Monday, November 7, 2011

why doesn't it feel like progress?

John Tamny argues, correctly, that manufacturing job loss is a sign of increasing productivity. So why does it feel like so much pain? What is it about the manufacturing jobs that we actually miss?

America is undoubtedly a country which is much richer now than it was decades ago during the manufacturing heyday.

Much of that growth is due to population growth and the increasing participation of women in the workforce, but the US has been, and remains, the wealthiest large country in the world measured by per capita GNP with a mean wealth that has just been growing pretty much since the founding of the republic.

So why do we feel like crap?

Although the country has grown wealthier on average, that doesn't mean most people have grown wealthier. If the former CEO of a failed company who still managed to get a 10 million dollar golden parachute walks into a bar, the mean wealth of the patrons of the bar goes way up. But the typical patron is still no richer. A better statistic is the median wealth.

Shockingly, median household income has not increased since the 1990's, and has only barely increased since 1967! The typical American family is not much richer now than in the manufacturing heyday of 1967!

(source US census, graph courtesy of NPR)

During this time, since 1967, mean income has nearly doubled! So there is much more wealth per person now than there was in 1967, but the typical household is barely better off. (Part of this is due to the decline in the number of people per household - a family of four needs more people than a single guy living alone)

By now, its no surprise where all the extra money has gone: to the top 1% and really the top 0.1%.

The problem is that the increase in manufacturing productivity and its concomitant loss of jobs has coincided with a rise in the share of the income captured by the few at the top. The line workers at GM who were pulling down $50/hour before they were laid off are now making $10/hour at Walmart while the Walmart CEO is making $35 million a year (more in an hour than the typical Walmart worker makes in a year)

The fact is that Manufacturing jobs are seen as good jobs: well paid, good benefits. Their loss has been seen as a loss of good jobs. But this is perhaps more a difference in culture: once upon a time manufacturing jobs were Satanic Mills while Andrew Carnegie made millions. But today there is simply a tradition that the manufacturing workers will share in the benefits.

Coming soon, how has this effected the economy for scientists?

1 comment:

Brian K Boonstra said...

On a worldwide scale, the picture looks different, and more optimistic, especially on plots that incorporate purchasing power parity.

I often think it myopic, and a little bit cruel, for these economic analyses to include the USA only.

Though you carefully avoid the common manufacturing fetish, and prescriptions of protectionism, that are a common companion of such plots, many others fall right into it. They motivate the reader to consider fixing the problem in ways that may seriously harm the ability of the rest of the world to continue increasing their living standards.

My actual biggest concern is the unpopularity of inheritance taxes. With serious inheritance taxes, we can at least ensure that any individual fortune someone manages to amass will revert to the rest of society within a few generations. Without them, every major fortune brings us closer to suffering a class of rich, powerful, disconnected and idle wastrels.