What's Caused Job Losses? Productivity Increases

by: Mark J. Perry

1. According to annual BLS data on manufacturing productivity, there was a 30% in productivity from 1993 (before NAFTA passed) to 2005, following a period of flat productivity growth from 1985-1992 (see top chart above, click to enlarge).
2. According to BLS data on manufacturing employment, there was an increase of almost one million manufacturing jobs in the five-year period following NAFTA (see middle chart above).
3. According to Federal Reserve data, manufacturing output increased by almost 60% in the period between 1994 and 2005 (see bottom chart above).

Bottom Line: Despite all of the political rhetoric about NAFTA, free trade and globalization causing U.S. job losses in manufacturing, one of the most significant factors in the recent decline of American manufacturing jobs is the significant increase in productivity of U.S. workers. Manufacturing output and productivity in the U.S. are both at all-time highs - we're able to produce more and more output with fewer and fewer workers.

Although some manufacturing jobs are gone forever, we're much better off as a country to be able to get increases in manufactruing output with fewer workers, just like the productivity gains in agriculture that eliminated millions of farming jobs. In the long run, we are much better off with fewer jobs in the farming sector producing an increasing amount of agricultural output, and likewise, we'll be better off in the long run with fewer workers in the manufacturing sector producing an increasing amount of output.