Ep. 83 Why All the Talk About Manufacturing? Don’t All Jobs Matter?

21 April 2017     |     Tom Woods     |     22

Krugman (correctly) wonders about all the emphasis on manufacturing employment, when many other perfectly honorable lines of work have also witnessed declines. Why the emphasis on manufacturing? Why, because white people tend to hold those jobs, says Krugman. What a surprise….

Krugman Column

Why Don’t All Jobs Matter?” (April 17, 2017)

Contra Columns

Politico Economy,” by Steve Landsburg
Paul Krugman: Environmentalist First, Economist Second,” by Bob Murphy

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  • Amplikov

    Manufacturing jobs create more value, are more knowledge-intensive, and pay higher wages than service jobs. Krugman is an insufferable idiot. (Sometimes one must point out the obvious.)

  • Amplikov

    Whenever I see a picture of Bob Murphy the first words that come to mind are “Platonic Form.” No doubt about it.

  • Amplikov

    I want to hear Tom and Bob interview Eamonn Fingleton. He’s the established expert on the significance of manufacturing.

    • Tyler Folger

      I’d be interested in knowing how one even distinguishes between service and manufacturing jobs. Like, I’m sitting here trying to think of whether someone creating a painting belongs to the service or manufacturing sector, and it’s not clear to me. And it becomes even fuzzier when it’s a digital painting, or a piece of software built for a company. Or what about the guy that programs the CNC machine.

  • Amplikov

    We have too many lawyers in the Pharisee-State. They are privileged by the State. And Tom’s discounting of manufacturing need to be examined. Advanced manufacturing equals power, prestige, and wealth. I’d rather live in a region which is home to companies that make aircraft, ships, and computer chips than one which has only service businesses. Manufacturing makes everyone wealthier. The trick is to make things people want! And if we don’t make valuable, needed things here, we’ll have to buy them from somewhere else. We want “breadwinner jobs” here so people can get married and raise families. We can’t all be intellectual entrepreneurs – as much as we would like to be.

    • Stratos

      Well said! It’s astonishing simple , yet most people buy the spin that we may loose manufacturing jobs but we’ll have better service jobs instead. If I loose my manufacturing job, my hairdresser eventually down the road will loose hers as well. Manufacturing is not only prestige, but in practical terms, it’s the entity like an anchor, were every other segment gets life from

      • http://www.TomWoods.com Tom Woods

        Why is that? This is all assertion.

        • Stratos

          When some one has a different view, it’s opinion yo you! Is your view opinion be too?

          • El

            There’s nothing wrong with thinking your particular job is important. Providing basic goods such as food and shelter is in a certain sense, more important then say building computers, because if a natural disaster hit computers could not save our lives. In an economic sense though, it is very dangerous to call one job more important than another. Anything people choose to spend their money on ( exchange their labor for) is important to people to the extent that they choose to spend that money on it. When we deem team one sector of the economy more important than another and begin to falsely incentivize and de-incentivize certain Market sectors with barriers and subsidies, then the market can not function correctly. Though you might say that food is more important to you than your computer, computers and technological advances have greatly increased productivity in the world to the extent that it could be argued that those advances have saved far more lives than thousands of farmers or basic manufacturers.

        • Amplikov

          The free market, when left to operate unhindered, places a higher value on manufacturing and mining jobs than on service jobs. This is because manufacturing and mining create value that everyone benefits from. Service jobs serve localized, particular needs, and this is a good and noble thing, not to be devalued. But manufacturing, energy production, construction, and the “extractive” industries such as mining, fishing, and logging, pay more because they lift the standard of living for everyone even remotely connected to these enterprises. They are the “engines of material progress.”

          As a colleague of mine once said, “We can’t get rich by selling each other pizzas.”

          I realize I have a lot of nerve to argue with someone I have described as “our new Alcuin.” But someone has to raise these questions (or assertions). As I have said, I’m here to be educated.

    • http://www.TomWoods.com Tom Woods

      This is all assertion. I can’t find an argument in here.

