Saturday, January 24, 2009

Chart of the Day

UPDATE: below

According to Fabius Maximus, America passed an unwelcome milestone:

source: Fabius Maximus

I can't confirm FM's data; the Bureau of Labor Statistics showed government employment well below manufacturing as of last May. Still, assuming it's true, the chart isn't quite as alarming as it might first appear.

That's because manufacturing productivity is rising, by 4.6 percent annually between 2000 and 2007. (In part, it's a result of increased factory automation.) Indeed, the productivity of U.S. manufacturing has risen at nearly double the pace of non-manufacturing productivity, and for the most part, manufacturing productivity has risen faster here as compared with Europe.

Observers on the left, far left and right blame the decline in U.S. manufacturing jobs on free trade. But, as Carpe Diem shows graphically, manufacturing output has increased even as employment has declined. This suggests that increased productivity has allowed the U.S. to make more with less, as the Heritage Foundation's Terry Miller concludes:
The explanation for these shifts is that productivity has been exploding in the United States and throughout the world. Technological change and innovation are making it possible to produce more output with less labor. In the U.S., that labor is shifting to jobs in the services sector and other parts of the economy. William Ward, a professor of applied economics and statistics at Clemson University, has estimated that 7.5 million of the 17.7 million manufacturing jobs that existed in the United States in 1990 would not have been needed in 2004 because of productivity growth.
Still, I'm no fan of big government; at some point, a larger bureaucracy inhibits growth and wealth creation. There are limits to the utility of using increased government to "vote yourself rich." Not that the left grasps the point, says Brian Micklethwait: "In the mind of the anti-free-marketeer, the government occupies the same kind of intellectual territory as the divine designer in the mind of an anti-Darwinian."

Conclusion: America is better off getting increased manufacturing output with fewer workers. But offsetting manufacturing job losses via a larger government sector isn't the answer, as Greg Mankiw observed:
[A]dvocates of limited government are rightly worried about the fiscal stimulus package that the incoming administration is going to propose. Rahm Emanuel, the new White House chief of staff, is reported to have said, "You don't ever want to let a crisis go to waste: It's an opportunity to do important things that you would otherwise avoid." It is not entirely clear what he meant by this. But one interpretation is that he wants to use a temporary crisis as a pretense to engineer a permanent increase in the size of government.

According to Carpe Diem:
Back in 1969, there were almost 2 manufacturing and construction jobs for every government employee. Since then, government employment almost doubled from 12 million in 1969 to almost 24 million today, as manufacturing and construction jobs have remained flat and have recently fallen, to the point that there are now more workers employed by government than are employed in the manufacturing and construction sectors.
(via Instapundit)


OBloodyHell said...

I think this needs to be contrasted with employment in the IP & Services sector. That should be showing steady growth during that same timeframe (it being the natural place for the unemployed workers to shift to), and, more critically, should be increasing steadily in productivity as well.

I believe that the main increase in real wealth in the last 20 years is almost entirely within this sector.

Carl said...

As a member of the services sector, I agree.

Fabius Maximus said...

BLS considers teachers and government employees as two categories. Since most teachers work for local school districts or State college systems, add them together to get an aprox total.