Those of us ensconced in debates in support of U.S. manufacturing often hear opponents claiming that the over-regulated U.S. labor market and unionized heavy industry render us uncompetitive in global markets.
That may sound convincing given competition from emerging markets, but there are lots of advanced economies with long records of positive net exports, while we continue to run large deficits in manufactured goods, year after year.
If you're thinking the difference must be prices, you're thinking like an economist... and you're pretty much wrong.
This new BLS report (including a link to their rockin' new dashboard -- go BLS!) provides the data in the form of manufacturing compensation costs across countries, with conversions to dollars using market exchange rates.
First, as shown in the first figure, in the most recent year for which they have complete data, we're toward the low end of the advanced economies in terms of compensation costs. Second, in dollar terms, manufacturing compensation costs have increased much faster elsewhere over the past decade (figure two; these summary measures use trade-weighted currencies, based on each countries relative share of U.S. trade; you can use the dashboard link above (open the Excel file) to view individual countries).
*OECD, Eastern Europe, East Asia
Source: BLS
Now, compensation costs aren't the whole story, especially with manufacturing becoming more capital intensive, but at least by these measures, which of course account for exchange rate movements (essential when we're discussing price competitiveness), there's not much support at all for an argument that overpaid manufacturing workers are the source of our competitive disadvantage.
I'd argue it has a lot more to do with the lack of a coherent manufacturing policy, wherein public and private representatives strategize on the best ways to boost the sector and gain global market share. Of course, this means retiring the canard that "we don't pick winners." Our competitors are well ahead of us in these endeavors and this is not the time for ideological sloganeering.
This post originally appeared at Jared Bernstein's On The Economy blog.
I'd guess it means workers wages, but if not - would you like to define what you mean by this term ?
The U.S. manufacturing sector never emerged from the 2001 recession, which coincided with China's entry into the World Trade Organization. Since 2001, the country has lost 42,400 factories, including 36 percent of factories that employ more than 1,000 workers (which declined from 1,479 to 947), and 38 percent of factories that employ between 500 and 999 employees (from 3,198 to 1,972). An additional 90,000 manufacturing companies are now at risk of going out of business.
Manufacturing employment dropped to 11.7 million in October 2009, a loss of 6 million or 32 percent of all manufacturing jobs since October 2000. The last time fewer than 12 million people worked in the manufacturing sector was in 1941. In October 2009, more people were officially unemployed (15.7 million) than were working in manufacturing.
For each manufacturing job lost, 3-10 support jobs are also lost (http://buyusafirst.org/). Since 6 million manufacturing jobs were lost since October 2000, the net effect on the economy is a total job loss of 30-40 million.
"Outsourcing is just a new way of doing international trade," said N. Gregory Mankiw, chairman of Bush's Council of Economic Advisors, which prepared the report. "More things are tradable than were tradable in the past. And that's a good thing." The report itself, under Bush's signature, offered similarly encouraging words, asserting that "when a good or service is produced more cheaply abroad, it makes more sense to import it than make or provide it domestically." Mankiw and the president's report contend that the U.S. economy ultimately will benefit when the production of goods and services finds its way to the nation that can render them most efficiently.
http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&contentId=A30194-2004Feb10
We don't need to start a trade war but we do need to quit giving away every advantage we might have.
Hmmm. Yes, I suppose if you are a fat cat who wants to destroy any hope of a prosperous AND equitable economy for the vast majority of us all so you can continue to pillage the economy it would be worthless. Or if you'd swallowed so many right wing talking points you were no longer capable of critical thought and using facts to reach conclusions. Yeah, that might do it too.
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/trs.pdf
Terminations, Reductions, and Savings...
In countries like Germany there is industrial policy, and unions, private and public sectors and federal and regional governments get together and look 20 years into the future, to create a strong manufacturing sector that will benefit everyone.
What does industrial policy create for Germany? Mercedes Benz, Audi, BMW, Porsche, VW
What does a lack of industrial policy create for the US? Chevrolet assembled in Mexico from Korean parts.
The key argument : During the 30 years after WWII, the absence of industrial policy could be justified because the Third World countries like China and India lived by subsistence agriculture. But now that China or Brazil or India make advanced products, the advanced western countries have to pick advanced market niches where they can be competitive.
Manufacturing will be the key variable that will define the success of the US in the future.
-- No USA manufacturing : the US turns into a Banana Republic.
-- Yes USA manufacturing due to good industrial policy : US joins Germany and other advanced countries.
