Industrial Insight

manufacturing improved productivity is the main cause of job loss … | April 1, 2013

America’s Trade Muddle

By Robert Samuelson – April 1, 2013

From 1973 to 2010, manufacturing’s proportion of employment fell from 22 percent to 10 percent in Canada; from 37 percent to 21 percent in Germany; from 23 percent to 9 percent in Australia; from 28 percent to 17 percent in Japan; and from 29 percent to 13 percent in France. A report from the Congressional Research Service reaches the same conclusion and adds South Korea and Taiwan to the list of countries with declining factory jobs.

Manufacturing’s story parallels agriculture’s. Improved seeds, mechanization, planting and harvesting techniques enable fewer people to produce more food. Greater productivity lowers relative prices. But for food and manufactured goods, lower prices do not stimulate a corresponding rise in demand. How many refrigerators, after all, do consumers want? (Again, in economics lingo, demand for manufactured goods is "price inelastic," say the two economists. A 10 percent fall in prices does not increase demand 10 percent.) Lower prices for manufactured products frees up money to spend on services — health care, education, travel, apps.

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About author

I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.







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