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Friday, October 9, 2009

Blame Productivity, not Trade

Don Boudreaux cuts through the faulty logic of those who blame the loss of manufacturing jobs on international trade.
Harold Meyerson reveals a weak grasp of economics when he laments that "Manufacturing now employs just one in 10 American workers; the vast majority of new jobs in recent decades has come in the service and retail sectors, which tend not to be as productive and don't pay as well" ("Recovering the New Deal Ideal," Oct. 7).

The low proportion of workers employed in manufacturing results from the same phenomenon that causes manufacturing wages to be high: high productivity. Equipped with lots of very productive machinery, each manufacturing worker today produces such large quantities of valuable output that consumers' demands for manufactured goods are satisfied by using only one-tenth of the work force.
We manufacture more goods in the United States than ever before. This year's output may be down slightly from last year due to the overall economic downturn, but imports aren't to blame. We produce more manufactured goods, but do it with many fewer people. These huge productivity gains mean lower prices and economic prosperity, as well as higher wages for those manufacturing jobs that remain. But it also means fewer people working on factory floors, and places a premium on education and training.

As Boudreaux points out, manufacturing jobs pay well precisely because of high productivity; not in spite of it.

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