Manufacturing Job Loss is Not Inevitable

February 22, 2012 —



Despite small gains during the last two years, the trend in U.S. manufacturing jobs for the last 30 years has been downward, leading some to argue that long-term manufacturing job loss is inevitable. But our research shows otherwise.

High wages cannot be the culprit; because wages in U.S. manufacturing are not especially high by international standards. As of 2009, 12 European countries plus Australia had higher average manufacturing wages than the United States. Norway topped the list with an average manufacturing wage of $53.89 per hour, 60 percent above the U.S. average of $33.53.

High wages cannot be the culprit; because wages in U.S. manufacturing are not especially high by international standards. As of 2009, 12 European countries plus Australia had higher average manufacturing wages than the United States. Norway topped the list with an average manufacturing wage of $53.89 per hour, 60 percent above the U.S. average of $33.53.

Moreover, the United States lost manufacturing jobs at a faster rate since 2000 than several countries that paid manufacturing workers more. Among the 10 countries for which the Bureau of Labor Statistics tracks manufacturing employment, Australia, France, Germany, Italy, the Netherlands, and Sweden both had higher manufacturing wages and lost smaller shares of their manufacturing employment than the United States between 2000 and 2010.

Nor is technology to blame. Factories have become more mechanized, so fewer workers are needed to produce the same amount of manufactured goods. If that were the end of the story, then technology-driven productivity growth would indeed reduce manufacturing employment. But it’s not the whole story. When productivity grows, manufactured goods become less expensive and the market for them expands. The expanding market creates a demand for more workers, and that extra demand usually outweighs the labor-saving impact of mechanization. The result is more manufacturing jobs, not fewer, when productivity increases in manufacturing.