From an economic perspective, it is easy to see how manufacturing adds value by converting raw or processed materials into tangible end-user products. That U.S. manufacturing jobs have been eroding in absolute numbers over the past ten years is irrefutable. This has been particularly in the case in industries such as Automotive, Electrical Machinery, Footwear Manufacturing, Furniture Manufacturing, Lighting Products, Office Machinery, Textile Manufacturing, and so on (for example, see Congressional Research Service Report for Congress, China’s Trade with the United States and the World, January 4, 2007). Based on U.S. Department of Labor statistics U.S. manufacturing jobs declined in the ten-year and seven year periods ended July 2007 by approximately 14% and 18% respectively.

At the same time, in the ten-year period ended July 2007 jobs in the U.S. Service Industries increased by approximately 22%. Given the comparative labor rates between the U.S. and the emerging economies there seems to be little chance this trend in manufacturing job loss will reverse. Many commentators advance the position that value add also can result in Service Businesses where people input time, knowledge, equipment, and systems to create real value to those who receive the service – and that as a result the American economy is not irreparably harmed by its loss of manufacturing jobs to offshore suppliers. Notwithstanding such commentary, it seems that service offerings typically are of short-term use and largely intangible, as contrasted to largely tangible, long life manufactured products. As a result, to paraphrase Thomas Friedman’s The World is Flat, it strikes us that if America does not find a meaningful substitute for its loss in manufacturing jobs, “in the end we will be left selling hamburgers to each other”. The unhappy conclusion of all of this from a U.S. perspective (which as a practical matter means most of Canada’s manufacturing base as well) is that America’s most important value-add component is eroding, and this erosion is both continuously increasing America’s dependence on the economies of other nations. Readers with contrary, different, or similar views or constructive suggestions for a directional change to this U.S. loss of manufacturing jobs are invited to comment. Comments addressing reader’s specific concerns, and that link those concerns to other current and prospective economic conditions will be of particular interest.

This entry was posted on Monday, September 24th, 2007 at 9:53 am and is filed under Economic Perspectives. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.