End of the Manufacturing Era - for US

I don't have a big issue around China, Germany, or any other foreign country for that matter, leading the world in manufacturing. We have already lived this era and have since gone on to eliminate most of our manufacturing jobs via increased productivity - just as we did with agriculture. Manufacturing now represents a only a small fraction of our overall economy. Today it employs less than 10% of our workforce. Even if the US had no imports, we would still only need 15% of our workforce to produce all the manufactured goods we consume. And this 15% number goes down every year with further increases in productivity.

Services are our mainstay and our vocation of excellence.  If we want to reduce unemployment that's where we should be looking to create jobs. Services represent 80% of the American economy. Services such as: rapid and efficient transportation of goods, air travel, food preparation, pleasant and efficient retail outlets with shelves stocked full of consumables, police services, insurance, garbage pick-up, finance services, sewage treatment, auto and home maintenance and repair, cleaning services, kid daycare, pet care, primary and secondary schooling, college and university schooling, entertainment services, internet services, design services, cable TV, cell phone services, hospitals, clinics, healthcare services - to mention just a few. Only a small percentage of our services are imported from China or India (one example of a service that is: help call centers), and I see it as unlikely that we'll import much more anytime soon.

I read recently that many in China believe America is in decline and that this will continue indefinitely. I can understand why they think this - their country and society are in the midst of their manufacturing age.  The #1 thing the Chinese want is manufactured goods, and the #1 thing they produce is manufactured goods. The Chinese have the biggest, the newest and the most modern manufacturing facilities and capabilities in the world. They see themselves as the leaders in the most important things in the world. And they see America's lesser concern with manufacturing as an an indication of decline.

What many do not realize is that once a society has a sufficient supply of manufactured goods and reaches a high level of wealth, then manufacturing becomes much less important - in the jobs it provides as well as in the products it delivers. I expect China's society will be in that situation a decade from now. Then for them too, manufacturing will be the 2nd dog. And perspectives will change.

Service has been the alpha dog in the US for a long time now, and the wonderful variety and quality of services we provide are unrivaled in the world. But for some reason a lot of Americans continue have the misconception that service jobs are minor and unimportant, and that manufacturing jobs are of utmost importance. They couldn't be more wrong. Take a look at the below chart.

            Note:  industry = manufacturing + mining + construction 

sources for the chart:  http://www.minnpost.com/macro-micro-minnesota/2012/02/history-lessons-understanding-decline-manufacturing

1840–1900: Robert E. Gallman and Thomas J. Weiss. "The Service Industries in the Nineteenth Century." In Production and Productivity in the Service Industries, ed. Victor R. Fuchs, 287-352. New York: Columbia University Press (for NBER), 1969. 1900–1940: John W. Kendrick, Productivity Trends in the United States. Princeton: Princeton University Press (for NBER), 1961. 1950–2010: Bureau of Economic Analysis, National Income and Product Accounts.

Sure, it's important that we maintain a certain level of manufacturing in the USA. Just as it's important that we maintain a certain level of agricultural production.

Today, with only 2% of our workforce employed in agriculture we export more food than we import. 20 years down the road from now I fully expect we'll be able to say "today with only 2% of our workforce employed in manufacturing we export more manufactured goods than we import".

The next time you hear a politician ranting that to fix unemployment we need to increase manufacturing jobs - you should just tune him out. He's either seriously uninformed, or he's intentionally misleading you..