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Commentary: Big cause of factory job losses? Efficiency, says expert

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By Jack Torry, Staff Writer Updated 12:43 AM Monday, August 9, 2010

WASHINGTON — Let’s concede the point: Nobody in the U.S. Senate spends more time dealing with manufacturing issues than Democrat Sherrod Brown of Ohio.

Chairman of the Senate Subcommittee on Economic Policy, Brown is convinced the U.S. is losing its manufacturing edge to foreign competitors. He ritually complains about “job-killing trade agreements” championed by former Presidents Bill Clinton and George W. Bush.

He sees a plummeting number of manufacturing jobs and argues that “since 1987, manufacturing’s share of (gross domestic product) has declined more than 30 percent.”

To Brown, it’s up to the federal government to save America’s manufacturing base, and he has drafted a series of bills designed to do just that. He wants to extend a federal manufacturing tax credit to encourage companies to develop clean energy, provide a revolving loan fund to help small and medium-sized companies produce clean energy products, and curb imports through tougher enforcement of trade laws.

“Absent such a strategy, our economy has tilted away from manufacturing, with disastrous results for the nation’s middle class,’’ Brown said Thursday, Aug. 5, at one of his hearings.

But is he right?

At Thursday’s hearing, a key witness said — in very polite terms, and without mentioning Brown by name — that the senator may be basing his arguments on a series of flawed assumptions.

“When discussing the health of the manufacturing sector, one major issue is whether we should be taking into account the number of people employed in the sector or looking at the amount of output created in manufacturing,” testified William A. Strauss, senior economist for the Federal Reserve Bank of Chicago. “Interestingly, each leads to the opposite conclusion about the strength of manufacturing in the United States.”

Strauss ticked off one statistic after another that shows the U.S. remains a manufacturing powerhouse. The nation’s factories, he testified, are just more efficient.

He said that between 1950 and 2007, manufacturing output in the U.S. increased by 600 percent. Yet the nation today has only 14 million manufacturing jobs, roughly the same number as 1950.

How can this be?

Strauss pointed to automation and increased worker productivity, telling the subcommittee that 184 workers in 2009 produced as much as 1,000 workers did in 1950.

He explained that worker productivity is the main reason why manufacturing’s share of gross domestic product has declined by pointing out that “the greater efficiency of the manufacturing sector afforded either a slower increase or an outright decline in the prices of this sector’s goods.”

“This allowed manufactured goods to be less costly to consumers and led to the manufacturing sector’s declining share of GDP,” Strauss testified.

He made clear that as manufacturing jobs continue to decline in number, younger Americans will need a better education to compete for new high-tech jobs, saying “education is the big key to continued advancement.”

In other words, instead of promoting new federal programs to save manufacturing, he offered a simpler message: Stay in school.

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