The Unassuming Economist

From China Daily:

“Manufacturing is the central focus of the industrial and trade policies being implemented by China and many other countries. The sector gets special treatment because of its crucial role in providing the hardware for national defense, decarbonization, artificial intelligence and quantum computing. Policymakers also seek to promote manufacturing because it has traditionally been important in generating good jobs for less-educated workers.

But despite manufacturing contributing to national prosperity in both developed and developing countries, with most research and development focused on the sector, it is increasingly unable to create enough jobs for workers who need them. In the United States, for example, less than 10 percent of workers work in manufacturing and even if President Donald Trump’s policies succeed in eliminating the US trade deficit through higher tariffs, the impact will not do much to change the prospects of workers without college degrees.

Inverted U-curve in manufacturing employment

Moreover, since many countries are focused on technological improvements, the skill-based nature of the new industrial policies could further disadvantage less-educated workers. This means additional policies are needed to achieve shared prosperity by creating more jobs for less-educated workers through the promotion of economic activity in services.

The misconceptions about manufacturing today are widespread. It is widely understood that as countries develop, the employment share in farming will decline and the employment share in services will rise. But it is not understood that in almost all countries the employment share in manufacturing follows a humped path — rising in the early stages of development and then declining. All developed and many emerging economies have now passed the peak and are moving along the downward side of the hump.”

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