturing is building things from parts from elsewhere. I did work for a pottery wheel company and the wheels major components were from Mexico (the metal frame) and motor from China. I didn't really take a look at the other parts but likely those were from overseas as well.

jerf4• 16 years ago

Secondary conclusion: As long as manufacturing productivity continues to improve, increasing our manufacturing may lead to American prosperity, but it won't save the economy, in that it won't produce jobs.

Long-term, I've actually not been concerned about American manufacturing for a while now. Why is overseas manufacturing cheap? Primarily, cheap labor. When does that cease to be an advantage? When labor is no longer a significant cost in manufacturing. We're getting there pretty quickly, and IMHO robotics has only recently (i.e., last two or three years) taken off, which should be able to continue the increased-productivity-per-human trend for a while yet.

Bad time to become an assembly line worker. Good time to get into robotics for manufacturing, probably.

I had a contract job in a tool & die facility a couple of years ago. It wasn't a factory, it was a "build-to-order" facility that had a wide variety of equipment in various places and they needed better tracking of their jobs and such. I didn't mention this to anyone, but I was struck by how much work was being done that could be automated in the near future. Tens of jobs dedicated solely to moving things around, which robots are going to be able to take over in the 5 year timeframe. Another tens of jobs that involve placing a metal part just so in a press and pushing two buttons (two so you have to use both hands). QA can't be replaced with robots entirely, but it could be helped. The bulk of the people on the floor were not doing things that required human judgment, even for human-class vision or human-class pathfinding. The future is basically now.

nradov• 16 years ago

Besides cheap labor, the secondary reason for overseas manufacturing is lack of (enforced) environmental laws. That advantage could last quite a while.

jbert• 16 years ago

And could be (partially) negated by requiring western suppliers to demonstrate some kind of parity in their supply chain.

go37pi2• 16 years ago

I echo that sentiment. To share another testimonial, I work in a vaccine manufacturing facility with control systems and robotics. The only reason biologics manufacturing facilities haven't been built overseas with the same zeal as other factories is the stringent requirements by the FDA, MHRA, etc. on manufacturing facilities that use live cultures. Many of the technician jobs are similarly dedicated to pushing carts and transferring components to the robots for processing. Because of the reduced efficiency of old drug discovery methods, many of these jobs are taken by college educated science majors who are finding that jobs in drug discovery research are quickly dwindling.

However, I disagree with the idea that robots are going to be able to take over in a five year timeframe.

I agree with you that the capabilities for robotics to do these tasks exist. "The future is already here - it is just unevenly distributed." I doubt however whether large manufacturing companies would be willing to shoulder the huge investments needed to develop robotics for these applications even in a healthy financial climate. Maybe this type of development could come from a company that proposes to do consulting work for manufacturing facilities, for example, Honeywell.

Additionally, I've seen that while companies see automation as an asset in pharmaceutical manufacturing, they also view it as a huge liability, as a single automation error can lead to enormous problems that take time to detect and can have huge costs, while human error generally leads to small mistakes that can be corrected and detected easily. Not sure how it is in other manufacturing subindustries.

jerf4• 16 years ago

"However, I disagree with the idea that robots are going to be able to take over in a five year timeframe."

That's not quite what I said. I specifically meant that robots will be able to take over the task of moving things around in the five-year timeframe. That is, the guys moving bins of things from here to there. We've already seen warehouses adopting this technology with a fairly high degree of sophistication today, so it's not really a far-out prediction. I'm not predicting that something that doesn't exist will be created, I'm predicting that something that does exist will be commercialized to the point it will become irresistible.

Remember, even if the robots are initially expensive, to replace an employee for a year opens up about $50,000 in capital to play with, assuming a low-paid employee + insurance (yours, not the employee's) + overhead, give or take $20,000. $50,000 is becoming a lot of robot.

