I frequently do public speaking, and it seems virtually every group I talk to has the same opinion about American manufacturing — it’s dying. A commonly accepted premise is that American factories are manufacturing less and less each year, and that the American economy is becoming more dependent on foreign countries for manufactured products.
Well, guess what — this widely accepted view is just plain wrong. American manufacturing is not dying. Production from America’s factories, except during recessions, continues to rise each year. The lights are not about to be turned out on American manufacturing.
Let me cite some simple facts about American manufacturing. All these facts are readily available from the latest issue of the Economic Report of the President.
Let’s compare 2001 to 1955. The total output from America’s factories increased by 378 percent. And the data for these two years weren’t just flukes. Calculating decadal changes since 1961, from 1961 to 1971, manufacturing output increased 63 percent; from 1971 to 1981, output rose 38 percent; from 1981 to 1991, output increased 25 percent; and from 1991 to 2001, output jumped 51 percent.
Manufacturing output increased even faster than our nation’s population. From 1955 to 2001, U.S. population increased by 68 percent.
Of course, not all segments of American manufacturing increased at the same rate. Manufactured electrical machinery products increased by a whopping 4,989 percent from 1955 to 2001, industrial machinery products skyrocketed 993 percent, and chemical products soared 891 percent. In contrast, textile products rose only 111 percent and apparel products increased just 55 percent, while iron and steel output actually fell 10 percent over the past 46 years.
But what about North Carolina? Hasn’t North Carolina’s manufacturing been on the skids, with all the downsizing in tobacco, textiles, and apparel?
Again, the actual answer is a resounding no. Over the past quarter century, the output from all North Carolina’s factories increased by 98 percent. Big increases occurred for industrialmachinery, by 1,483 percent; electrical machinery, 1,136 percent; chemical products, 546 percent; and motor vehicle parts, 399 percent. Even the output of textile and apparel mills and furniture factories increased (textile and apparel mills, 21 percent; furniture, 33 percent.
The output of one North Carolina manufacturing sector did drop significantly. The production of tobacco factories fell almost 88 percent during the past 25 years.
If data conclusively show manufacturing has increased, not declined, in both the nation and North Carolina, then why is the common perception just the opposite. Why does the view persist that America doesn’t manufacture anything anymore?
Two reasons likely explain this contradiction. First, while manufacturing output has increased, the output of other sectors of the economy has increased more. In particular, service output has consistently increased faster than manufacturing output since World War II. In the last 25 years, North Carolina’s total economy increased 50 percent faster than the output of North Carolina’s factories.
So, in other words, while manufacturing output has increased, it has increased slower than service output. Is this bad? No. It simply suggests that as our standard of living has increased, American consumers have chosen to spend relatively more of their incomes on services, such as health care, personal care, and education.
A second reason for the perception American manufacturing is dying is changes in employment. In the past 50 years, the percentage of employees working in manufacturing has been more than cut in half, from 33 percent to 14 percent. Since the late 1970s, the absolute number of jobs in manufacturing has trended downward.
So as people look around, they see relatively fewer folks going to work at factories. It’s no wonder they think manufacturing is on the way down.
Should we lament the loss of so many manufacturing jobs, despite the fact manufacturing output has increased? No, we shouldn’t cry over these losses any more than we cry over the loss of farm jobs during the past 70 years. Only a handful of farmers today work the land compared to the 1930s and 1940s, yet we produce more crops and livestock than ever before. Again, better technology and know-how are the reasons.
A feature of modern economies, not only in our country but also in developed, foreign countries, is increased efficiency in “basic needs” industries, like agriculture and manufacturing, and increasing employment in new service industries. These trends are not bad. It means we can devote fewer of our precious human resources to meeting our basic needs and more to extending the standards of life. Sounds like a good tradeoff to me.