Erm, Iain?

Iain Dale worries that State employment is now higher than employment in the manufacturing sector. In both the US and the UK.

Well, yes, but there\’s two entirely different stories here.

Divide the economy into three sectors (hell, why not?). Agriculture, manufacturing and services.

Three-ish centuries ago just about everything was agriculture. Certainly just about all employment was (which is what is actually being talked about here). 80% or more of the population farmed in one manner or another.

OK, fast forward to say the 1920s. Agricultural employment was down to, ohhh, say 20% of the population (depends upon which country to be honest), 60% in manufacturing? The remainder in services?

Look at matters now. Agriculture is 2% or so of the UK workforce, a similarish number in the US. Manufacturing is I think 13% (from memory, not looking at Dale\’s figures) of the UK workforce, meaning that everyone else is in services.

What\’s been happening here is that we\’ve actually found it easier, over the centuries, to increase productivity in agriculture than anything else. We thus need, again over time, ever fewer people growing the things we put into pots to eat. This has freed up people to go into manufacturing so that they can make those pots to put the feed into.

We\’ve also found it easier to increase labour productivity in manufacturing than we have in services. Not too strange an idea, for services are almost by definition constructed out of the time of another human. Manufacturing is easier to automate. So again, we\’ve been able to increase manufacturing production (and yes, in the UK, manufacturing production is double, triple, what it was in the 1970s or 1950s, despite there being a small number of people working in it and a smaller proportion of the population working in the sector) while freeing up people to go and offer services.

OK, so that\’s one part. The part about manufacturing being a smaller part of employment, as happened to agriculture before it.

The rise in State employment is something very different. That\’s a political decision that many of these services are supplied by and thus many of the workforce providing services are employed by, the State. This may or may not be a good idea (hey, argue about it amongst yourselves) but it\’s got nothing at all to do with the decline in manufacturing employment. That latter is a good thing, as it\’s a sign of increased productivity, and as Paul Krugman has pointed out, productivity isn\’t everything but in the long run it\’s almost everything. As long as labour productivity keeps rising then so will the earnings of that labour. That is, living standards will continue to rise, our children will be better off than we are now.

That\’s a very different thing from arguing about whether services should be run by or delivered by whichever tosspot lies convincingly enough to get into Parliament.

12 comments on “Erm, Iain?

  1. Isn’t it the case that Britain is nearly the only (Belgium? and a few others?), country where manufacuring was more than 50% of employment. In others the service sector grew too quickly.

    I agree with most of what you say, but this is nonsense. I think you are thinking of the US:

    and yes, in the UK, manufacturing production is double, triple, what it was in the 1970s or 1950s, despite there being a small number of people working in it and a smaller proportion of the population working in the sector

    On a 2003=100 basis, manufacturing output in Nov 08 was 97, at the start of 1970s it was 80 (it averaged about 85), so that’s about 20% higher.

  2. Isn’t there a definition thingy going on as well?

    If a manufacturing company decides that its large IT requirements should be outsourced those jobs transfer from manufacturing to service. Ditto cleaning, admin and tea ladies.

  3. The problem is the stagnation and decline of the manufacturing base of the country.

    I’ll take it that UK figures reflect the US figures in the graph from http://www.ContraryInvestor.com .

    With higher productivity comes less dependence on manufacturing jobs, but without an adequate production base, the service sector, no matter how efficient cannot generate enough wealth to maintain a equal standard of living.

    The disparity between rich and poor in this country has grown proportion to the difference between the service and manufacturing (and agricultural) sectors.

    The growth of the manufacturing output is only impressive when taken without the stagnation of the manufacturing base. If the manufacturing base has grown at the same rate as population, then the UK would be far richer than it is now. However, the right wing policies, destroying the working class base, have lead to a decline in manufacturing by population. Lowering the wealth of the lower and middle classes in favour of the super-rich.

