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Ford assembly line in Illinois (Scott Olson/2009 Getty Images)
Ford assembly line in Illinois (Scott Olson/2009 Getty Images)

Neil Reynolds

There are no 'lost' jobs, just lost opportunity Add to ...

Everybody understands the decline in the number of farmers. One farm family now feeds 150 people. Why should the decline in the number of factory workers be any different? It shouldn't. Yet many people attribute the long decline in manufacturing jobs in North America to sinister forces.

President Barack Obama himself blames these job losses on U.S. corporations that "shipped jobs abroad" and on foreign countries that cheated on trade agreements. U.S. manufacturing jobs consequently disappeared, Mr. Obama says, "leaving millions of skilled, hard-working Americans sitting idle." If so, they didn't sit idle for long, any more than skilled, hard-working farmers who lost their jobs sat idle for long. Although manufacturing industries shed 10 million jobs from 1980 to 2006, the U.S. unemployment rate remained single digit and among the lowest in the world.

That was then. This is now. The real U.S. unemployment rate exceeds 15 per cent of the labour force - and U.S. manufacturers have eliminated another two million jobs since 2007. Yes, the economy as a whole dropped eight million jobs, but the decline in factory jobs has become a lament for a nation expressed by the nostalgic assertion that Americans "can't make things any more."

This is a defamatory lament. It incites further populism and further protectionism - and further delusion. It is, simply, wrong. The American factory worker leads the world in "making things." The problem is not production. It is perception. U.S. manufacturers mostly make high-technology "things" that aren't sold from store shelves - advanced computer electronics, for example, and sophisticated aerospace products. (The biggest losers in manufacturing: textile mills and clothing.) The fact is that the United States remains the No. 1 manufacturing economy in the world by a wide margin. The average American factory worker is more than twice as productive as the average worker in the next 10 leading manufacturing countries. The U.S. produces 22 per cent of the world's manufactured goods - compared with Japan's 13 per cent and China's 12 per cent.

Now the U.S. appears set to widen the gap. In 2010, the Great Recession notwithstanding, U.S. manufacturers are setting records in productivity. Expressed on an annualized basis, in 2000 dollars, the average factory worker makes $270,000 (U.S.) worth of things a year. In 1975, again expressed in 2000 dollars, the comparative number was $75,000. (Expressed in 2010 dollars, the average American factory worker makes $300,000 worth of things a year.)

The U.S. Bureau of Labor Statistics reports that 11.5 million people are still employed directly in manufacturing industries, and another 7.1 million people are employed indirectly: These industries sustain 18.6 million jobs or one in every six private sector jobs in the country. The average factory job pays $70,000 in salary and benefits, compared with $50,000 in the average non-manufacturing job - though some factory-based unions pushed wages so high that they essentially replaced themselves with non-union robots.

This is not an industry in decline. It is an industry doing more with less, the definition of increased productivity. This bodes well for the post-recession U.S. economy: Doing more with less, after all, is the source of all advances in wealth. You could theoretically restore millions of lost manufacturing job - by making everybody poorer. But who would think to do so?

In a report published in September, the National Association of Manufacturers (NAM) answered that rhetorical question by citing the U.S. government. NAM says U.S. manufacturers now face a serious threat to U.S. global manufacturing dominance, in the shape of government interference and government protection. The United States hasn't signed a single free-trade agreement since Mr. Obama took office, not even the agreements already negotiated, with Panama, Colombia and South Korea.

More aggressive countries - NAM specifically cites Canada - are signing trade deals around the world and pursuing what the associate calls "a strategy for [manufacturing]success." NAM notes that the European Union, with 32 free-trade agreements, is negotiating 17 more, one of them with Canada. These agreements will give Europe substantial export advantages, effectively shutting U.S. exports out of many markets.

Meanwhile, the U.S. government pursues a disastrous strategy at home: treating manufacturers as people who can't make things, compelling them to produce only the "right" politically correct products and imposing yet higher corporate tax rates. For consistency, perhaps Washington should restore a half million family farms while it's at it.

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