Man Without Qualities

Saturday, November 15, 2003

Global Manufacturing Jobs Shrinkage

References to this report claiming that manufacturing jobs have declined worldwide - with China, for example, losing a huge number - have popped up all over. But the article itself has not been all that easy to find on the internet.

So here it is.

I am, to say the least, skeptical of some of the details. With respect to China, for example, there are also reports that manufacturing in China often tends to substitute human labor for the technology employed in the country from which the jobs "come."

China also has some peculiar labor laws that one can imagine creating some very strong incentives for employers to report the "loss" of manufacturing jobs. For example, China is experiencing a huge migration of workers from the countryside to cities - where they take a lot of manufacturing jobs. But Chinese law requires that such migrating workers hold and comply with internal passports and visas - and those visas are good for only a few years. That means that, in principle, the workers must leave their new job and city and return to their old village at the end of their visa period.

Him? He left! Went back to his village and took some other position paying, say, 10% of what we paid him here. Sure. Big problem for us, too, we had to train him and now we have to train his replacement. That happens all the time. After all, it's the law. Gotta follow the law.

Is that the Chinese way? Is the Pope a Zoroastrian?

In the alternative, one imagines, the worker could stay and the employer deny the job exists or that the employer is employing the worker. This is just one peculiarity of Chinese employment law that might distort employment statistics.

There is also generally and worldwide a rather strong relationship between the number of employees an employer claims and the employer's tax obligations. The reader may wish to take a private moment to contemplate the traditional relationship between a Chinese business owner and the tax authorities.

I would be very skeptical of the reliability of Chinese employment statistics generally. This is a country that for decades officially denied that it suffered any unemployment at all!

Indeed, it is difficult in the extreme to suppress the sense that to accept easily the proposition that China saw a 15 percent drop in factory jobs one would have to have an intellect on the order of Robert Reich's (if Glenn Hubbard has really been saying such things about China - as distinguished from worldwide - he should know better). A Wall Street Journal article describes the Chinese situation this way:

Perhaps the most surprising result of these latest studies is the manufacturing employment trends in China. Since 2000, manufacturing payrolls in China are up about 2.5 million, even as the rest of the world has suffered. But looked at over a longer time horizon, employment in China's manufacturing sector is down sharply. From 1995 to 2002, manufacturing employment has fallen to 83 million from 98 million, a 15% drop that outpaces many of the declines elsewhere in the world.

It isn't difficult to figure out why. China remains burdened with a massive and unproductive state sector that will take years to restructure. Even as foreign direct investment pours into the country's newer plants, millions of workers at inefficient state plants have to find new work, a source of potentially destabilizing unrest in the country and massive internal migrations.

But, of course, for the "loss of jobs" argument to hold in China it is not just necessary that these millions of workers at inefficient state plants have to find new work - but that they have, in fact, not found factory work. Is the idea supposed to be that these former factory workers have gone on to rice picking or the like? Even in China the sudden creation and long-term persistence of fifteen million unemployed manufactring workers would cause more than a political ripple.

Odd that the argument just omits a little detail like that, along with any mention that those "newer plants" in China tend to use more human workers and less technology - and are often less productive per worker - than comparable plants in the developed world.

So maybe there's more to the story that just the two words cited by Mr. Reich: higher productivity.

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