Monday, February 25, 2008

Do you want a job or wealth? 

The other night when I presented my slides for the presentation described here, I thought someone would catch me on slide 18, where I show employment in the St. Cloud area divided between credit-sensitive and credit-insensitive industries. I was unwilling to classify manufacturing so I made a separate line. The newspaper report picked up my remark that the industry had lost 310 jobs. But wages to the 17,437 workers still in manufacturing in the area -- more than 17% of area employment, much higher than national averages -- had risen $13.1 million between 2006:II and 2007:II. Nobody made any note of this. I wonder, is St. Cloud's manufacturing sector better or worse off?

That same day, Russ Roberts produces a fine essay discussing this very problem in a larger scale. Commenting on an op-ed by Harold Meyerson that observed that the biggest private sector employer now is Wal-Mart, whereas some years ago it was GM, Roberts observes,

It's a fact. Sort of. Actually, the federal government is the largest employer�1.7 million employees and that excludes the Post Office. Does that mean we've become a nation of bureaucrats because a little over 1% of all employees work for the government? Does it mean we're on a perilous downward path where instead of making things, we regulate things? That would be a silly statement. It is equally silly to conclude that because Wal-Mart is the largest private employer we've stopped making things.

Actually, making things is not the road to prosperity. The road to prosperity for a nation is to use the skills of its citizens wisely. The wise use of those skills depends on the skills and desires of people in other nations. Sometimes that means making stuff. Sometimes it means providing services in exchange for making stuff.

And as it turns out, we do make a lot of stuff here in the United States. Manufacturing output is dramatically greater today than 30 or 40 or 50 or 60 years ago, the halcyon era that Meyerson imagines once existed. Manufacturing output has almost tripled since 1970. What has happened over the last 60 years is that productivity in the manufacturing sector has increased greatly. That has allowed the US manufacturing sector to produce a lot more stuff with roughly the same or even a declining number of employees.

Wal-Mart is a red herring. It's success hasn't come at the expense of the manufacturing sector. The trends in the manufacturing sector go back 60 years, long before Wal-Mart existed.

Two points flow from this. First, contra Charlie Quimby, it's not true that state public employment has fallen. Go to DEED for the data, and you'll see that in Dec. 2007 state employment was 97,135 compared to 92,425 in Dec. 2002. Where employment fell was in local government, from 298,637 in Dec. 2002 to 292,534 in Dec. 2007. (This data is being revised by the state and will come out on Thursday.) Fewer government regulators at the local level strikes some of us as progress.

Second, and you can see it on slide 19 of the presentation linked above, St. Cloud area output in manufacturing isn't a one-time blip. We produced 5.2% per year more stuff in manufacturing between 2001 and 2005 (the last year for which we have local area GDP). But employment in manufacturing in St. Cloud stayed flat. Is this bad? I guess it depends -- do you want to get more stuff for the same number of workers and have the other workers find new things to produce, or do you want to force those workers into employment? Do you think they'll make more goods there than elsewhere?

If I can have more net worth AND more leisure time, am I better or worse off?

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