…the same is true of establishing policy for a national economy and while misunderstanding the relevant economic indicators.
It has often been asserted, by economists and others, that the decline in US manufacturing employment is largely a result of great strides in automation-based productivity, and that offshoring and imports have had relatively little effect…some have gone so far as to say that the offshoring/import effect on jobs has been practically irrelevant compared with that of automation.
I was quite willing to believe that there have been great strides in manufacturing productivity, but the idea that offshoring & import effect on jobs was unimportant never sat very well with me…it seemed clear that the tens of millions of workers producing for export, in China and elsewhere, must have had a very material impact of American jobs, even given the greatly superior productivity of American factories to those located in most other countries.
But now it seems that even the assumption of a broad-based productivity improvement in American manufacturing must be questioned. Susan Houseman, an economist at the Upjohn Institute, has done some interesting work in unpacking the productivity numbers. Her analysis indicates that a very high proportion of the measured growth in US manufacturing productivity actually reflects productivity growth in a single sector: computers and electronic products. Excluding this sector reduces to overall productivity growth for US manufacturing reduces annual productivity growth from about 3% to a little less than 1%. Moreover: Houseman argues that the productivity growth in that computers & electronics segment is less a result of automation-driven manufacturing productivity than it is a result of (a) better product design, and (b) the way the price deflators are calculated to turn nominal into real numbers. And in all segments, the handling of imported intermediate goods (parts, subassemblies, and materials) changes the productivity estimates in ways that may be questionable:
Also, direct links to some of her work:
I learned about this work via Marginal Revolution…a few relevant comments at the link.