Can we stop this nostalgia for manufacturing jobs please?

May 16, 2016 by

We’re told, endlessly, that we must do more manufacturing here in Britain. The underlying argument being that manufacturing jobs are good jobs, that they pay well, and that given that we’d like to have more well paid jobs therefore we must do more manufacturing. This argument is really just evidence of the ghastly conservatism of large portions of the British commentariat. For the truth is that the marginal manufacturing job is not well paid.

OK, so these figures are from the US but the same basic story will be true here too: Recent research by the National Employment Law Project (NELP), however, found that manufacturing production wages now rank in the bottom half of all jobs in the United States. In decades past, production workers employed in manufacturing earned wages significantly higher than the U.S. average, but by 2013 the typical manufacturing production worker made 7.7 percent below the median wage for all occupations. During the same time period productivity in the U.S. manufacturing sector increased at a rate one-third higher than in the private, non-farm economy overall. The median wage for production workers in the manufacturing industry in 2013 was $15.66, with 25 percent of these workers earning $11.91 or less.

The actual figures themselves can be checked in this table here.

There are of course very well paid manufacturing jobs: just as there are very well paid services jobs. But the marginal manufacturing job pays less than the average wage. Meaning that if we expand this sector, move people into it, then we will be lowering the average wage of the country. This is also known as making us all poorer.

We could argue two different ways about why this is so. One would simply be that there’s people half a world away willing to do those manufacturing jobs for £1 an hour. That inevitably puts pressure on whatever anyone is willing to pay labour here. The second would be that we appear to value the marginal production of more services more than we do the marginal production of manufacturing: thus we are made richer by having more of those services.

But whichever argument we use to explain it it is still true that the marginal manufacturing job these days is not a well paid job. Thus we’re not going to increase the number of well paid jobs by increasing the amount of manufacturing we do.

Source: Can we stop this nostalgia for manufacturing jobs please? — Adam Smith Institute

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