Friday, October 5, 2012

Freedom from Want 5: Jobs and Manufacturing

In my latest reading of Freedom from Want: American Liberalism and the Global Economy, Edward Gresser uses charts to argue against the idea that freer trade results in fewer American jobs and eviscerates American manufacturing.

The first chart in my latest reading was entitled “Jobs, Imports, and GDP Since 1975″.  This chart looks at the years 1975, 1985, 1995, and 2005.  (This book was published in 2007, prior to the economic crisis.)  It shows that U.S. GDP and  private-sector jobs have increased dramatically, even as the unemployment rate has decreased.  And this has coincided with an increase in imports and the ratio of imports to the GDP.  Gresser gets the job data from the Bureau of Labor Statistics, the import data from the Bureau of the Census, and the GDP information from the Bureau of Economic Analysis.  For Gresser, the number of jobs in the U.S. has increased, even after trade agreements.

The second chart is entitled “Businesses Not Fleeing”.  In this chart, Gresser is arguing against the notion that “businesses fled, at least in the mass, to poor countries with weaker labor and environmental laws” (page 124).  The chart shows that, from 1960 to 2005, foreign investment in the U.S. has increased dramatically—-and, by “foreign investment”, Gresser seems to mean foreign companies setting up their plants in the United States.  The chart also demonstrates that American companies in 1985-2005 spent far more for “factories and offices abroad” in Europe, Canada, and Japan than they did for these things in developing countries.  The endnote for this chart cites the following as Gresser’s sources: “Direct investment data from Bureau of Economic Analysis for 2005; October 1986 Survey of Current business for 1985; Historical Statistics of the United States, Colonial Times to 1970, for 1965.”

The third chart is “Unemployment Falling Since Nafta”, and its point overlaps with that of the first chart, so I’ll move on to the fourth chart, “Stable Manufacturing in the U.S. Economy”.  Gresser’s point for this chart is that “Using constant dollars, which adjust for the low and sometimes falling inflation in manufacturing and the high and rising inflation of health and real estate, factories account for more of America’s production in 2006 than they did in 1992″ (page 126).  The chart shows that GDP has increased from 1993 to 2005, and that the “Manufacturing Value Added” has increased (from $0.974 in 1993 to $1.537 in 2005).  The manufacturing as a percentage of GDP, however, appears more complex: it went from 12.9 percent in 1993, to 13.6 percent in 1995, up to 14.5 percent in 2000, and back down to 13.6 percent in 2005.  Gresser’s source for these statistics is the Bureau of Economic Analysis.

The fifth chart is entitled “U.S. Manufacturing in the World”, and it is “measured by value-added”.  The point of this chart is that U.S. manufacturing increased between 1993 and 2003—-from 21.4 percent to 23.3 per cent—-which shows that it has remained stable.  The U.S. is dramatically outpacing China, and manufacturing went down in Japan and the European Union (yet Japan and the European Union still have high manufacturing rates—-Japan had 18.2 percent in 2003, and the EU had 26.1 percent in that same year).  Gresser’s sources here are the UN Industrial Development Organization and the World Bank.

The sixth chart is entitled “U.S. Manufacturing Exports, 1990-2006 (in billions)”, and its claim is that U.S. manufacturing exports increased dramatically between 1990 and 2006.  Unfortunately, as far as I can see, Gresser does not cite a source for that.

And yet, Gresser acknowledges that machines are replacing people in American factories.  The seventh chart is entitled “The Vanishing Factory Job”, and it shows that the number of manufacturing jobs was lower in 2006 than it was in 1990 (though there was an increase in 1995).  I do not see a source for this claim.  But the picture that I am getting is that U.S. manufacturing may be increasing, but the number of manufacturing jobs is decreasing due to machines replacing workers, and Gresser states that this is in response to “a challenge from low-cost competitors” (page 146).  Gresser acknowledges that this is stressful for laid off workers, especially considering the “weak safety net” in the United States, but he hopes that the U.S. will stay strong by attracting “the most sophisticated industries” through scientific research, and also by higher education.

Another point: On page 127, Gresser states that 95 percent of Americans who lose their jobs do so as gas station attendants, construction workers, secretaries, maids, and “the like”, and this is due to such factors as “recessions, bad management, computers, and robots or superior nearby competitors” (page 127).  According to Gresser, trade is not a factor behind most layoffs in the U.S.  Gresser in this paragraph cites as sources Gary Hufbauer’s Institute for International Economics Survey, and Kate Bronfenbrenner of Cornell.

One issue that I wish Gresser addressed in my latest reading is the salaries of American jobs: the number of jobs may be increasing, but do they pay a decent wage?

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