21/10/2019 by EconTalk: Russ Roberts
Economist Susan Houseman of the Upjohn Institute for Employment Research talks about the manufacturing sector with EconTalk host Russ Roberts. Houseman argues that the data surrounding both manufacturing output and employment have been misunderstood and misinterpreted. In particular, she argues that conclusions about the growth of manufacturing are driven overwhelmingly by computer production while the rest of manufacturing has been stagnant. She also argues that productivity has a small role in reducing manufacturing employment. Trade has been the main cause of employment reductions. These claims go against the standard narratives most economists have been telling for the last 20 years.
Listen date: 2020-01-23 to 2020-01-24
TL, DL: It’s difficult to measure it when cheap imports replace domestic sourcing of raw materials or intermediate goods for manufacturers. This makes it look like base costs are still higher, and that leads to productivity looking much higher than it really is. If you adjust for this, American manufacturing productivity has probably not grown all that much.
Other interesting things: most of the manufacturing growth in the USA has come only from computers (and probably semiconductors more than the finished personal computer). As chip fabbing moves overseas, even that growth is going to stall out and the American domestic production is now mostly specialised military hardware.
Later on, there’s another discussion, similar to the one with Dani Rodrik, about how China joining the WTO and gaining market access was a massive shock to US manufacturing and a more gradual entry would probably not have shocked the rest of the world as much. Though I liked Russ Roberts’ point that you will never again get a similar shock of one billion people joining the free trading world together.