Innovation Files has moved! For ITIF's quick takes, quips, and commentary on the latest in tech policy, go to itif.org

Services

microchip

Time to Stop Blaming Manufacturing Job Losses on the (Nonexistent) Shift to Services

The U.S. lost more than 5 million manufacturing jobs since 2000 (roughly a 30 percent drop), while nonmanufacturing jobs have grown by 8 percent. Understanding why is critical to developing the right policy response.

Unfortunately, too many apologists for U.S. manufacturing decline argue that manufacturing employment loss is a natural trend. They blindly follow the assumption that as economies get richer they naturally consume a smaller share of manufactured goods and a larger share of services.  Therefore, we should expect manufacturing job losses.

New data from the St. Louis Federal Reserve Economic Data should hopefully put an end to these false claims. Recent analysis demonstrates that after adjusting for inflation, the share of real consumption of services has actually decreased slightly after reaching a peak in 1992. At the same time, durable goods manufacturing consumption is growing as a share of total consumption.

Accounting for inflation, services reached a peak of 70 percent of total consumption in the mid-1990s and have since declined to around 66 percent. This is not so different from the late 1950s when services made up 62 percent of total consumption. Meanwhile, the consumption of durable

Read the rest

Response to competitiveness RFI – manufacturing and services

 

Following on yesterday’s posting, I would like to take up some of those intriguing questions posed by the Commerce Department’s Competitiveness study RFI (see earlier posting).

Let’s start with something I have written on before: manufacturing and services.

For topic #6: Manufacturing.  The RFI asks the following questions:

What is the role of advanced manufacturing in driving American economic growth and international competitiveness, and what are the key obstacles to success at advanced manufacturing? In which manufacturing industries will our nation have comparative advantages?

The short answer to the first question is simple: manufacturing will continue to play a major role in American economic prosperity.  It will be a different role.  As we pointed out a year ago in our Policy Brief–Intellectual Capital and Revitalizing Manufacturing, manufacturing is in the process of being transformed into a much more knowledge-intensive activity.  The process is analogous to the transformation of agriculture in the early 20th century.  Farming did not simply move to other nations with lower-cost producers using the traditional techniques. Agriculture was mechanized–or industrialized, if you prefer. That transformation led to

Read the rest