Completely taking over in five years, no, definitely not. Certainly not in the facility I saw. But the long-term job trend will be clear in five years.

ugh4• 16 years ago

We get richer as labour gets more automated and cheaper. So it’s not a bad thing. It shouldn’t be.

The big problem is that we don’t have work for bigger and bigger parts of the population. They are poor not because society as a whole got poorer, they are poor because they don’t have anything the labour market wants because it can be had cheaper now.

I think it’s about time we recognize that. We have to make it possible for everyone to live ok lives, even without having a job. We are rich enough. We didn’t get any poorer as a whole. We should be able to afford that.

How to do that is anyone’s guess (I’m betting on some sort of ‘basic income’), but it’s about time to start. We can’t think about work and earning money with our 19th and 20th century goggles on.

yummyfajitas2• 16 years ago

We have to make it possible for everyone to live ok lives, even without having a job. We are rich enough. We didn’t get any poorer as a whole. We should be able to afford that.

It already is possible. The poor in the USA right now have a standard of living greater than the middle class of 1970, but tend to work less than 800 hours/family/year.

http://www.heritage.org/research/welfare/bg1713.cfm

jerf4• 16 years ago

We gotta be really careful about how we do it. Were I single and not willingly in the scenario where I am going the extra mile to have and provide for a family (that best-case scenario for society), I might very well decide to just take your "basic income" and call it a day, but if society is going to have that "basic income" it's only going to happen if people like you and me and anybody else hanging around on HN don't rationally choose to take the option, if given. (I hate to pander to the audience, but the HN community really is set up around being a community of producers, so I'm not just trying to pander here.) And forcing me to work to provide for those others, the easiest obvious answer, would be slavery, full stop. There's enormous moral hazard in that idea. It also makes it very easy for a person born into a family who has chosen that option to not be around any person who can teach them the culture or the mental toolkit necessary to make the transition to producer, which would make "being poor" a one-way ticket for a family, on average. (Arguably a problem we already have in the inner cities, which in a way gets worse the more comfortable the "basic income" becomes.)

Mind you, I don't disagree. As a futurist looking out across the next thirty years I too see an increasing number of people who through essentially no fault of their own will basically have no marketable skills; they'll have skills, just not marketable ones. Somehow we've got to deal with it. But it's going to be enormously tricky; all the easy answers are wrong. All the politically acceptable answers both liberal and conservative are also wrong. I don't have a clue what the right answer is, either.

Enra2• 16 years ago

To me it is interesting to attempt to guess the winners in such a scenario (where robots for a lot of tasks are cheaper than asian unskilled workers). Could it be that countries like Dubai would become manufacturing centers? Some advantages for it as opposed to China/India would be: less corruption, no taxes, flexible and business friendly regulations in general and cheap energy.

richcollins2• 16 years ago

Secondly, there have been calls for a US industrial policy -- that is, for Washington to essentially "pick winners and losers" by promoting some industries that they feel have a high probability of success. Asian countries have been doing this for years with remarkable success and it is a policy which we clearly need to copy.

The market is pretty good at picking winners. Washington likes to take money away from the winners and give it to the incumbent losers that bribe lawmakers.

xanados• 16 years ago

Yeah, that part seems like it needs more support. The situation for the largest and most diverse economy on the planet is a little bit different than the situation for those Asian countries. Our economy is far too complex for this sort of central planning to be effective. Also, politicians are idiots, and need to secure votes from the workers in industries currently existing, not the industries of the future.

teeja• 16 years ago

Winners like Goldman and Enron?

The government can help by protecting productive concerns from the thieves and pirates. Those "winners" can go to hell.

jdminhbg• 16 years ago

I'm not sure how you saw this sentence: "Washington likes to take money away from the winners and give it to the incumbent losers that bribe lawmakers." and thought that Goldman was an example of the former rather than the latter.

richcollins2• 16 years ago

Unfortunately, the government has just as strong a history of protecting the thieves and pirates from competition as it does protecting others from them. Goldman and Enron are possible because of government intervention in their favor.

rms• 16 years ago

What you say is true, but reality has also become more complicated than free market good, socialism bad.

