Scarcity easing in manufacturing?

For all the talk both within New Zealand and abroad not enough time is given to the hypothesis that it is in fact improvements in technology that are “hollowing out” the manufacturing sector … and that what we really need to help the unemployed is availability to skills training, rather than trying to prop up inefficient domestic jobs in current manufacturing industries.

And yet, there is an increasing amount of evidence that this is the case (via Matt Yglesias).

Increasing output with fewer inputs is a good thing – but when labour is one of the inputs involved we know there may be losers.  If this is really what is happening, then as a nation I would suggest that we try to integrate education and benefit policy more fully, stop demonising those who are out of work arbitrarily, and also stop talking about intervening to “create jobs” in industries that are likely to be long term losers … give people opportunities in this ever changing, and technologically improving, world.

This is, after all, the same sort of thing that happened with the primary industries – with less and less labour needed to dig up coal and produce food.  Work is a cost, it is the income people get from working with a capital owner that is missed when something like this happens.  And it is this fact that we need to keep in mind.

And yet in New Zealand we have one political party talking about subsidising manufacturing and the other political party talking about how lazy the unemployed are.   It makes me a sad panda.

  • Have you ever strapped your sad panda eyes around Tyler Cowan’s great stagnation thesis?

    (This is one of those ‘sort of related’ comments again.)

    • Si, I’ve seen a bunch of stuff about the Great Stagnation. I’m not entirely convinced, as I’m not sure many of the improvements we’ve experienced in consumer technology are being appropriately taken into account when we discuss this.

      Furthermore, it is a description of what has happened – when the idea that we are on the verge of a “second industrial revolution” through large parts of the manufacturing sector is one of those weird looking forward things 😛

      When it comes to discussing the role of the state and technology, I’ll stick to the idea of an equity-efficiency trade-off, but I’ll also allow scope for endogenous technological change. I’ll then leave it open as an empirical question rather than taking a firm view – as that is what I do.

  • Kevin McMenamin

    Don’t know if you subscribe to John Maudlin but his latest newsletter shows what is happening in US manufacturing – huge output increases with declining human input as robotics(ie capital) displaces labour. Looking at stats NZ we appear to be about 7% down since 2005 and up about 7% from a low point in 2009 which does put the recent hysteria about job losses into perspective. We are likely to continue to lose jobs while increasing output.

    • And if that is the result of improving technology, then the “right” policy solution would be one that allows people to move into other work by helping them transition into other skills etc – rather than giving money to manufacturers directly by messing around with the dollar.

      It is in an interesting point to think on at least

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