Too many modern Americans associate manufacturing with horse carts and buggy whips. We think of dirty old industries that economic evolution will naturally replace with high-end services in America and low-wage workers in other countries. We don't appreciate that manufacturing still constitutes 12 percent of U.S. gross domestic product, 60 percent of U.S. exports and 70 percent of private sector research and development. If we hope to move beyond the production of goods, we need to think what would replace it.
We tried over the past thirty years to replace goods-producing jobs (down 54 percent) with service-providing jobs (up 34 percent). It hasn't worked so well. First, because our deficit in goods far exceeds our surplus in services -- $840 billion versus $160 billion-- so our accounts are out of balance. Second, service jobs don't pay as well. Even in the broad category of "services " which includes high-end professionals like doctors, lawyers and investment brokers " service-providing jobs have an average weekly wage of $610 compared with $810 in the goods-producing sector. Service jobs pay 75 cents for every dollar paid a production job. Retail jobs pay 50 cents.
This change helps explain the "lost decade in the latest Census Bureau data. Median household income dropped a thousand dollars in the ten years before 2008, the only ten year period in census records in which incomes failed to rise. It's easy to predict that 2009 will be even worse.
The second lesson from Pittsburgh is the connection between the production of goods and their sale. Trade, that is.
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