    We need a complete restructuring of the UK economy in favour of the manufacturing sector, with it’s technology driven increases in productivity leading to increased total median wealth rather than average wealth.

  4. However, the right wing policies, destroying the working class base, have lead to a decline in manufacturing by population.

    And an increase in quality of stuff manufactured, I’ll bet. Give me advanced pneumatic switchgear for installation on oil platforms than crappy old Rover cars any day.

  5. Tim, that’s a rather undercooked load of bollocks and you know it.

    Manufacturing specifications and tolerances increase as a derivative of technology and miniaturisation.

    Moore’s Law states that as technology improves the newest microprocessor manufacturing technology will improve geometrically.

    The capability to produce the same quality of produce improves at the same rate. While Britain and the US has stagnated, Germany, Japan and the far east have forged ahead. Japan and Germany are now producing an increased level of production compared to a decade ago while undergoing a severe age demographic shift.

    This underlying sickness in US/UK production has stemmed from the 1970/80’s war on the technologically literal working class.

    We’ve left our technological elite die while celebrating the service sector yahoos who until 12 months ago managed to parasitically leech value from the world’s production.

    Time we went back to our technological roots and dispensed with the richest 5% in favour of a mercantile 50% producing huge national benefit while providing year on year improvement for the engineering working classes.

  6. State employment will inevitably increase as employees from formerly high-flying financial institutions become civil servants in state-owned toxic funds.

  7. Tim,

    What I’d love to see is a comparative over time of all private sector payroll numbers vs public sector payroll plus benefits receivers. I’m guess it would look like an X!

  8. @Brit_in_Aussie

    No, Screw you, increases in government payroll match population increase. I just showed you the real figures. You’d expect a nominal increase in bureaucrats who are employed directly to deal with the increasing population.

    The real scandal is the fact that the manufacturing jobs remain constant in an increasing population.

    Work it out. No increase in wealth creators = no increase in wealth.

    The rich sponge off the diminishing ownership of creation of wealth. The poor get to do minimum wage jobs as manufacturing jobs lost due to pressure on the poor as competition for real jobs.

    The truth just bit everyone in the ass. Without a real increase in manufacturing jobs in an economy, money is squeezed out of the system and everyone loses.

  9. “With higher productivity comes less dependence on manufacturing jobs, but without an adequate production base, the service sector, no matter how efficient cannot generate enough wealth to maintain a equal standard of living.”

    Why?

    “This underlying sickness in US/UK production has stemmed from the 1970/80’s war on the technologically literal working class.

    We’ve left our technological elite die while celebrating the service sector yahoos who until 12 months ago managed to parasitically leech value from the world’s production.”

    Well, technology development doesn’t tend to come from the working class but from university educated engineers (who can surely not be considered working class). These goods that were developed by the middle-class were (are) then produced by a (largely technologically illiterate) working class.

    Further, I completely agree with The Great Simpleton that a lot of what was previously sold as manufactured goods is now sold as services.

  10. Akheloios:

    First you claim that average wealth has increased but that the distribution gets skewed if you don’t have manufacturing jobs, then you claim that wealth does not increase if you don’t have manufacturing jobs…Some coherence wouldn’t be bad

    “The real scandal is the fact that the manufacturing jobs remain constant in an increasing population.”

    No, that’s no scandal, that’s increased productivity.

    The truth just bit everyone in the ass. Without a real increase in manufacturing jobs in an economy, money is squeezed out of the system and everyone loses.”

  11. “This underlying sickness in US/UK production has stemmed from the 1970/80’s war on the technologically literal working class.”

    Actually I think he has a very important point there. Ever since the first assault on academic excellence (with the destruction of the Grammar Schools), the applied sciences have been going downhill. We are now heavily reliant on the engineers who graduated in the 70s and 80s for technological innovation. But retirement is looming, and the technology pool is already contracting. Soon, we will lose the ability to design, innovate, and manufacture.

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