RUSS ROBERTS

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Why Are We Losing Manufacturing Jobs?

Audio Version on NPR

Politicians like to blame the loss of manufacturing jobs on the nefarious schemes of foreigners to steal American jobs and lower our standard of living. The real answer lies closer to home. And surprisingly, the shrinking of the manufacturing sector is actually a sign of America’s economic health.

Consider how long this has been going on. In 1950, about a third of the work force was in manufacturing. For five decades, that percentage has fallen steadily. Today, manufacturing jobs are only 12% of the workforce. A trend that lasts fifty years isn’t a trend. It’s a tidal wave. And reversing that trend will mean understanding its source.

Globalization is part of the cause. But the driving force behind the changes of the last half-century is the incredible productivity and innovation of the manufacturing sector. Take a look at the automobile industry. Fewer people work in that sector but they’re able to make a lot more cars. That’s happening all over America, in any industry where you can use machines and know-how to make people more productive.

That transformation has meant hardship for some manufacturing workers and their employers. But overall it’s been good for America—it’s played a key role in the enormous growth in our standard of living. Our cars and refrigerators and washing machines and televisions last longer, work better and require less maintenance than they used to. And the average American worker can earn the money to buy those goods in a fraction of the time it took back in 1950. That frees up the resources to create the companies and the products we couldn’t have dreamed of in 1950—new medicines, computers, cell phones and all the things we enjoy now but didn’t have back then. And that’s how we’ve been able to more than double the overall number of jobs in America in the last 50 years.

Contrary to conventional wisdom, our standard of living does not depend on manufacturing employment.

Manufacturers and their unions will tell us otherwise. But the only way we can revitalize manufacturing employment is put up some kind of barrier to innovation and competition. That will only serve to make the rest of us poorer.

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