Jackart wrote a fine post recently debunking this myth, worth a read.
I was reminded of it when I was reading an article about measuring GDP and stumbled across the chart below, which sums it all up nicely. To wit, there hasn't been a decline in UK manufacturing (by value) at all (nobody disputes that manufacturing employment has fallen, sad, but a separate topic), it is merely that service output (by value) has increased faster than manufacturing output, so there was a relative decline but an absolute increase.
So to constantly bang on about "manufacturing declining as a share of GDP" is to miss the point. It's the same when people wail about hedge fund managers "paying less tax than their cleaners". Wrong! They pay a lower rate of tax than their cleaners but still pay far more in tax overall. Whether they 'should' pay a lower or higher rate of tax as their cleaners, or the same rate (my preferred option) is a different topic, but let's try and get facts and figures straight before we debate them*:
* I might as well chuck in the point that a Land/Location Value Tax based on capital selling values would not fluctuate wildly even if capital selling prices fluctuated wildly, as it is only relative values (between different houses) which matter, absolute values are just the method for apportioning a fixed total bill. So if all house prices doubled (or they all halved) then the amount payable on any particular house would not change one penny. That's basic maths and is quite simply true, whether you agree with LVT or not.
Thursday 16 February 2012
The "decline" of British manufacturing
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13 comments:
The flipside of the process "by which we all get rich"
is that there are fewer and fewer jobs for the thick and incompetent. Of course if we accepted that having a larger proportion of the population effectively unemployable is a reasonable price to pay for the rise in the general standard of living and stopped trying to pretend that there are jobs for everyone, then it wouldn't matter so much.
B, that's a bit harsh. Germany, and I'm sure plenty of other countries, manages to have universal good education, good employment rates, good living standards. Work is good, it's good for the individual and it's good for society, let alone good for the economy.
At the same time, having a halfway decent Citizen's Income and leaving people in peace if they can't find work is a good idea too.
UK manufacturing has changed. My perception (as a small manufacturer) is that UK plc does not do cheap bulk, it does small quantities of very specialised products with a small skilled workforce.
Think of it as suits. We don't make thousands of cheap suits, they are made in Asia but we do make small quantities of beautifully tailored suits in Saville Row.
So instead of making 200 low quality suits at 25 quid each we make (and sell) one perfect suit at 5,000 quid.
Anon, thanks, that confirms what I thought.
Bayard, isn't that why in the 60s people were encouraged to "train for leisure" because it was thought that with automation etc. over time there would be less for people to do?
That is why education and training is so important because there has to be a mechanism for people to upskill or at least improve their chances of "keeping up".
Unfortunately as a country goes up the value scale *and* insists on minimum living standards there will be people who can't compete. That is the reason underlying the massive expansion of the welfare system post 1945.
Of course it turns out at the moment that for the vast majority of the workforce there is plenty of medium-skilled and administrative work to do. When a good chunk of the "middle classes" can't keep up we won't be quite so scathing about "the underclass".
Maybe.
Hi Bayard, - or put it another way - Progress towards an increase in the standard of living by definition causes unemployment. No one builds a machine to increase the amount of labour required to produce the finished product.
BE: "Unfortunately as a country goes up the value scale *and* insists on minimum living standards there will be people who can't compete"
It appears inevitable that the gap between low wages and high wages will get wider, but that's no reason for wages at the bottom to become higher. And the really big gap is not in earnings, it is in land ownership, which is far more concentrated than earnings, that's the only thing which concerns me, not the gap in earnings.
Good point about make-work for the middle classes. That's the bread and butter of the middle classes, I think.
Din, there is no natural reason why automation should increase unemployment - that's the whole point of the chart. We need fewer and fewer to manufacture stuff (because it can be automated) but you can't automate a hairdresser, taxi driver or chef.
MW there is massive political pressure for living standards at the very bottom to keep up with increases in the middle. The "poverty" line in the UK demands double glazing, a washing machine and satellite TV! The very richest didn't have these things 60 years ago.
I agree that wealth distribution is even more stark than income distribution. What is interesting is that people like my mother who are capital rich (property boom) don't necessarily have a much "higher standard of living" than those in the middle (good jobs, next generation).
BE, double glazing and washing machines look like very good investments to me, whatever your level of income. As to your Mum, ask yourself: how much money would somebody have to be earning to be able to buy her house, pay the mortgage out of post-tax income and have the same amount of money left over as your Mum currently does?
@MW and @Anon 17 February 2012 00:11
As another SME manufacturer I sort of concur. Yes the £5k suit argument chimes (and I do a bit of this) but we also make volume stuff that 'can' be made in Asia. The trick is we do it better, quicker (< lead time), better support, customer management etc
Plus I bet we do it with more 'kit' and less people than in Asia.
9 years ago when we started out we had 40-ish people plus a bunch of temps and did circa 9m packs. In 2011 we did 14m packs with average 44 people. But we now have 7 automated production cells whereas then we had 3 plus a bunch of
manual processes.
Shiney
Employment is not a goal in and of itself. When technology enables us to do something quicker and easier, it frees us up to do something else. Whether it's for ourselves or for someone else is, to a degree, irrelevant.
SM, thanks for anecdotal, that comment would also support a recent "reader's letter of the day" which says that manufacturers who are physically near their customers have a slight advantage.
F, full employment is A Good Thing, employment in itself is A Good Thing - from the point of view of the individuals who have a job or from the point of view of society as a whole. Automation (more output for less labour) is also A Good Thing
But there is no contradiction between wanting less unemployment and more automation, and we could (theoretically at least) have both.
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