CamperBob• 16 years ago

Well, I guess I can take that to the bank.

Kadin• 16 years ago

Amen.

Also, although some of the quasi-planned economies (where "winners" were picked and subsidized) in Asia have been remarkably successful, it doesn't necessarily follow that the relationship is causative, or that they wouldn't have been successful anyway, had that selection process not happened.

A lot happened in the 20th century in Asia that keeps it from being a repeatable experiment, much less a model that can be followed elsewhere. The effects of WWII and the consequent rebuilding on Japan, and urbanization and the so-called "demographic dividend" (http://en.wikipedia.org/wiki/Demographic_dividend) on many other countries in the area, shouldn't be underestimated.

Locke1689• 16 years ago

Eh. Neither of you cited any empirical evidence for your claims. Jury's still out.

anamax• 16 years ago

> Asian countries have been doing this for years with remarkable success and it is a policy which we clearly need to copy.

Even if Asian countries can consistently do that, which I doubt (there's a serious case of survivor's bias here), that doesn't imply that the US can. The American political class is fundamentally incompetent.

After watching the health care discussion on Friday, did anyone think "those are the folks who I want running something important"?

Whenever I see a politician, my reaction is thatt I don't want that person in charge of anything having to do with my life.

scotty79• 16 years ago

Is no Chinese! Is dang robots tha took'ar'jobs!

rw• 16 years ago

Where are the corrections for population growth? I think the OP's claim might be true, but their case is not watertight.

A quote: "The real issue is manufacturing employment, which is dropping like a stone. And the reason for the drop is an increase in productivity." ...Really? Maybe it's only part of the reason? Macroeconomic phenomena are complex. 538 should be better than this! Give me nuanced analysis, with intellectually-honest qualifiers.

bokonist3• 16 years ago

The methodology used by the Industrial Production Index is extremely problematic. Any index that uses Fisher price indexes introduces huge amounts of subjectivity. For instance, the decision to use an "overlap method" rather than a "direct comparison method" is subjective ( http://en.wikipedia.org/wiki/Fisher_index ). Choosing one method rather than the other can dramatically alter the resulting index. The result is that the index ends up replicating the assumptions and opinions of the index creators.

_delirium• 16 years ago

I'm not sure this actually refutes a relationship between offshoring and manufacturing employment. It's possible it's purely a result of automation getting better, and would have happened identically with no major shifts of trade. But given that the increase in offshoring makes labor-intensive industries much cheaper to locate elsewhere, it's also possible that market forces have accelerated the U.S.'s shift to less-labor-intensive industries. That is, we haven't just automated existing industries as technology has gotten better, but have actively stopped manufacturing certain things that are hard to automate, even though there's still demand for them, because we can't compete with cheap labor. We then put our resources into manufacturing easier-to-automate things instead, which keeps total output high.

If you break down the total manufacturing data and look at labor-intensive sub-sectors, you don't see the same upward trend in output. US textile manufacturing, for example, has totally collapsed, not just in employment but also in output.

ww520• 16 years ago

We need more engineers to be politician instead of lawyers. Engineers build and lawyers redistribute.

patrickgzill• 16 years ago

Ever notice it is the guys with indoors, non-science desk jobs who are always pushing science, engineering, and manufacturing on your kids, but not theirs?

randombit• 16 years ago

It's worth considering that industrial index he cites includes some things that most people might not consider manufacturing per-se, including construction, mining, and utilities. According to http://www.federalreserve.gov/releases/g17/Current/default.h... the only sectors in the index that have seen growth over 2% compared to 2002 levels are utilities (electric and gas) and business equipment (which seems to consist of "industrial and other", "transit", and "information processing"). Unfortunately there is no breakdown among them.

US Manufacturing Is Not Dead

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