Fed's Strauss Says Manufacturing Employment Decline Tied to Increased Productivity

Senior Federal Reserve economist likens industrial shifts to past agricultural trends in the United States.

CHICAGO -- The health of U.S. manufacturing should be measured by production growth instead of job creation, said William Strauss, senior economist and economic adviser for the Federal Reserve Bank of Chicago Nov. 15.

Manufacturing jobs as a share of national employment have been declining for 50 years as automation has replaced slower, manual processes, said Strauss during a media event at Rockwell Automation Inc.'s 20th annual automation fair in Chicago.

On average, manufacturing output has been growing 3.1% annually over the past 63 years, Strauss said. Automation has enabled U.S. manufacturers to produce significantly more with fewer workers than they did in previous decades. Today, 177 workers can generate as much output as 1,000 plant employees could produce in 1950, Strauss said.

He likened the shift to the decline in agricultural employment in the United States. Manufacturers were once viewed as "the bad guys" because they were replacing farming jobs, Strauss said. But farmers are much more productive today with far fewer workers as farming equipment has become more automated.

Strauss disagreed with previous speaker Robert Atkinson of the Information and Technology Foundation who said manufacturing in the United States was in a state of steep decline.

Since 2000 manufacturing job growth in the United States has been slower than any other developed nation, said Atkinson, president of the Information Technology and Innovation Foundation. Atkinson called for a national industrial policy that fosters innovation through tax incentives, workforce development and technology investments.

Economists' market-driven approach to policy has dominated decision-making in Washington, Atkinson said. More government and private industry partnerships are needed to re-establish the United States a global manufacturing leader, he said.

Atkinson repeatedly pointed to Germany as a possible model for manufacturing growth. Germany's government has focused more on innovation and technology investments than the United States. More than 55% of Germany's manufacturing base is high-tech focused compared with 42% in the United States, Atkinson said.

That puts the United States at a competitive disadvantage because it must compete with low-wage countries for products, Atkinson said.

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