Kinross

Designed in USA.

Bill

Once upon a time. Less and less as time goes by. I know; I'm one of the unemployed engineers. And there haven't been any good engineering jobs that I could even apply for since the late 1990s. Since then, I've been strictly in operations. And now, even the operations jobs are getting scarce..... Particularly since there are a lot of former engineers (like myself) competing for them.

== Bill

Kinross

Engineering is cyclic it always has been. I remember the last recession when engineering jobs were scarce. Then during the boom they couldn't fill them fast enough.

Vorkosigan

LOL. Are you not aware that every country has protection problems? Do you think the US is the only country with a protectionism controversy?

Vorkosigan

Who cares where the resources come from? Must everything be made here? It would be stupid and inefficient for the US to make everything for itself. Autarky is bad economic policy.

Further, the reality is that far from overtaking developed countries, developing countries are falling behind. From a recent UNCTAD development report:

"This becomes apparent from a comparison of shares in exports and value-added in world manufacturing. While developing countries as a group more than doubled their share of world manufacturing exports from 10.6 per cent in 1980 to 26.5 per cent in 1998, their share of manufacturing value-added increased by less than half, from 16.6 per cent to 23.8 per cent. By contrast, developed countries experienced a substantial decline in the share of world manufacturing exports, from 82.3 per cent to 70.9 per cent. But at the same time their share of world manufacturing value-added actually increased, from 64.5 per cent to 73.3 per cent."

See? It's not as simple as "we're doomed because we don't make radios."

Fact is, the US, Japan and Germany account for 60% of global manufacturing. Toss in the rest of Europe and the figure rises to over 80%. And the US also does well precisely because it exports ag products, which have been rising in recent years as incomes grow in Asia. There's nothing wrong with exporting beef and wheat, you know. In any case, 40% of the world's tooling and machining equipment is US made. We won't even mention hi-tech, that's too easy. But we could discuss things like medical technology, military hardware, conncectors (Half the world market is owned by US firms)...there are dozens of industries out there where US firms dominate. So don't give up the ship yet, Bill.

Vorkosigan

Ruy Lopez

So don't give up the ship yet, Bill.

The word yet is revealing. It could imply Vork believes nevertheless that the terms of trade and wealth creation had been shifting from the West for some time now and are expected to continue.

Vork's reminder of the still dominant status of the US, including Europe and Japan, is correctly placed because it puts the problem in context, especially amid the pessimism in this thread. Before going to my real point, one more clarification.

By contrast, developed countries experienced a substantial decline in the share of world manufacturing exports, from 82.3 per cent to 70.9 per cent. But at the same time their share of world manufacturing value-added actually increased, from 64.5 per cent to 73.3 per cent."

If one determines that the first datum is correct, the second should usually show also a decline for the developed countries. What is the explanation for the divergence? It's largely transfer pricing from the 1st to the 3rd world and possibly US dollar overvaluation. The period covered, 1980 to 1998 were very profitable and prosperous years for Asia. US exporters and companies with 3rd world operations succeeded in insinuating higher prices for US exports. This is one standard explanation for low western but higher 3rd world inflation. The US dollar rose sharply from 1994 to 1998.

The point here is value added gains are more temporary in nature but loss in manufaturing exports are much less temporary.

Now for what I really wanted to contribute. Bill's worries and concerns are also correctly placed. Three major reasons among others:

1) There is a major global shift in manufacturing competitiveness and it is still poised to continue. There's nothing much the west can do about it but to adjust and look for other moneymakers they can export with advantage--as well as reduce their imports. Problem is adjustment is often painful.

2)Bubbles in the US have not been fully worked off yet (liquidated is a better word); these are in real facility overinvestment, the stock market and now real property, which is still to decline, actually plunge. In Asia, bubbles burst in 1997 some three years earlier; in the case of Japan, its 9 years(the Japanese need to accept the loss or collapse of some banks to get over their problems--write them off and grimace with excruciating pain).

