According to some pundits and political hustlers, free trade has led to a loss of "good manufacturing jobs." Let’s look at it, but before doing so, let’s first see whether we should work ourselves into a tizzy over other job losses.
In 1900, 41 percent of the U.S. labor force was employed in agriculture. Now, only two percent of today’s labor force works in agricultural jobs. If declining employment is used as a gauge of an industry’s health, agriculture is America’s sickest industry.
Let’s not stop with agriculture. In 1970, the telecommunications industry employed 421,000 workers in good-paying jobs as switchboard operators. Today, the telecommunications industry employs only 78,000 operators. That’s a tremendous 80 percent job loss. What happened to all those agriculture and switchboard operator jobs? Were they exported to China and India by rapacious businessmen?
The easy and correct answer is that our agricultural sector has seen massive gains in productivity as a result of advances in farm machinery, innovation and technology. There have also been spectacular advances in telecommunications. In 1970, those 421,000 switchboard operators annually handled 9.8 billion long-distance calls. Now 100 billion long-distance calls a year require only 78,000 switchboard operators. What’s more is, the cost of making a long-distance call is a fraction of what it was in 1970.
Here’s my question to you: Should Congress do something to restore all of those jobs lost in agriculture and telecommunications, and what might that something be?
The tremendous gains in productivity seen in agriculture, telecommunications and some other industries have benefited the manufacturing industry as well. According to David Huether, chief economist of the National Association of Manufacturers, U.S. manufacturers are producing and exporting more goods than ever before. While manufacturing output easily outpaces the larger U.S. economy, manufacturing employment, at 14.2 million, is at its lowest level in more than 50 years.
How do we reconcile lower manufacturing employment with rising manufacturing output? In his April 3, 2006, BusinessWeek article, "The Case of the Missing Jobs," Huether says, "Since 2001, with the aid of computers, telecommunications advances, and ever more efficient plant operations, U.S. manufacturing productivity, or the amount of goods or services a worker produces in an hour, has soared a dizzying 24 percent. That’s 72 percent faster than the average productivity advance during America’s four most recent recession-recovery cycles dating back to the 1970s. In short: We’re making more stuff with fewer people." That means rapid economic growth doesn’t translate into the kind of manufacturing job creation of earlier periods.
How about the claim that our manufacturing jobs are going to China? The fact of business is, since 2000, China has lost 4.5 million manufacturing jobs, compared with the loss of 3.1 million in the U.S.
Job loss is the trend among the top 10 manufacturing countries who produce 75 percent of the world’s manufacturing output (the U.S., Japan, Germany, China, Britain, France, Italy, Korea, Canada and Mexico). Only Italy has managed not to lose factory jobs since 2000.
Economist Joseph Schumpeter referred to this process witnessed in market economies as "creative destruction," where technology and innovation destroy some jobs while creating others. While the process works hardships on some, any attempt to impede the process will make all of us worse off.
Imagine for a moment that technology hadn’t destroyed most of the jobs of those 41 percent of Americans working in agriculture in 1900. Where in the world would we have gotten the manpower to make all those goods produced now that weren’t even imagined in 1900? Jobs destroyed through the market forces of creative destruction make us all better off, and that applies also to job destruction that comes from peaceable, voluntary exchange with people in different cities, states and countries.