Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Are Data Problems Undermining U.S. Policymaking?
I recently recieved the following question:
"Interesting article... Is Manufacturing Going the Way of Agriculture? Manufacturing output may not actually be dropping in the USA even as employment in manufacturing is. How accurate do you think their #s are?"
My response: The authors are quite right that manufacturing employment has dropped more than manufacturing output. One explanation (presented as the only explanation in the article) would be that this is because productivity is increasing. Hence, manufacturing employment is going the way of agriculture employment. Few people work on farms anymore, but the U.S. still grows a lot of food because many of the farms that remain are extremely efficient and highly mechanized.
There is one thing that gives me pause about these figures, however, and that is that the manufacturing output and the productivity figures both are probably distorted by increased outsourcing of component production. This has two effects. 1. It makes U.S. manufacturing output look larger than it is because it counts the many imported components in American manufactures as part of the U.S. manufacturing output when in fact they were not produced here. 2. It makes U.S. manufacturing workers look more productive than they actually are. For a discussion of these data problems with regard to productivity see a recent op-ed in the New York Times entitled “Trading Away Productivity” by Alan Tonelson and Keven L. Kearns. If Tonelson and Kearns are right about the measurement problems, it is entirely plausible to argue that important aspects of U.S. manufacturing are going away instead of going the way of Agriculture.
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