It's true that our country's 'loss' of manufacturing jobs has been due partly to our shift from labor—intensive products, such as textiles, to high—tech products, such as pharmaceuticals.  But there are pieces of this jobs puzzle that aren't getting nearly the attention they deserve.

Brian J. Schwarz highlighted one important dimension of the argument here. I would add the following:

Most people assume that 'outsourcing' means the transfer of an American job to a foreign worker, for instance in China.  In fact, most of the 'outsourcing' going on today involves the transfer of a job from one American company to another American company.  For example, a company with a big factory, such as an auto—manufacturer, needs a cafeteria in that factory so its workers can eat, cheaply and quickly, on their lunch breaks.  They used to operate these cafeterias themselves.  But in recent years, operation of these cafeterias has been 'outsourced' to companies that specialize in operating food—service facilities within factories — or other large facilities such as hospitals.  That's because these food—service companies can do the job more efficiently because, unlike the auto—maker or the hospital, operating a cafeteria is the only thing they do — so they do it very well.

Now, imagine the nice lady — we'll call her Edith — who for years has been working the cash register in the auto—maker's cafeteria.  She knows just about all the workers by name, always has a smile and a kind word, and has photos of her grand—children scotch—taped to her cash register.  When the auto—maker outsources operation of the cafeteria to a company that specializes in this, the auto—company fires Edith.  But the company now operating the cafeteria hires Edith. The only thing that's actually changed is the logo on Edith's blouse.

But technically, Edith no longer is classified as a 'manufacturing worker' and is re—classified as a 'service worker.'  The headline that evening is, 'America Loses Another Manufacturing Job!' —— and some idiot Senator is all over the talk—show circuit whining that we're becoming a nation of hamburger—flippers.

Of course, it isn't just food services that American companies are outsourcing to other American companies.  Indeed, they are outsourcing just about everything they can to highly—specialized companies that do one thing, and do it very well.  That's one reason American productivity is moving 'off the charts.'  And its why so many American manufacturing workers are being re—classified as service workers — which has the effect of exaggerating the number of 'lost' manufacturing jobs.

In short, our economy is changing so rapidly that we haven't shifted our statistical measures quickly enough to keep pace with what's actually happening.

Herb Meyer  10 01 05

Herb, Brian, and The Economist, are all correct. I have a few points to add to Herb's analysis. Edith, when she leaves the auto maker, is very unlikely to be represented by the United Auto Workers or any other union. From the UAW's standpoint, she might as well be in Shanghai, in terms of the dues they can extort from her as a condition of employment.

In many cases, Edith will be joining a company with fewer than 50 employees. That's because when a firm hits the magic number of 50 employees, all sorts of expensive regulatory requirements, such as affirmative action data—keeping and "remedies" start raining down on their head. They will need a human resources manager, who, while probably a nice enough person, doesn't contribute to sales or profits.

Edith may well be working as a an independent contractor, rather than an employee, putting in less than 8 hours a day, and getting no or few fringe benefits. Edith will discover the joys of filing quarterly tax payments, a real consciousness raiser for those accustomed to receiving tax refunds once a year after filing a 1040 EZ short form. But if Edith has kids in school, she may well appreciate the work hours. Or she may use her free time to start another business, maybe baking supplies for her new employer to sell in the cafeteria they manage.

To me, even more important than the "loss" of manufacturing jobs is the rise of home—based small entrepreneurial business. I am part of this tribe, as are many others I know, some barely making it, and others bringing home yearly incomes in the high six figures. And not one of them is involved in multi—level marketing, the stereotype hurled by those denigrating this quantum leap in people's control of their own workplace life.

Finally, Britain in the Nineteenth Century endured a "catasptrophic" loss of agricultural jobs. Then, as today, elitists moved by romantic notions and unfamiliar with the drudgery of agricultural or industrial labor, bemoaned the transition to a higher level of production: manufacturing in Britain then, and services and information in the US now.

Unlike many pointy—headed intellectuals, I have actually worked in factories, and have been forced to hand a chunk of my pay to crooked union bosses. I don't bemoan the transition to an economy where people enjoy better working environemnts and more control over their lives.

Thomas Lifson  10 01 05