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Monday, February 6, 2017

How Fewer Manufacturing Jobs Can Be Good for Workers and the Economy

Manufacturing's share of employment has decreased because jobs have been created in other sectors.

Politico reports that Donald Trump may not have a Council of Economic Advisors, the White House’s in-house think tank. Upon hearing that, former Obama White House CEA chair Austin Goolsbee tweeted: “If you never want to hear-even privately-that your idea will cost X/have these effects/needs more thought, you should definitely ban the CEA.”

Which got me thinking: What sorts of things might a proper Trump CEA tell Trump? Maybe that superfast economic growth is very, very hard.  Maybe that we can’t grow out way out of the entitlement debt problem. Maybe that selling health insurance across state lines won’t revolutionize the insurance marketplace.

And maybe the CEA economists would show Trump these two charts:

The above charts are taken from a Martin Wolf column in the Financial Times, with this bit of explantion:

The main explanation for the long-term decline in the share of manufacturing employment in the US (and other high-income economies) has been the rise in employment elsewhere. In 1950, employment in manufacturing was 13m, while that in the rest of the economy was 30m. By the end of 2016, it was 12m and 133m, respectively. Thus, all the increase in employment between 1950 and the end of 2016 occurred outside manufacturing. Yet output of US manufacturing was not stagnant. Between 1950 and 2016, output rose 640 per cent, while employment fell 7 per cent. Even between 1990 and 2016 output rose 63 per cent, while employment fell 31 per cent. The explanation for the contrast between output and employment is rising productivity.

Republished from AEI.

  • James Pethokoukis is a columnist and blogger at the American Enterprise Institute. Previously, he was the Washington columnist for Reuters Breakingviews, the opinion and commentary wing of Thomson Reuters.