Read Doug Irwin on this controversial topic. Doug is arguably America’s leading trade economist these days. He writes:
“Has U.S. manufacturing been vaporized in the process? No–manufacturing production has risen about 40 percent over the past decade. Despite lower wages abroad, foreign firms have chosen to produce cars made by high-wage workers here, including Honda in Ohio, Mercedes-Benz in Alabama, BMW in South Carolina, and Toyota in California. Of course, the share of the American workforce in manufacturing has fallen steadily over the postwar period because of vast increases in productivity, but this is a worldwide phenomenon. Between 1995 and 2002, China, Japan, Brazil, and other countries lost more manufacturing jobs than did the United States, according to an Alliance Capital Management study.
The service sector will be reshaped by international developments, too. But just as low-wage China has not taken all of our manufacturing capability, low-wage India is not going to take all of our service sector production. Service producers will become even more specialized and will have to seek new ways of improving their efficiency and productivity. (Productivity in the service sector has notoriously lagged behind that in manufacturing.) As long as the American workforce retains its high level of skills and remains flexible as firms position themselves to improve their productivity, the high-value portion of the service sector will not evaporate.”
Irwin also offers a lengthy description of the benefits of outsourcing, read the whole thing, as we say in the blogosphere.
Comments are closed.