Trade vs. manufacturing

A question from Yahoo! Answers:

Do you like the trade agreements or was it better when we had manufacturing?

Since the trade agreements took affect the economy seems out of balance and people seem to have less money working these service jobs, would you put it back and have tariffs and manufacturing jobs again or keep it how it is?

Trade agreements have nothing to do with job loss in manufacturing. The fastest pace of manufacturing job loss is in fact observed in China, even though China’s industrial output rises very quickly. The estimates I saw suggest that China loses between two and three million manufacturing jobs every year.

The real reason for job loss in manufacturing (and not just in the U.S. or China, but worldwide) is the fact that manufacturing is much easier to mechanize and automate than services. Computer-controlled machine-tools and robots can machine, weld, paint, and assemble just fine. But they cannot flip hamburgers, teach middle school, or empty bedpans in hospitals. A doctor today sees as many patients per day as a doctor in 1906. A teacher today actually has less students than a teacher did in 1906. And oh by the way, how many dental hygienists were there in 1906?

A very similar thing happened to agriculture. In 1870, half of the U.S. workforce was employed in agriculture. By 1920, the percentage dropped to a quarter. Now, it’s about three per cent. As output rose, labor was working with greater and greater amounts of physical capital. As a result, there was less and less need for labor in agriculture, and workers kept moving away into the cities…

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