The GM Mini-strike

The GM strike settled after one day. According to the UAW the strike was about a lot of things all relating to the "deindustrialization" of the US economy. Jobs in the auto industry are not the same as they were 20 years ago and they are unlikely to be as many or as lucrative as they have been in the past. That is true in the US and also true around the world. But one issue raised by the union is totally bogus - an accepted urban myth but bogus - our manufacturing sector is pretty vibrant and still dominates the world economy. Over the last several years all of the major indicators for the manufacturing economy have improved.

A recent study by the Cato Institute and Daniel Ikenson suggests just how silly the common logic is. Since 2002 "output, revenues, profit growth" have accelerated. 2006 was a record year. The US produces two and a half times more than the Chinese in manufacturing output.

The story is not all positive. For example, gross output in American manufacturing, while rising in some key areas like the extractive industries (Coal and Oil) has declined in things like textiles, leather products and printing. Operating profits have also risen in some key areas including furniture and machinery. In value added per worker, transportation equipment has actually declined. But those declines are more than offset in other areas. Compensation has risen during the period at pretty good rates for most manufacturing industries. Computers and electrical compensation is up into healthy double digit additions. Median salaries have grown the best in those areas of manufacturing that are in the highest demand. Ikenson's paper offers some very good numbers on each of the sector in key areas (wages, productivity, output).

Clearly part of the problem was the recession in the early part of the decade, then as in previous recessions employment in the manufacturing sector dropped pretty seriously - but since then those numbers have declined in most sectors or have been reversed. There are pockets of problems. Michigan, according to Ikenson, ranked 50th among the states in terms of additions of value added growth or of GDP growth.

This is not a problem that is limited to the democrats and a lot of the anger and rhetoric is aimed at China. The worry expressed by Ikenson that I share is that the rhetoric will begin to limit our continued efforts to liberalize trade around the world - that is most pronounced in Asia (Korea and China) and in our relationships with Mexico and Central and South America. What the critics of this seem to ignore is that while there is some evidence of decline in some industries the net effect of a more liberalized trade regime is the production of both more jobs and better paying ones.

Myths are often a hard thing to break but Ikenson's paper should help to dispel some of the most pernicious ones. In many cases, the political class does not take to data when it does not prove their case. The same could be said for people like the protectionist Xenophobic Lou Dobbs. For those interested in more than rhetoric, the paper should be very helpful.