alien & sedition.
Wednesday, September 05, 2007
  Manufacturing Shared Prosperity

Cato's Daniel Ikenson follows up on his own thesis about the allegedly-surprisingly-vital state of American industry with a mention of Peter Goodman's recent article, which provided a case study in the same phenomenon.

As Goodman describes it:
The United States makes more manufactured goods today than at any time in history, as measured by the dollar value of production adjusted for inflation — three times as much as in the mid-1950s, the supposed heyday of American industry. Between 1977 and 2005, the value of American manufacturing swelled from $1.3 trillion to an all-time record $4.5 trillion, according to the Bureau of Economic Analysis.

With less than 5 percent of the world’s population, the United States is responsible for almost one-fourth of global manufacturing, a share that has changed little in decades. The United States is the largest manufacturing economy by far.
Ikenson offers his own thoughts on the implications of this "metamorphosis" in American manufacturing:
During the most recent decade, U.S. manufacturing has become increasingly oriented toward the middle and upper ends of the value-added spectrum. Opportunities abound for workers with skills or the willingness and wherewithal to acquire them. In fact, the title of the National Association of Manufacturers tenth annual Labor Day Report on the state of U.S. manufacturing is “Rising Incomes Cushion Economy,” and its subtitle is “Finding Highly Skilled Workers Remains a Challenge for Manufacturers.” It seems to me that rising wages should make more workers willing to get the skills, and the need to find highly-skilled workers should induce manufacturers to assist on the wherewithal front.
The story about the current economy continues to be the disconnect between the optimists and the pessimists: the former seem completely unable to understand the latter, even though pessimism about the economy is the lived experience of most Americans.

Wage growth in fact remains relatively slow. But if we take Ikenson's analysis on faith and concede -- happily -- that there is increasing demand for highly-skilled manufacturing workers, then we should also take seriously the question of "wherewithal." Specific investment in advanced skills is a risky thing, as Jacob Hacker has pointed out. And it becomes an increasingly difficult question of "wherewithal" when seen in the context of the many other risks facing American workers: lack of portable, affordable health care, unreliable defined-contribution pension schemes, low savings and high levels of debt, and an increasingly volatile housing market.

Certainly it would be a good thing for high-value-added manufacturers to invest in helping train workers to fill the jobs they need filled. But addressing those other sources of insecurity would go a long way toward encouraging workers to make their own investments in obtaining advanced skills -- or even in starting up their own ventures.

Good social insurance can be capitalism's best friend. And in the long run, experience has shown us that economic growth most benefits society when government helps ensure that the newfound prosperity is shared by all.

If we're having a "second industrial revolution," as Ikenson calls, it, let's not forget the lessons of the first.

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Ikenson seems to ignore all the recent job losses in manufacturing. He's also contradictory in his logic. If he deplores "protectionism," why does he not criticize China's blatantly protectionist practices (like currency manipulation)?
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