3)The rising US trade or current accounts, not fiscal, deficit. Internal fiscal deficits pose less danger. The trade deficits, if it continues to rise briskly, could be the cause of the trigger that could reduce drastically the stature of the US in the world economy. Internal living standards would go too. Europe does not have this particular problem.

ohwilleke

The U.S. has been systemically shifting its unskilled labor from the high wage U.S. to the low wage third world, where it can. At the same time, automation has replaced unskilled labor where possible. Labor unions probably accellerated the shift of U.S. unskilled labor off shore, but it was probably inevitable anyway. A factory job in the U.S. pays $10 an hour, a factory job in Mexico pays $1 an hour, a factory job in China pays $1 per day. Even incredible productivity has a hard time competing with those labor costs. Jobs like the stamping plant job the Eminem character had in the movie Eight Mile, either don't exist, have gone off shore, or will be eliminated soon.

Where the U.S. can't shift unskilled labor out of the country to lower wage areas, immigration from lower wage countries has filled the gap. The U.S. immigration laws favor white collar immigration. So, in areas like computer science and medicine, the immigrants usually get green cards and eventually become American citizens. In areas like construction, farm labor, slaughter houses, car washes, autobody work, cleaning, and cooking, cheap foreign labor, often in violation of immigration laws, is the norm, or at least, common. Foreign unskilled or semiskilled workers are frequently better qualified than Americans who are willing to work for the same wage.

In the past decade or so, high school educated workers have seen their economic prospects stagnate, while educated workers have absorbed almost all of the economic benefits of the economic boom.

The fact that the U.S. economy isn't always easy to understand, doesn't mean that it isn't productive. A "service economy" does not mean that Americans have moved en masse to becoming maids and burger flippers. Americans are doing worthwhile things of benefit to people and getting paid for it. There is nothing unproductive about treating illnesses, educating students, computerizing the American economy, developing a telecommunications infrastructure, and building buildings, which are all areas where the U.S. has seen significant employment growth. The U.S. has also in the past two decades out sourced many functions like building maintenance, personnel management, and filing (now done thorugh computers) that it had kept in house before. Job declines are found only in agriculture, mining, manufacturing, and household servants.

Here is employment by industry in the U.S. in thousands with change since 1980-2001 following it:

Agriculture 3144 (-120)
Mining 567 (-412)
Manufacturing 18970 (-3972)
Construction 9581 (+3215)
Transporation, Communication and Utilities 9738 (+3213)
Wholesale Trade 5102 (+1082)
Retail Trade 22571 (+6301)
Finance, Insurance and Real Estate 8797 (+2803)

Advertising 296 (+105)
Building Services 946 (+576)
Personnel Supply Services 1032 (+797)
Computer and data processing 2395 (+2174)
Detectives and Security 614 (+401)
Automotive Services 1580 (+628)
Other Business Services 2901 (+1215)

Household Servants 816 (-441)
Hotels and Lodging 1568 (+419)
Other Personal Services 1068 (-365)

Entertainment and recreation 2684 (+1637)

Hospitals 5189 (+1056)
Non-Hospital Health Services 6758 (+3413)
K-12 education 7735 (+2185)
Higher education 3006 (+898)
Social Services 3516 (+1974)
Legal Services 1402 (+626)
Other Professional Services 5839 (+3391)

Public Administration 6126 (+784)*

* includes only government employees without private sector counterparts. For example, public hospitals and schools are not included.

Source: Statistical Abstract of the United States 2002, Table 591.

What is going on in the declining industries?

Agriculture

Agriculture, while experiencing modest employment slippage (about 3% in 20 years), has seen productivity increase faster than employment has decreased, through technology and the weeding out of marginal farms. Cash proceeds from farm product sales have increased by about 24% between 1980 and 2000 after adjusting for inflation. Statistical Abstract 2002, Table 791. In 1997, a majority of farms in the U.S. (973,000 out of 1,912,000) had sales of under $10,000. Statistical Abstract of the United States 2002, Table 787. The average farm with less than $10,000 of sales had 133 acres, while the average farm with more than $10,000 of sales had 846 acres. Statistical Abstract 2002, Table 786. Marginal farms making less than $10,000 of sales each year, while providing a majority of U.S. farms, account for only 1.5% of U.S. farm sales. Big farms are becoming more productive (sales growth of 24% can't come from a sector that makes up only 1.5% of all farm sales), while small farm collapse is leading to declining farm employment.

