Losing manufacturing jobs?

Robert B. Reich

North America and the developed world has been losing manufacturing jobs to China, Latin America and the rest of the developing world. Right? Well, not quite.

It turns out that manufacturing jobs have been disappearing all over the world. Economists at Alliance Capital Management in New York took a close look at employment trends in 20 large economies recently, and found that since 1995 more than 22 million factory jobs have disappeared. In fact, the United States has not even been the biggest loser. Between 1995 and 2002, the U.S. lost about 11 percent of its manufacturing jobs. But over the same period, the Japanese lost 16 percent of theirs. And get this: Many developing nations are losing factory jobs. During those same years, Brazil suffered a 20 percent decline.

Here’s the real surprise. China saw a 15 percent drop. China, which is fast becoming the manufacturing capital of the world, has been losing millions of factory jobs. So what’s going on?

In two words: higher productivity. All over the world, factories are becoming more efficient. They’ve installed new equipment and utilized new technology. And that often means fewer jobs.

Market reforms have also played a role. In China, new modern factories are replacing large, inefficient state-run plants. The result is that even as China produces more goods than ever before, millions of factory workers have been laid off.

Manufacturing is following the same path as agriculture. As productivity rises, employment falls because fewer people are needed. In 1910, almost a third of adult North Americans worked on farms. Now, fewer than 3 percent do. But North American agriculture is the most productive in the world.

Similarly, global manufacturing output is rising – since the mid ’90s up 30 percent – even as worldwide manufacturing employment has been dropping. The two trends are directly related.

So next time you hear a politician complain that manufacturing jobs are fleeing to low-cost countries like China or to Latin America, watch your wallet. Everyone’s losing factory jobs.

Robert B. Reich is the Maurice B. Hexter Professor of Social and Economic Policy at Brandeis University, and was the Secretary of Labor under former U.S. President Bill Clinton. This commentary originally appeared on Marketplace, public radio’s only daily business news program, on November 5, 2003