      And we can’t all be TV makers, either.

      • Amplikov

        I’ve been hoping for several years that you would address this question. I’m waiting to be convinced. Manufacturing adds value to raw materials by the admixture of knowledge. And such knowledge is not universally possessed. Not everyone in the world has the ability to make a computer chip, a car, a submarine, or a passenger jet. And yet everyone agrees that the making of such things generates wealth, power, and prestige. Agricultural regions aren’t as wealthy as manufacturing or industrial areas.

        I’m not suggesting that the state empower manufacturers. I’m suggesting that the state remove the burdens it has placed on people who make things. The state is especially interested in manufacturing because manufacturers produce lots of wealth the state can take (steal).

        I remember several years ago you said you found it amazing that one could buy a dehumidifier in the middle of the night. I find that amazing also. I’m also suggesting that advanced manufacturing is at the top of a hierarchy of wealth-creating activities.

        It may be that the knowledge of Libertarian philosophy and Austrian economics, and the dissemination thereof, is a more important activity for humanity than the manufacture of computers. I’m not discounting this possibility. But it is clear that the Federal government is determined to stop the advancement of technology. I’m suggesting they get out of the way of science in general, and of the development of technology in particular, so our standard of living can go up.

        Out here on the West Coast we need nuclear power plants, desalination plants, liquefied natural gas ports, and manufacturing plants of various kinds, but the Federal government places such a huge regulatory and tax burden on the energy and technology sectors that no progress can be made. They want to freeze us in 1977. (I think a very smart person with a podcast once said that very thing.) Ask the people who have been trying to build a nuclear power plant on the Savannah River, for several decades.

        I hope, Dr. Woods, that you will address the arguments made by Eamonn Fingleton in his influential book “In Praise of Hard Industries.” The Platonic Form known as Bob Murphy made some of these arguments in your last episode of “Kontra Krugman.” I would like to hear this conversation expanded into an entire episode.

        If I am wrong, please explain fully. I listen to your podcasts and read your books in order to learn. But so far all I hear is assertion. No arguments have been detected.

        • El

          Manufacturing jobs are very important because things have to be made. They just aren’t more important than other jobs that people are willing to spend money on. People want high paying jobs close to them because they value their communities more than they value places far away. In the grand scheme of things though, if it is cheaper to have something manufactured far away and shipped locally then everyone wins. A $15/hr service job would be worth more than a 30$ /hr manufacturing job 30 years ago if the dollar not been devalued by monetary expansion, and wasteful spending by the government that deprives us of 40 to 70% of our income.

  • tz1

    Velocity and disposable income.
    A $10/hr service job isn’t enough to create savings or other service jobs.
    A $30/hr blue collar job will have $20/hr to save or invest or pay for piano or karate lessons, Trader Joe’s or Whole Foods, and restaurants and coffee shops, movies.
    Losing 1 blue collar job takes with it at least 5 service jobs, and one mine or factory a large number of small businesses.

  • http://2vnews.com 2VNews

    Blame big government (excessive regulation, excessive taxation, excessive spending and the Federal Reserve) for hoarding off-shore, outsourcing, corporate inversions and the problems of American workers; not innovation, not technology, not immigration, not globalization, not foreign currency manipulation, not foreign subsidies, not journalists, not the media.

  • davegrille

    Services don’t create initial value manufacturing ,mining ,and agriculture does.

  • Caleb

    In response to you comment on the value of manufacturing jobs versus everything else. I’ve paused the podcast, so you may address this further on, but I think there are two considerations that are important.

    First, manufactured goods are typically more easily exported than services. Are you going to call a plumber from China or down the street? What about your doctor? This is important when you consider America’s debt to foreign nations and trade deficit. In the latter case, eventually, that deficit will need to turn into a surplus, or else people will just stop trading with us. China, for instance, is giving us a lot of goods for a lot of paper. Eventually, China will like to start getting some goods back for them (even taking the petrodollar into account). The same goes with the debt. Those will be redeemed in dollars, not yuan. Thus, eventually, the holders of that debt will want to redeem their dollars for goods. Manufacturing will play the most important part in that.

