It might be hard to believe but American manufacturing output reached an all-time high in 2015. A report from the Federal Reserve indicates that the amount of durable goods manufactured in the United States last year was more than three times larger than in 1980.
The output of some other American manufacturing sectors including petroleum and food is also at an all-time high. Total US factory output actually came within 3% of its all-time high – set in 2007 on the eve of the Great Economic Meltdown. It appears that American industry has recovered even though the USA is now the world’s number two manufacturing nation behind China.
Manufacturing Comes Back Jobs Don’t
There is a very dark side to this rosy picture that politicians such as Donald Trump and US Senator Bernie Sanders (D-Vermont) have been exploiting. Even though factories are producing more than ever before, around five million American manufacturing jobs have disappeared since 2000.
At the turn of the 21st century there were around 17.3 million factory jobs in the United States, Market Watch Columnist Rex Nutting pointed out. By 2015 that number had fallen to 12.3 million.
This would suggest that automation and robotics and not trade are the real culprits for job loss in the United States. Even though manufacturing is still America’s largest economic sector generating $6.2 trillion in revenue in 2015 and accounting for 36% of the nation’s gross domestic product it only employs around 8.7% of the work force.
These figures do not bode well for America’s future because the Pew Research Center projects that the US population will rise to 438 million people in 2050. The United States currently has a population of a little under 323 million. If the trend in manufacturing continues, there will be fewer jobs than ever before and more people.
Manufacturing Boom is not Benefiting Average Americans
The situation in the United States shows that it is now possible for a nation to have a level of economic and manufacturing output without significant job growth. To make matters worse, income and wealth growth in the United States has also slowed and income inequality has gotten worse.
The median wealth of middle class Americans households fell by 28% between 2001 and 2013, the Pew Research Center found. At the same time upper income households received 49% of the aggregate income produced in the United States. Middle income households only received 43% of aggregate income, in 1970 the middle class received 62% of aggregate income.
The median income of middle class households in 2014 was 4% less than it was in 2000, Pew found. That seems to indicate the loss of manufacturing jobs was having an effect on the middle and working classes. Part of the problem is that in the United States, factory workers are considered middle class, just as many college educated professionals in the United Kingdom label themselves working class.
Interestingly enough, the disappearance of factory jobs has not necessary led to an economic downturn in the United States because the percentage of the population in the upper class has increased. Pew found that in 2015, 9% of Americans were in the top economic bracket, in 2001, around 7% were.
This could mean that the upper class which presumably owns the machines is taking advantage of the new manufacturing technology to enrich itself at everybody else’s expense. One reason why upper class wealth could be increasing is that factory owners are able to take a higher level of the profits. Worse, it looks as if the manufacturing boom is not benefiting working or even middle class Americans.
Will it lead to Technophobia?
Americans are already feeling the political effects of this disjointed economy. Trump in particular has been able to win elections and attract large crowds with promises to restore manufacturing by placing high tariffs on Chinese and Mexican made goods.
Trump has attracted support from working class voters by claiming his plan to put a 45% tariff on Chinese products and a 35% duty on some Mexican imports would bring back factory jobs. The figures above indicate that even if Donald were to somehow convince Congress to implement his trade policies (an eventuality that is extremely unlikely) the jobs would not come back. Instead the Trump scheme would probably speed up the adoption of automation and robotics and possibly kill more jobs.
This of course leads to another question, when will some political figure or religious leader start blaming technology itself for the job losses? There is already a nasty undercurrent of technophobia in the Trump campaign, Donald has attacked both Apple and Amazon and tried to label those companies unpatriotic.
The next logical step will be for somebody to campaign for a ban or limits on automation and/robotics. Organized technophobia among the working class is likely to be the next outcome of these job losses.
The American economy has become more productive than ever. Unfortunately there’s one product it is not producing and that’s jobs. Sooner or later political leaders will have to face this reality and find some way to compensate for it. If they do not America could be on the verge of class warfare in the midst of the greatest increase of manufacturing output in history.
