Study: Government Miscounting Manufacturing Jobs

Tuesday, 10 Sep 2013 07:51 AM

By Michelle Smith

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The rise of "factory-less goods producers" might have caused the U.S. government to miscount how many manufacturing jobs the United States has really lost, according to a study from economists at Dartmouth's Tuck School of Business.

Overall, 6 million manufacturing jobs were lost between 2000 and 2009, according to the Bureau of Labor Statistics, The Washington Post reported.

But Dartmouth economists Andrew Bernard and Teresa Fort argue that there are many companies heavily involved in manufacturing that aren't included in government statistics. Called "factory-less goods producers," these companies design and coordinate manufacturing of various goods, but they do not have traditional production facilities.

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Apple is as a prime example, they noted. The company doesn't have a factory or assembly plant in the United States, but apart from stitching its iPhones and iPads together, Apple does almost everything else here.

"Since 2004, Apple has not owned any production lines in the U.S. and the actual production is conducted by other firms, such as Foxconn, in China and elsewhere," the economists wrote.

Currently, a business such as Apple is considered a "wholesale" firm. The only reason its engineers and designers aren't considered manufacturing workers is that the company does not have a factory here.

Bernard and Fort argue that reclassifying workers such as those at Apple could drastically alter the number of jobs counted in the manufacturing sector.

For example, they estimate that if factory-less goods producers were captured in the manufacturing statistics, it would have added between 431,000 and 1,934,000 workers to the manufacturing sector in 2007.

Manufacturing has changed over the years — some jobs have moved overseas, some have been automated. But there is also a shift away from the production floor, which the government seems less apt to recognize.

According to a report from the Congressional Research Service, less than 40 percent of manufacturing employees are directly involved in actually making things, USA Today reported. About 31 percent of manufacturing workers now hold management and professional jobs.

The McKinsey Global Institute estimated that 5.7 million jobs in manufacturing supply chains are not figured in as "manufacturing" jobs as they would have been in the past, according to USA Today. The reason — many functions, such as telecom and logistics providers, have been outsourced and are now counted differently.

"We can safely say that the decline of manufacturing jobs is a true decline," Bernard told The Post.

"But that decline may be mitigated by the fact that some of those jobs and capabilities have still stayed within the country."

The upshot, he added, is that "we may have to rethink our knowledge of what manufacturing firms do."

"Unlike traditional wholesalers, these establishments are not primarily engaged in intermediation but instead undertake design and engineering of products themselves and exert control over the production process. To date, many of these factory-less goods producers have been hidden in the wholesale sector," the study authors wrote.

"Our findings open a window into the extent and characteristics of factory-less goods producers in the U.S. wholesale sector. The potential for increasing fragmentation of production across firms and borders means that factory-less goods producers are likely to play an even larger role in industrialized economies in years to come."

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