Contributor: "Revive American Manufacturing?" Not Necessary—It's Thriving More Than Ever

If you trust what politicians say, you might assume that American industry has been depleted, emptied out, or “moved abroad.” Both conservatives and liberals agree that manufacturing in the U.S. is weakening. Their debate typically centers around assigning responsibility and determining the appropriate level of tariffs needed to address this issue.

This commonly shared story is incorrect.

When considering the discussions about job losses and economic downturns, it's important to recall that the unemployment rate remains quite low. 4.1% and actual wages (those taking inflation into account) have been growing . If anything, manufacturing is experiencing a labor shortfall, with over 600,000 open jobs in the sector.

It's equally important to recognize the significance of U.S. manufacturing output Even after adjusting for inflation, it remains close to all-time highs. Although it is approximately 5% lower than its peak in December 2007, it has still risen by 177%. compared with 1975 In the year when the U.S. last experienced an annual trade surplus. Industrial output encompassing manufacturing, mining, and utilities combined—is higher than ever That's not really a collapse.

The main cause of misunderstanding lies in distinguishing between employment and production levels. Indeed, the workforce in manufacturing has shrunk significantly—from approximately 19 million in 1980 down to roughly 13 million now. However, this decline did not occur because the U.S. ceased producing goods; rather, it transpired due to our remarkable improvement in manufacturing efficiency.

The productivity in manufacturing has significantly increased due to automation, technological advancements, and global supply chains. Similarly, we currently produce more food than ever before. just over 1% Of Americans employed in agriculture (a decrease from around 75% in 1800 We generate a higher volume of manufactured products using significantly fewer workers. This isn’t an indication of economic decline; rather, it signifies advancement.

Additionally, regional elements contribute to the notion of decline. The closed factories in cities like Detroit or Youngstown cause significant hardship for the communities' workers. This reality isn't disputed. However, manufacturing hasn't vanished; instead, it has moved and advanced.

This renders discussions regarding its alleged decline unconstructive. Instead, the focus ought to be on how we can most effectively support these communities, which includes enabling them to gain advantages from alterations that have proven more beneficial than detrimental to the nation overall.

High-tech manufacturing has surged in various regions across America, generating employment opportunities in sectors like aerospace, semiconductors, pharmaceuticals, and sophisticated machinery as well as related services. The salaries for these positions are significantly higher compared to those traditionally offered in the manufacturing industry. Output The production of computers and electronic goods has surged by 1,200% since 1994. Output from the motor vehicle sector has also increased by more than 60%. The U.S. and its workforce excel in these sectors, where they hold considerable competitive advantages.

The biggest job and output losses were in sectors like apparel, textiles and furniture. Apparel and leather-goods output, for example, have fallen more than 60% since 2007. Should we do something about this?

If we were able to reverse these tendencies, it would involve moving well-off manufacturing employees back to positions with lower wages producing garments and footwear. Even if we managed to initiate a manufacturing resurgence, we wouldn't revert to being a country predominantly made up of factory laborers, as achieving manufacturing efficiency hinges on automation.

Next comes the fact that younger individuals prefer working in the service sector. This brings us to another misconception: the idea that an economy heavily reliant on services must be weak or unproductive. Actually, services currently account for approximately 79% Of the total U.S. gross domestic product. This is characteristic of affluent economies. As we become more prosperous, our consumption of services like healthcare, education, and entertainment increases compared to our demand for manufactured goods.

This outcome stems from increasing wealth, which fuels innovation and contributes to greater efficiency in manufacturing. As roles in the services sector grow more appealing, producers need to boost salaries or adopt technologies that reduce reliance on manual labor to attract employees. If people nowadays accepted pay akin to what was typical in the 1950s within similar working conditions, we would witness far less automation. However, this scenario would result in significantly lower economic status as well.

Ultimately, certain individuals contend that safeguarding local sectors such as steel or semiconductor manufacturing is essential for national security purposes. Notably, even renowned economist Adam Smith, known for advocating free trade principles, acknowledged exceptions for matters of defense. However, the belief that this type of protective measure significantly boosts employment is misguided. Any gains in jobs within these protected industries would likely be negated by declines elsewhere across American businesses.

The claim 'America doesn't manufacture much anymore' serves as a compelling argument, yet it is inaccurate. In reality, we still produce an abundance of items, particularly those with significant complexity and value such as airplanes, medications, and sophisticated electronic devices. While our workforce may not focus heavily on producing basic commodities like t-shirts or toaster ovens—tasks that can be performed at lower costs elsewhere—the success in generating and exporting cutting-edge equipment allows us to purchase even greater quantities of imported goods.

The foundation of American industry isn't crumbling; it's transforming—growing more efficient, more focused, and more reliant on capital. Shielding industries from foreign competition won't resurrect former glory days or restore previous employment opportunities. Instead, it will only increase costs for the future and steer workers towards less lucrative positions.

Veronique de Rugy is a senior researcher at the Mercatus Center located at George Mason University. This piece was developed in partnership with Creators Syndicate.

This tale initially surfaced in Los Angeles Times .