Manufacturing Productivity Has Improved Our Lives

by: Mark J. Perry
In a comment on this CD post about the dramatic gains in U.S. manufacturing productivity, JoeMac asks an important question: "How have these gains in productivity improved the lives of Americans?"

The chart above displays the share of Personal Consumption Expenditures represented by three categories of manufactured consumer goods that are most important to U.S. households: a) food and beverages consumed at home, b) clothing and footwear, and c) furnishings and durable household equipment (BEA data here). In the late 1940s, it required almost half (41%) of consumer expenditures to provide for the household basics: food, clothing and home furnishings, which are all manufactured goods.

As a direct result of the significant improvements in manufacturing productivity, manufactured goods have become cheaper and more affordable over time, resulting in a declining share of total consumer expenditures required to furnish our homes, and cloth and feed our families. By 1985, the share of consumer spending on household basics was only 20%, or less than half of the 41% share in 1948. For each of the last five years since 2006, the share of consumption expenditures on food, clothing and household furnishings has been below 14%, and was only 13.5% in 2010.

For every $100 of consumer spending today, only $13.50 is spent on food, clothing and household furnishings and $87.50 is spent on everything else. Contrast that to 1948, when it took $40 of every $100 of spending for the basics, leaving only $60 to spend on all other goods and services.

Bottom Line: Without the major productivity gains in the manufacturing sector over the last fifty years, it would still require almost half of consumer spending just to furnish our houses, and feed and clothe our families. The standard of living for the average American household has improved significantly over the last 50 years, and keeps getting better all the time, thanks in large part to greater manufacturing productivity.

Here's the proof that productivity gains have improved our lives: Would you be willing to exchange your computer and laser printer for an old manual typewriter? Would you be willing to exchange your cell phone or iPhone for an old rotary phone? Would you be willing to exchange your big-screen color TV for an old black and white TV? Would you be willing to trade your iPod and iTunes for an old phonograph and 45 RPM records? Would you be willing to trade your modern refrigerator, washing machine or dishwasher for appliances from the 1950s? I think most rational people would much prefer today's manufactured goods to those from past eras, and we can thank manufacturing productivity for lower costs and greater variety, and for better quality and more energy-efficient products.