The "salaries in manufacturing" number, though, should include jobs other than direct labor: design engineers, industrial engineers, procurement people, etc–both automation and shortening of product lifecycles will tend to shift more of the personnel to these categories. Unfortunately, it would probably be very hard to pull out the domestic-only component of these functions in most companies.

I worked in the Purchasing department of a large transportation company for a couple of years. I was once a buyer for a national restaurant company. I'm probably more aware than most of the variety of goods that big corporations buy.

should read:

"which in part will be manufacturers…."

I almost forgot. Your point about businesses buying manufactured goods is also insightful and pertinent, and something I and others tend to overlook, or not realize, in talks about manufacturing.

If we can get people who want to tax the crap out of businesses to realize they are a significant source of demand for manufacturing, perhaps US corporate tax rates will become lower, leading to more companies actually opening up shop in the US than otherwise would have been the case, which in part will manufacturers….

His(hers?) post is reasonable in length. It is my post that looks, and is, long. And thank you. In the future I'll try to make it shorter somehow so that readers eyes don't glaze over.

John Dewey,

You make good points, as usual. I'll modify my general argument in the future to make your point clear as well about previous luxury goods becoming more and more commonplace.

I agree with just about everything in your comment. But I'm not so sure about this limit on "stuff" that Americans will buy.

Yeah, we might not need a third TV, but I did just buy another one for my workout room. Americans may limit the number of cars to the number of drivers, but that won't stop them from adding a jet ski and a motorcycle to the fleet in the garage.

Consumers and businesses seem to be buying all sorts of goods that weren't necessary until prices came down. Defibrillators are being purchased for aircraft, school buildings, and workplaces. Upper middle class families found a place on the counters for espresso machines. All my golfing buddies have sky caddies, though it'd hard to see any improvement in their games.

No doubt we're devoting a larger share of disposable income to services, as you point out. But I don't think the era of stuff accumulation is over by any means. We've got to fill up all these big houses with something.

A new product is invented, perhaps the washing machine. Manufacturers start hiring workers to make them, then start making them, and then start selling them.

Over time two different things happen with very different effects on employment. One thing that happens is that a bigger and bigger percentage of households buy them, which means more units are sold, and more hiring to make them is done.

The second thing that happens is that employers figure out how to make more of them with fewer workers per 1000 washing machines sold. This is called productivity. If the market for washing machines keeps growing faster than the rate of productivity, then there will be more hiring, otherwise there will be fewer workers making washing machines one way or another (i.e. either layoffs or attrition).

In a competitive market higher productivity means that prices get lowered, or quality increases, or both, as different companies compete for customers. The lower prices means that more and more households can afford to buy washing machines.

Eventually this simply has to lead to fewer workers making washing machines as productivity increases but sales slow, and quality improvements mean fewer replacement sales, which simply accelerates the decline in the number of manufacturing employees making washing machines.

Repeat this process in all manufacturing industries of consumer durables. Most households don't want to buy a second washing machine if the one they won works well enough, preferring to spend their money on something else.

They don't want to buy a third car (for the parents anyway) in general, preferring to spend their money on something else. If cars were cheap to buy, then sure people would buy lots of them, just the way many women buy shoes they rarely wear. But cars aren't that inexpensive to buy, unless you're rich, which helps explain why many rich people own lots of cars. Because they can.

They may buy more than one tv, but eventually they stop as they prefer to spend their money on something else.

They will only buy one lawnmower, seeing little point in buying another and lots of point in spending their money on something else.

And so on. How do you increase, or even stablize, manufacturing employment when the number of workers needed for each different type of (durable) manufactured ware eventually turns down and goes down "forever"?

The only feasible way is if people choose to spend their money on buying more and more "things", instead of buying more and more services.

The verdict is in, and has been for over a generation. People will only buy so much "stuff", preferring to buy services instead once they own "the usual" stuff. This holds true in economically developed countries all over the world.

Thus manufacturing employment as a percentage of the economy will inevitably keep falling, and falling, and falling, much the same way that the percentage of Americans working in the farming industry has fallen steadily pretty much since the industrial revolution started improving agriculture productivity.

Thus any politician, or tv talking head, or newspaper editorialist, who proclaims that we must "save manufacturing jobs" is telling you, whether or not they realize it, that either productivity must stop(!!!), and along with it wage increases (you can't sustainably have one without the other), or that the people must be forced to stop buying services they want in order to finance their purchases of new "stuff" they don't want but which they must be forced to buy anyway.

Of course I don’t mind manufacturing producing goods and jobs.

Nonetheless I read this post commenting on “Harold Meyerson insists yet again that America has lost its manufacturing, alleging also that investors are abandoning the U.S in favor of "nations with far cheaper workforces" as a discussion of losses of job in the manufacturing sector, and if so, I felt we should be looking at figures related to that workforce…that’s all.

Now if it is only in about losing out “manufacturing” in general then I misread it, though I do not understand why anyone would be interested in just discussing that in just a general way.

I have no doubt that is true. Of course, the PPI is used to adjust for price changes in manufacturing inputs. The GDP deflator is used to adjust for price changes in manufacturing value added. So all the high inflation in energy and other commodities would be included in PPI but correctly excluded from manufacturing GDP deflator.

I just thought about why you and I may see this issue so differently.

Your comment seems to indicate you believe the purpose of a manufacturing operation is to provide jobs – which sounds vaguely like a European socialist concept I once read.

I believe the purpose of a manufacturing operation is to produce a good.

Where you would measure the success of a plant in salaries, I would measure it in number of goods produced.

Not sure what you mean, Per. If one wants to lack at the impact of what on jobs?

- the impact of automation on jobs/salaries?
- the impact of globalization on jobs/salaries?
- the impact of low-skilled immigrants on jobs/salaries?
- the impact of right-to-work laws on jobs/salaries?
- the impact of corporate re-engineering on jobs/salaries?

The number of manufacturing jobs in the U.S. has been dependent on so many factors I don't see how anyone could make conclusions about causes.

IMO, manufacturing salaries and total manufacturing output are two completely different numbers, and one does not indicate much at all about the other.

In any case, the competing claims under discussion are:

Myerson – America lost its manufacturing to nations with cheaper labor;

Boudreaux – America manufacturing is stronger than ever in history.

All the relevant data I've seen support Don's position. Do you have any data which does not?

Absolutely, but if you just want to look at the impact on jobs, then salaries paid is a better way to start than looking at total manufacturing output.

However, one would expect that with depreciating USD there should be more incentive to produce.

Anyway, thanks for the link, I did wonder what the meaning of the deflator actually is

Adjusting GDP using any measure of CPI is just not valid. Manufacturing GDP measures the value added by manufacturing operations. Manufacturing GDP does not include:
- raw material and other inputs such as imported energy;
- transportation costs;
- most marketing costs; and
- retail costs.

If we used any measure of CPI in the denominator, we would be adjusting for price changes in goods and services not included in the numerator, which is nominal manufacturing value added.

James Hamilton provides a very simple explanation of the difference between inflation and the GDP deflator.

I know many of you guys are skeptical of those government officials who derive such measures as GDP deflators. But they really do know so much more about this than you do.

Salaries in manufacturing say nothing about the total manufacturing output of a nation. All over the world, automation has been eliminating manufacturing jobs for decades.

All consumers benefit when manufacturing productivity is increased, of course. But increased productivity does sometimes lead to job losses. Certainly some former manufacturing workers must seek employment in new fields. Such adjustment of human resources has been ongoing for centuries.