The remarkable thing in agriculture is not that employment has declined, but that so many marginal operations manage to stay in business.

Mining

Similarly, while mining has seen a dramatic drop in employment in the past twenty years, the quanity of fossil fuels, non-fuel minerals and metals mined has remained more or less constant over the past decade. Statistical Abstract 2002 Tables 852 and 855. The mining industry is doing essentially the same work it was doing 20 years ago, with 60% of the workers it had then.

Given that manufacturing has had fairly slowly growing employment, there hasn't been an economic need for more mining productivity growth requiring new employment.

Manufacturing

U.S. manufacturing of indusrial machinery, electronic equipment, chemicals and motor vehicles actually shot up in the 1990s (in sales adjusted for inflation), while other sectors of the manufacturing industrial had essentially static levels of production. Statistical Abstract of the United States Table 954. The areas that have seen production booms have outside the automobile industry, done it with little or no change in employment. The U.S.'s electronic equipment manufacturing sales, for example, more than tripled in real dollars between 1990 and 2000, while the number of people employed in that indutry increased only 2%. Statistical Abstract of the United States 2002, Table 954 and 962.

Jobs have gone away in the manufacturing of textiles, leather, oil and coal products, and transporation (other than cars and trucks). Statistical Abstract of the Uinted States 2002, TAble 962. And, while manufacturing jobs have gone down, compensation in the manufacturing section has gone up by about 20% in real dollars between 1990 and 2000. Statistical Abstract of the United STates 2002, Tables 681 and 962. Thus, while manufacturing jobs have gone down, real manufacturing payroll has stayed close to constant or even gone up in the past couple of decades. Basically, in the manufacturing sector, it isn't so much a matter of U.S. jobs going overseas, as it is of increased efficiency at home, and new jobs being created overseas, instead of at home.

Loren Pechtel

Yeah--people keep deriding the "service economy". That's what both my wife and I are in--she's an acupuncturist and I'm a computer programmer. Shit jobs?!

Mike S.

There are two major problems with the "service economy" as I see it. One is that there are two distinct tiers of service jobs, the largest being the burger flipplers, retail workers, clerks etc. of the world and a much smaller elite of lawyers, doctors, executives and their like. There is not much of a middle ground apart from assistants to the upper class types and beaurocrats who add very little value to any economy. With a manufacturing economy the middle class is the strongest.

The second problem as I see it is that people always have and always will spend more of their money on goods than on services, much more. Move too heavily into a lesser sector while letting other countries take too much of the greater and the economy as a whole will be hurt, your personal experience is irrelevent. Check the record trade deficits that the US continues to post year after year and you will see why an strong industrial base is king. Every year $400-$500 billion worth of your money is flowing out of your country with no signs of it returning.

The belief that dominance of the software/hi-tech market will make up for the death of skilled heavy manufacturing is ludicrous and completely unsupported by facts and logic. Go to any finance site and compare the revenue of the worlds top ten software companies combined (far less than $100 billion total) to that of any major American automakers revenue (Ford: $162.5 billion, GM: $189.9 billion, Chrysler: $164.1 billion). Now realize how many more people and related industries would be affected if these companies went the way of the American television and radio industry. This is a very real possibility as European and Japanese companies are much more profitable and continue to take market share away from the big three. This combined with an apparent massive pension plan shortfall within these companies and you have an industry that is in dire straits.

That is just one example of importance of manufacturing to an economy and I have already rambled enough so I won't get into structural manufacturing/erecting. Just wanted to say that the money simply is not there to support a service only economy at the level most people are accustomed to.

Loren Pechtel

Originally posted by Mike S.
The second problem as I see it is that people always have and always will spend more of their money on goods than on services, much more.

When you look at the indirect use of services I have to disagree.

Our desire for goods is *NOT* increasing at anything like GDP, I strongly suspect it's actually decreasing. (Not that we want fewer things, but that the price of the things we want drops over time.)

Furthermore, those goods have a bigger and bigger service component to them.
We make cabinets, the sort of things you have in the kitchen. 30 years ago you would have found craftsmen and laborers in such a business. Now, however, there are two of us IT types and IIRC three engineers. None of us builds or designs cabinets.