Modern Machine Shop

DEC 2018

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THE Z AXIS MMS DECEMBER 2018 20 mmsonline.com pzelinski@mmsonline.com Peter Zelinski EDITOR-IN-CHIEF @Z_Axis_MMS When Productivity Doesn't Imply Automation "productivity" would appear to increase—solely because of the offshoring. This effect is not even the most vexing, she says. An even greater problem comes from the BLS's attempt to maintain parity within product com- parisons as those products improve. A cell phone of 2005 is not the same as a cell phone of 2018, even if prices are similar. Nor is a car the same. In both categories, the government introduces adjust- ment factors to account for quality and capability gains. Yet the cumulative adjustments in the area of electronics have been so large that just these adjustments—not the quantity of items made, just the adjustments for product improvements—have overwhelmed manufacturing output. If BEA manufacturing figures are corrected to remove adjustment factors in one area, comput- ers and semiconductors, then that change alone dramatically alters the comparison. Manufac- turing productivity no longer shines after this adjustment. (See graph at gbm.media/mfgprod .) Productivity in manufacturing has advanced at about the same rate or slightly greater compared to productivity in other parts of the economy. There is nothing distinctive about automation in manufacturing that brings something special to the discussion of jobs in manufacturing. In other words, manufacturers still need people. That means, to a greater extent than we might have believed, the decline in U.S. manufac- turing jobs has been a direct result of a decline or low growth in U.S. manufacturing activity. Technology and trade both affect manufactur- ing, Dr. Houseman says. Both must be part of the public discussion. But thanks to the still-wide- spread misreading of productivity data, the effect of trade on U.S. manufacturing and U.S. manu- facturing employment has been masked. We have spent years having a distorted public discussion that lets trade policy too far off the hook. Manufacturing appears to lead in productivity growth, but productivity measures pick up factors besides automation. Recognizing this changes the terms of the public debate. The United States has lost about 5 million man- ufacturing jobs since 2000. Is that decline the result of automation or trade? Susan Houseman does not have the answer, but she says the terms of the debate get muddied. Arguments based on U.S. government manufacturing productivity met- rics tend to misinterpret what those metrics mea- sure. In U.S. manufacturing, she says, automation is not doing as much as some claim. Dr. Houseman is VP and Director of Research with the Upjohn Institute for Employment Research. She spoke on manufacturing employ- ment at the most recent MTForecast conference, hosted by AMT–The Association For Manufac- turing Technology. She says the problems with productivity numbers relate to the composition of domestic work as well as adjustment factors. Here is the productivity-based argument that is often made: Manufacturing output, adjusted for inf lation by government statistical agencies, has kept pace with gross domestic product growth for decades, even as employment declined. Man- ufacturing's ability to keep producing the same or more stuff with fewer and fewer people shows that productivity growth has been greater in man- ufacturing than elsewhere in the economy. We have fewer employees in manufacturing because fewer are needed. Thank you, automation. But hold on, Dr. Houseman says—automa- tion is not the only factor driving productivity growth. And the strong manufacturing output and productivity growth reported by the Bureau of Economic Analysis (BEA) and Bureau of Labor Statistics (BLS) is misleading. For example, consider a product with many manufacturing steps in which the labor-intensive steps are outsourced to another country. The BEA figure captures value added in the United States. After outsourcing, since there are fewer U.S. jobs relative to the value still added in the states, the

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