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.