Maybe it's because of things like this:
'....Under President Obama, government will spend more on welfare in a single year than President George W. Bush spent on the war in Iraq during his entire presidency. According to the Congressional Research Service, the cost of the Iraq war through the end of the Bush Administration was around $622 billion. By contrast, annual federal and state means-tested welfare spending will reach $888 billion in FY 2010. Federal welfare spending alone will equal $697 billion in that year.
While campaigning for the presidency, Obama lamented that "the war in Iraq is costing each household about $100 per month." Applying the same standard to means-tested welfare spending reveals that welfare will cost each household $560 per month in 2009 and $638 per month in 2010....'
I think Germany has it right. People around the world are willing to pay for premium products made there. The US manufacturing is suffering because outside of military products, its difficult to justify the premium.
In one month - 1,114,000. That's what the Obama brags about creating in an entire year.
Obama has added $5 trillion debt in under three years already
today manufacturing is a hollow shell with the heart of it exported .
how can America compete with the world with big brother clamping down more regulations and imposing more fees and taxes and permits ....
All this country needs is for the government to get out of the way. we must have free trade , not regulated trade.
Ron Paul is the exact opposite of what the US needs.
Deregulation is not the answer.
I know by now you're probably laughing, but that's the way it was at GM before we went broke.
American unskilled labor is done.....
http://www.nytimes.com/2004/01/06/opinion/second-thoughts-on-free-trade.html
Second Thoughts on Free Trade - New York Times
"...Yet in that essay of 70 years ago, Keynes himself was beginning to question some of the assumptions supporting free trade. The question today is whether the case for free trade made two centuries ago is undermined by the changes now evident in the modern global economy.
Two recent examples illustrate this concern. Over the next three years, a major New York securities firm plans to replace its team of 800 American software engineers, who each earns about $150,000 per year, with an equally competent team in India earning an average of only $20,000. Second, within five years the number of radiologists in this country is expected to decline significantly because M.R.I. data can be sent over the Internet to Asian radiologists capable of diagnosing the problem at a small fraction of the cost.
[snip]
We are concerned that the United States may be entering a new economic era in which American workers will face direct global competition at almost every job level -- from the machinist to the software engineer to the Wall Street analyst. Any worker whose job does not require daily face-to-face interaction is now in jeopardy of being replaced by a lower-paid, equally skilled worker thousands of miles away..."
The U.S. is there.
Reality can be justified from just about any point of view, by looking selectively at the information that coincides with your view.
Cheers
Also, other Western countries, such as Germany, protect their labor markets with tariffs,
most also provide some form of universal health care.
We rank 4th, with Sweeden number one...LOL...
We have dropped 2 places because of our deregulated and questionable financial markets per the study, but they say our finanical reform( which repubs are against). may correct this when fully implemented...
In other words , deregulation does not always make you more competative..
For example, those that regulated CO2 sooner, now have electric generation 3 times more efficient than in the U.S. with our older and yes dirtier plants... MFG here when the energy you need can increase 400% over just a few years as under Bush, does not make for competativeness.The U.S. has no long term strategy in place to prevent such increases where as the EU/Germany moved to new technology and have 5 times fewer power outages.. and Japan is even better..
Being ranked 4th however, does NOT mean that our regulations prevent competativeness and of course our regulations are much less than in the EU/Sweeden(#1).
Regards
Don´t spread the blame.
The USA and Greece are both equally off track, for different reasons.
Research at the American Georgetown University indicates that skills from science graduates are so popular among businesses that they can virtually choose whatever job they like. And more often than not are they unrelated to science."
"http://www.scienceguide.nl/201110/science-graduates-cherry-pick-jobs.aspx"
Thats because not just by choice, but the numbers graduating are more than twice the science jobs being created each year in the US and half of those jobs being created are filed by H1bs(75k per year, with wages 30% less, driving wages in the science fields lower than in non related science fields)...
US science graduates are replacing jobs that nonscience majors once got. Those with nonscience degrees, then replace those with jobs that dont require college!
We have less hightech workers than when the PC was first created...
Engineering and etc are being outsourced in record numbers, high tech moves to where the MFG is over time historically. When a factory closes as 60,000 did under Bush, you lose the MIS, HR, accounting and engineering departments.
What state has the highest percent of enginneers and the highest unemployment! DUH..
Pls note with degrees in Chemistry, computer science, accounting, now retired CPA, I recall getting 25% wage increases every year/30 job offers....That isn't the case today...
Regards