President Obama's State of the Union speech was surprisingly bullish on reviving manufacturing, prompting one very clever person on Twitter to say something along the lines of: "Democrats want the economy of the 1950s, while Republicans just want to live there."
It got me thinking: What did the economy look like in the 1950s? If you could organize all the jobs into buckets and compare the paper-shuffling professional services bucket to the manufacturing bucket, what would they look like around 1950, and how has the picture changed in the last 60 years?
National Journal addressed just this topic in its special report on the rise and fall and rise of manufacturing. The spectacular graphic compares employment by sector in 1947 and 2007 and its most important lesson is a whopper. Manufacturing and agriculture employed one in three workers just after World War II. Today, those sectors employ only one in eight.
The champion in the last six decades was finance, insurance and real estate, which doubled its share of employment from 10.5% to 21.4%. But the broader service industry -- including professional and business services (a broad catch-all with marketing, managing, consulting, computer services) and health and education services -- also grew from about 13% to about 30%. Everything else has stayed pretty much the same. Government, wholesale/retail, information, and construction account for a little more than a third of the economy today, and they accounted for a little more than a third of the economy 60 years ago.
The big story about American jobs in the post-war period is this: The manufacturing/agriculture economy shrunk from 33% to 12%, and the services economy grew from 24% to 50%. I don't want to leave you with a facile explanation, but for the purposes of space, I think it's acceptable to say that as manufacturing and agriculture got more efficient, they required fewer American workers, while the services industry (which had slower efficiency gains since it has more person-to-person work) required more employees to keep up with the rising demand for consulting, nurses, teachers, computer technicians, and so on. This isn't a sad story, or a happy story. It's just what's happening, and it's not accurate to think we can change it very much by, say, creating a panel to badger China's trade practices, as the president has proposed.
Closing thought: Why isn't anybody talking about the tragic decline of agriculture? The industry's share of workers has fallen by 80 percent in the last 60 years. Nobody seems to think that's much of a tragedy, but we do consider it tragic that manufacturing has lost 60 percent of its share over the same period. Are we being hyperbolic about the decline of manufacturing, in particular, or are we being way too stoic about the greater loss in agriculture employment? Open question.
Update: I should have made this point more clearly: Manufacturing jobs have declined as a share of the economy. But manufacturing hasn't declined as an industry. It's grown. By a lot. Here's total industrial production (manufacturing, utilities, and mining output) indexed to 1945. Output has sextupled.
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