Where have all the manufacturing jobs gone?
Old shoe factory, Columbus, OH. Photo: Nytend. Source: Wikipedia
Since 1989, manufacturing employment in the US has plunged by 6 million workers – over 30%. But this doesn’t mean the US has stopped making things. Employment has fallen, but output – after a setback during the recession – has continued to grow. In fact, the output of stuff made in the US – cars, engines, advanced machinery – is currently near an all-time high.
Source: St. Louis Fed
Is this good or bad? Employing people is good, but not if it’s unsustainable. US manufacturers have become far more efficient at what they do. Global supply chains now take rare earth metals from Africa to make advanced chips in Texas to apply to circuit boards in Taiwan to assemble iPhones in China. Different areas have different specialties. And our improving productivity adds to global prosperity.
To some extent, this has always been the case. When shoe factories couldn’t operate profitably in New England, they moved to the Southeast and Midwest. When inputs became too expensive there, the facilities moved somewhere else. But new manufacturers also started up, with processes that aren’t as labor-intensive. For the most part, the folks who lost their jobs found other work. But the transition can be tough!
I’ve worked in finance most of my life. I’ve been merged, downsized, laid off, right-sized, and seen lots of other issues. I’ve moved overseas and back again. It seems that banking and finance have many of same issues as manufacturing: pressures on profits, new technologies, and a workforce that constantly has to upgrade its skill-set or risk being left behind. Better skills and higher profitability should lead to higher wages. But it doesn’t always seem to work out that way.
In many ways, today’s job market is like riding a bicycle: you have to keep moving forward or you fall off.
Photo: Octavio Lopez. Source: Morguefile
Douglas R. Tengdin, CFA