Thursday, July 7, 2011

Mythic Manufacturing

FLG, unlike Ryan Avent, was not surprised by the vote tally over at the Economist's debate on the importance of manufacturing to an economy. Slightly more than 3/4th of people believe an economy cannot succeed without a big manufacturing base.

FLG has written about this before many times, but he hears stuff like this all the time from pundits, business executives, his classmates, and people on the street. "We don't make stuff in America anymore. We need to make stuff."

But then if you ask one of these people who have just made these very sober, thoughtful, and serious statements whether they'd rather their kids be a plumber or scientist, carpenter or lawyer, factory worker or doctor, they, pretty much without exception, say banker, lawyer, and doctor. Well, guess what? Scientist, lawyers, and doctors don't make anything. Even engineers don't really make anything themselves. They design things. To take the example from Free Exchange post, Apple's engineers don't actually build the iPods.

While economies aren't people, the United States is better off if its citizens have a lifestyle closer to that of a lawyer or doctor, .i.e service providers, than somebody who "makes stuff."

There are only two problems with the lack of a large manufacturing base in an economic. First, the geopolitical fact that without a large manufacturing base it's hard to win wars. However, this is a question of manufacturing output, which is still very high the United States, not a question of manufacturing employment, which is how most people intuitively approach the issue of manufacturing. Second, is that the skill level associated with services is relatively more bimodal, and thus more unequal, than manufacturing. A person with limited education can acquire skills in manufacturing and move up from low-skill to medium- or high-skill labor over time. With services, at the high-end, you have doctors, accountants, lawyers, management consultants, bankers, etc, all of whom are highly-educated, but then at the low-end you have gardeners, custodial staff, and the seemingly ubiquitous manicure places. You can't go from manicures to management consulting as part of a career path.

This isn't to say that it's easy or smooth to go from low-skill labor to high-skill labor, but one can see a path where a person is hired to do day labor, they then get to do some rough carpentry, and then move up to more highly-skilled finish carpentry over time as part of their career. You don't go from gardening to lawyering as part of a career. High-end services require years of formal education, often graduate degrees. So, the fear that we have a bimodal economy of gardeners and retail associates serving bankers and lawyers isn't entirely unjustified.

The only exception, and it's a big exception, is IT. It's definitely possible for somebody with a bit of technical skill to get into a career path where they are a highly-skilled programmer or system administrator.

And to be honest, it's not clear that a shift towards more services, wouldn't result in a mid-level service sector emerging.

1 comment:

Zog Karndon said...

The problem with having everyone be a lawyer/doctor/engineer (etc.) is that supposedly, lawyers/doctors/engineers are brighter than average.

Which is a problem given that (by definition) half the population is dumber than average.

So what is the dumber half of the population supposed to do?

I hope the answer is not "pick up the garbage of the other half"; but that seems to be the answer so far.

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