The United States is losing jobs manufacturing jobs to other countries. The number of manufacturing jobs has fallen in the United States in recent years. If the current trend in manufacturing jobs continues, the day will soon come in the United States when Americans produce no manufactured goods. Something has to be done to reverse this trend, and the sooner the better. Hear what and how the economist thinks: The person who wrote this opinion piece seems to think that as the number of jobs in the manufacturing sector declines, so falls the number of manufactured goods produced in the United States. In other words, more jobs means more output and fewer jobs means less output. First, let’s think of an example that counteracts this relationship. There used to be time in the United States when a fairly high percentage of the labor force was in agriculture. But today only a small percentage (1.5 percent) of the labor force is in agriculture. In other words, the country has lost agriculture jobs; it has lost many of its farmers. But does it follow that because there are a small percentage of workers in agriculture today—as well as a smaller absolute number of farmers—that there is less food produced in the United States today than in the past. The answer is no. In fact, more food is produced in the country today with fewer farmers than was the case in the past with more farmers. Think in terms of a production possibilities frontier (PPF). Suppose manufactured goods are on the vertical axis and services are on the horizontal axis. What can shift the PPF rightward such that it intersects both the vertical and horizontal axes further away from the origin? Well, an increase in resources will do it, but also an advancement in technology. As economists know, an advance in technology commonly increases the ability to produce more output with a fixed quantity of resources. Now, if an advance in technology increases the ability to produce more output with a fixed quantity of resources (e.g., it allows 100 people to produce 1,000 units of a good instead of 700 units), it then follows that an advance in technology also makes it possible to produce the same amount of a good with fewer resources (e.g., it allows 80 instead of 100 people to produce 1,000 units of a good.) Could that be the case in manufacturing? Could it be that there have been technological developments in manufacturing in the United States, such that fewer workers in manufacturing can produce the same number of manufacturing goods as it took more workers to produce in the past? It certainly could be. Case in point: While manufacturing employment in the United States was lower in 2016 than in 2001, manufacturing output was higher in 2016 than 2001. The person who wrote the opinion piece linking a decline in the number of jobs in manufacturing with less manufacturing output missed an important point: It is possible, with developments in technology in manufacturing, to produce the same amount of manufacturing output with fewer manufacturing workers or even more manufacturing output with fewer workers.
Questions:
1. Think of the total output produced in an economy in a year. Say the dollar amount of this output, adjusted for price changes, is \($500\) billion in year 1. In year 2, it falls to \($490\) billion. Also in year 2 it happens that the number of jobs in one particular industry declined from 1,000 to 900. Does it follow that the number of jobs declining in one particular industry was the cause of the decline in total output produced?
2. Suppose higher-level educational output is measured by how many college students graduate with an undergraduate degree in a year. Also, suppose that the number of instructors in colleges declines. Does it follow that higher-level educational output will decline too? Why or why not?