    Secondly (and WAY more importantly, in my opinion), not everybody can be a doctor. I don’t mean that there are only so many doctors needed to go around, I mean some (most) simply do not have the brains to be a doctor or lawyer. In fact, a lot of people do not have the IQ required to be able to excel at intellectual jobs. How are these people supposed to earn a good living in an economy that is tilting moreso to services ever day?

    Manufacturing plays the very important role of a sort of social safety net. You may not be able to be a doctor, but you can put a steering column in a car and make $25/hr doing so. That’s a decent living wage. Service sector jobs that give you a decent wage require decent brains, for the most part. Being a mechanic, plumber, and electrician all have certain intellectual barriers that a significant number of people just can’t meet. Assembly line work is a MUCH lower barrier to cross and enables significant numbers of people to take care of themselves.

    • BrotherDave

      Was thinking along same lines on debt and the trade deficit. Thought maybe TW would go there in the podcast. I live between two close, but very different cities….Baltimore and Wash. DC. One is a diverse, growing and economically important city where they still make real things and also a hub for transporting goods; the other makes hot air and gums up the works with paper and red tape and calls it “public service.” DC could close down tomorrow and Baltimore would still be humming.

  • Caleb

    Also, in response to Bob Murphy’s comment on paying hotel owners to keep rooms empty, I don’t think that point is particularly good. For example, the entire minimum wage debate, from a certain perspective, writes into law that business owners must leave some labor unused, due to its lack of productivity. Those laws are pushed, primarily, by unions, and particularly fast-food unions.

    That’s not a researched opinion at all, just my thoughts on a particular perspective of minimum wage and the lobbying around it.

  • http://www.economicmanblog.com Roger Barris

    Bob touches on, but does not enter into, the real question when he points out that manufacturing jobs are high-paying than service sector jobs. The economic question is: why should this be the case?

    This is the theme of a blog that I wrote about a year ago on the cult of the manufacturing job (http://www.economicmanblog.com/2016/06/20/manufacturing-jobs/). Here is one paragraph:

    ***********

    So, why all the fuss about manufacturing jobs? The real reason is that a manufacturing job has become synonymous with a high-paying, full-benefits, and secure position, particularly one that can be performed by someone with a limited education. When people lament the passing of manufacturing jobs, they are nostalgic for the days when a high-school graduate could walk onto a Ford assembly line and earn enough for the American Dream. Instead, the storyline of today is the former manufacturing worker who, after trying for months to secure something similar, is now flipping burgers for the minimum wage.

    *************

    However, the labor is not supposed to function this way. A competitive and mobile labor market should equate the returns to labor across the various sectors (except for differences coming, for example, from the fact that sitting in an office is a lot more pleasant than working at the coal face).

    My blog speculates on some reasons for this failure of the labor market, but doesn’t come to any definite conclusions. Does Bob have any thoughts?

  • Tyler Folger

    I’d be interested in knowing how one even distinguishes between service and manufacturing jobs. Like, I’m sitting here trying to think of whether someone creating a painting belongs to the service or manufacturing sector, and it’s not clear to me. And it becomes even fuzzier when it’s a digital painting, or a piece of software built for a company. Or what about the guy that programs the CNC machine.

    I’m a drafter for a construction company that sometimes produces physical structures from other people’s steel and concrete, but also often acts as a middle-man by hiring sub-contractors, and I don’t know what sector I belong to. And sometimes, we just dredge channels. I don’t know if dredging a channel is a service or if we’ve just manufactured a 20′ deep channel from a 10′ deep channel.

  • Aajaxx

    One thing that got lost in the discussion is that jobs are a cost. We don’t want the creation of products and services to incur more labor cost. If jobs were a primary concern, we could create jobs by banning all productivity improvements retroactively.