We Used to Build Stuff In this Country: How the Service Workforce Eclipsed the Manufacturing Workforce

There has been this belief for over a decade now that, as the video above illustrates, American manufacturing is practically dead and along with it blue collar jobs. Frustrated American workers bemoan the loss of an employment marketplace where any guy could graduate from high school (maybe) and get a blue-collar job that paid enough to feed his new family. The typical case that gets made is that since NAFTA (North American Free Tree Act) came into existence, there has been a loud sound of manufacturing jobs being sucked out of this country in all directions overseas. Simply put, people believe that in 2010, there are hardly any jobs left for the average non-college educated American, that every toy and gizmo is made in China and if you want customer service learn to speak Hindi.

The idea that manufacturing has all but dried up in America is largely a myth. The Federal Reserve Bank of Chicago reported in August of 2010 that, “…between 1950 thru 2007 manufacturing output was just over 600% higher while over the same period growth in real GDP of the US was only a slightly lesser 560%…The greater efficiency of the manufacturing sector afforded a slower price increase or an outright decline in the prices of this sector’s goods.” In other words, it’s not that manufacturing dried up so much as the workers who did the manufacturing were replaced by advances in technology. The plants are still here in large numbers and we are still the leading producer of goods in the world.

The Center for Trade Policy Studies cites the following statistics that support the reality that the US remains a manufacturing world leader as of 2006:

The top manufacturing country in the world is currently the United States. The US contributes 21% of the world’s total manufacturing economy.

The US manufacturing output is 2.5 times higher than the output of China (the number 2 manufacturing economy in the world).

Since 1950 the US total number of manufacturing jobs has been a constant of 13 million workers.

So the question is that if manufacturing output has gone up 600%, why haven’t the jobs followed suit?

The typical answer to this question is that good blue-collar jobs have been shuttered in the US and moved over seas. In actuality, productivity is the main culprit. The Federal Reserve Bank of Chicago reported that, “In 1950 it took 1,000 workers to produce what 184 workers could produce in 2009.” Productivity has greatly increased since 1979 with the advent of computer numerical control devices (which are machines that are controlled by computers that greatly increase the efficiency of the assembly line) and these machines also require a greater level of education to maintain and operate. Essentially what has happened here is that we’ve decreased the amount of workers needed to labor in a factory while increasing the need for skilled and educated workers to maintain the machines and the keep the lines moving. In short, we’ve decreased the number of jobs done by human beings and replaced some of them with jobs needed to be filled with educated workers. We still build stuff here, we just don’t require a lot of people to do it, much like agriculture.

On the subject of education in the workforce, it used to be that employers did not look for higher education in their workers. Now the trend towards a post-high school educated worker has not only permeated through the manufacturing world but has also extended throughout most of the rest of the US economic workforce. For example, the police force used to only require a high school diploma for entrance in to the local academy and military enlistment didn’t even require that much. Now you have to have 2 years of college or complete a 2-year degree within a certain period of time to be employed as a police officer and these days the military won’t consider you unless you’ve graduated from high school. For those that long for the days when an education didn’t matter and anyone willing to do hard work could feed his family, those days are over. Today the average American worker absolutely has to finish high school, probably has to finish college and should get some degree of post-college education or training in order to feed his or her family.

The other part of the education-worker equation is that more employers demand higher educated workers simply because of the wide availability. Before World War II, most Americans didn’t go to college and many left high school early to get a job in order to help out their families. In 1950 6.2% of Americans graduated college. In 2000 25.6% of Americans graduated college. The shift in attainable higher educated workers started with the GI Bill that paid for veterans to further their education. Those people got high paying jobs in various industries from engineering to law to medicine to sales. In turn, those people passed that value onto their offspring along with the wealth they had earned. So now, it is not really so much a privilege to go to college as it is an expectation that most will go to college. That being said, employers are more likely to look for said college graduates because they exist in such large numbers. The theory is that the person with a college degree has already shown a greater potential for maximum positive output as opposed to the non-college educated worker. The merits of this theory are debatable which is why employers will frequently allow X amount of experience in specialized areas to substitute for education. However, unless you were brought up in the family business, you can’t get experience without the education first.

That brings us to the title of this piece. The implication in the above scene was that American manufacturing is dead, leaving no jobs for the working class blue-collar folks in America. The statistics just don’t support that argument. Again, we make plenty of goods here, we just don’t employ many people to do it. The reality is that if you want to have a career in America today you have to enter the exponentially growing service economy. The service economy is made up of but not limited to the medical industry, sales, food service (chef’s, cooks, waiters, etc.) transportation (trucking), social and therapeutic services, education, and repair or refurbishment services. Simply put, these are the jobs that for the most part you can’t displace the human in favor of the machine or foreign worker. Not only that but it is difficult to increase the amount of productivity of these jobs therefore as the amount of work grows, so do the job opportunities accordingly. For example, with the amount of people out of work, there tends to be a rise in recorded number of domestic violence occurrences. Typically when DV cases increase the need for more counselors, child protection investigators and women’s shelter workers increases as well. Another example would be mandated class sizes and teachers. As school enrollment increases, and class size requirements remain constant, the need for more teachers or teachers’ assistance increases as well (all things being equal). Unlike manufacturing, what took 1,000 service workers in 1950 probably takes the same amount of workers today, if not more so.

Service economy jobs are also where maybe you could replace the worker with a machine but you wouldn’t because many would consider it creepy. For example, I cannot see an agency replacing human home health aides with robot ones no matter how much the robots improve productivity and quality. I imagine it will be another hundred years before the average person becomes comfortable dealing intimately with caretaker machines in their home. Another example is studies that have found that children will learn better from a virtual purple dinosaur rather than a flesh and blood teacher, but no education administrator in his right mind would actually get rid of teachers in favor of virtual dinosaurs. If they tried to replace real teachers with virtual ones I think most parents would plotz (never mind what the teachers union would do). We like machines in America but we don’t like them that much yet.

So where are the jobs in America? Well 1.3 million jobs have moved overseas since 1992. That equates to 1/6th of the jobs lost since 2006. In the grand scheme of the total American economy that’s actually not a lot of jobs compared to the total amount of jobs in America. I empathize with the frustration people have with not only being unable to find a job fairly easily and without having to compete heavily but then also not being guaranteed that job for life. However, the reality is that the US is part of the global economy and thus you are not only competing with your local neighbor for a job, but you are also competing with your neighbor in the next state and you are also competing with your neighbor in the next country. Pandora’s Box has been opened for good and short of the federal government losing its mind and instituting a major trade war (like the one that helped start World War II) globalization and the increased importance of the service economy is a permanent fact of life. In short, if you want a job today, get an education, learn to compete and sell yourself to potential employers, learn a second or third language and assume you’ll be moved around the world, and think ahead in case the worst happens and you find yourself out of a job (or worse, out of a career). Remember it is only 235 milliseconds from New York to Bombay.