The constant drumbeat of "outsourcing" or "offshoring" and " jobs going overseas" does a disservice to all the manufacturers here in the USA and the size and scope of our economy. For all the noise about imports from China, they only represent a small percentage of our GDP. In a recent publication (8/8/2011) by Galina Hale and Bart Hobijn, two economists
at the Federal Reserve Bank of San Francisco, titled "The U.S. Content of 'Made
in China." Hale and Hobijn find that the vast majority of goods and services sold in the
United States are produced here. In 2010, total imports were about 16 percent of
U.S. gross domestic product, and of that, 2.5 percent came from China.
Much of what China sells us has considerable "local content." Hale and Hobijn give the example of sneakers that might sell for $70. They point out that most of that price goes for transportation in the U.S., rent for the store where they are sold, profits for shareholders of the U.S. retailer, and marketing costs, which include the salaries, wages and benefits paid to the U.S. workers and managers responsible for getting sneakers to consumers. On average, 55 cents of every dollar spent on goods made in China goes for marketing services produced in the U.S.
Going hand in hand with today's trade demagoguery is talk about decline in U.S. manufacturing. For the year 2008, the Federal Reserve estimated that the value of U.S. manufacturing output was about $3.7 trillion. If the U.S. manufacturing sector were a separate economy — with its own GDP — it would be tied with Germany as the world's fourth-richest economy. Today's manufacturing worker is so productive that the value of his average output is $234,220, three times higher than it was in 1980 and twice as high as it was in 1990. That means more can be produced with fewer workers, resulting in a precipitous fall in manufacturing jobs, from 19.5 million jobs in 1979 to a little more than 10 million today. Add to that the rise in the minimum wage which drives many low skilled workers out of the workplace. And the various rules and regulations in all sectors of the economy which drive up the costs of everything including labor. Our schools are failing their students by not training them for the jobs that exist.
The bottom line is that we Americans are allowing ourselves to be suckered into believing that China is the source of our unemployment problems when the true culprit is Congress and the White House.
Much of what China sells us has considerable "local content." Hale and Hobijn give the example of sneakers that might sell for $70. They point out that most of that price goes for transportation in the U.S., rent for the store where they are sold, profits for shareholders of the U.S. retailer, and marketing costs, which include the salaries, wages and benefits paid to the U.S. workers and managers responsible for getting sneakers to consumers. On average, 55 cents of every dollar spent on goods made in China goes for marketing services produced in the U.S.
Going hand in hand with today's trade demagoguery is talk about decline in U.S. manufacturing. For the year 2008, the Federal Reserve estimated that the value of U.S. manufacturing output was about $3.7 trillion. If the U.S. manufacturing sector were a separate economy — with its own GDP — it would be tied with Germany as the world's fourth-richest economy. Today's manufacturing worker is so productive that the value of his average output is $234,220, three times higher than it was in 1980 and twice as high as it was in 1990. That means more can be produced with fewer workers, resulting in a precipitous fall in manufacturing jobs, from 19.5 million jobs in 1979 to a little more than 10 million today. Add to that the rise in the minimum wage which drives many low skilled workers out of the workplace. And the various rules and regulations in all sectors of the economy which drive up the costs of everything including labor. Our schools are failing their students by not training them for the jobs that exist.
The bottom line is that we Americans are allowing ourselves to be suckered into believing that China is the source of our unemployment problems when the true culprit is Congress and the White House.
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