Transcript Changing Flows of Capital, Manufactured Goods & Jobs

The International Dimension:
Changing Flows of Capital,
Manufactured Goods & Jobs
Conversation on the SC Economy
October 21, 2005
Bill Ward
Center for International Trade
Clemson University
Economic Growth
& International Realities
Large US trade deficit, low US saving
rates & large inflows into US capital
markets (“non-competitive” $)
Declining manufacturing employment
– Globally as well as nationally
SC traditional Mfg base (textiles) at
the tip of the spear of change
SC unemployment rate above US
average (but below Europe’s rate)
Global Imbalance
& the Juxtaposition of Two Factors
Growth in global supply of tradable
manufactured goods, caused by
– Market liberalization in LDCs & FPEs
– Dramatic rates of productivity growth
US as sole global demand generator
– Endogenous to the US economy
– Exogenous to other national economies
that pursue export-led growth
Comparisons to Period following
2nd Industrial Revolution (after 1860s)
Supply shock comparable to 2nd
Industrial Revolution in late-19th &
early 20th century
Then juxtaposed against
19th century gold standard that
limited national and global options
for monetary expansion
US & Global Economy
at Start of 20th Century
US price level dropped by half
during 19th century
Mercantilist views and beggarthy-neighbor trade environment
going into 20th century
SC, US & Global Economies
at Start of 21st Century
No “pricing power” for Mfg goods
producers
Increasing Mfg output coupled with
decreasing employment—US and
globally
Talk of “labor force competitiveness”
solution for Mfg job creation
US Mfg Output versus Employment
(Source: US Bureau of Labor Statistics)
US Mfg Employment 1979-2005
Year
1979 (historical peak)
1985
1990
1995
2000
2001
2002
2003
2004
2005 (1st Qtr)
Jobs (000)
19,426
17,819
17,695
17,241
17,263
16,441
15,259
14,510
14,329
14,258(p)
SC Mfg Jobs—1980 to 2005
Year
1980
1982
1987
1990
1992
2000
Mar 2005
SC Mfg Employment
398,411
367,400
365,800
389,540
366,900
352,570
264,800
The Demand-side Problem
Endogenous demand limited by
– PCE shift towards services
– Low prices of competing Mfg imports
Exogenous demand limited by
– Export-led growth policies in major
countries (including Japan & China)
– EMU constraints in Europe
– Labor competitiveness equation in the
face of resulting Global Imbalance
(exchange rate for $)
The Endogenous Side:
e.g., Growth of U.S. GDP & PCE
From 1990 to 2004,
U.S. real GDP grew 54%
This does not translate into
comparable growth in
demand for Mfg goods
Shifting Demand for Goods
versus Services within U.S. GDP
PCE for Goods versus Services (1950-2004)
80.00%
70.00%
Percentage
60.00%
50.00%
Goods
40.00%
Services
30.00%
20.00%
10.00%
0.00%
1950
1960
1970
1980
Years
1990
2000
2004
From GDP Growth to Endogenous
Demand for Manufactured Goods
GDP grows 54% 1990 to 2004
41% of PCE goes for goods
Straight-forward math: growth in
domestic demand for goods
1990 to 2004 was only 21%
Productivity of U.S. Mfg Labor
Meanwhile,
Mfg Output per Worker in U.S.
increased 83%* between
1990 and 2004
In a closed economy, that is a
recipe for job loss.
Open Economy Math
In an open economy,
US company success
and
US jobs
depend upon
Global demand growth and
US global competitiveness
Global Demand Constraints
EMU fiscal balance agreements &
policy on monetizing deficits
Japan financial sector instability &
continued use of export-led growth
Asia Mfg cluster all have weak
financial sectors and follow exportled path post-1997 (3 Chinas,
Thailand, Malaysia, Korea)
Global Demand Growth Limiters
Willingness of investors and risk
managers to hold more US and UK
financial instruments—Making them
the “gold mines” of 21st century
Particularly in the face of growing
global imbalances posed by forces
discussed here
The Global Supply Shock
Market liberalization of large LDCs
and FPEs
– China (20% of global workforce)
– India (15% of global workforce)
– Rest of East Asia + FPEs push totals to
more than 50% of global workforce
Dramatic productivity growth 19902005 (following slides)
International Manufacturing Competitiveness
factors tracked by BLS
These three factors taken together
– Productivity
– Wage Rate
– Exchange Rate
Give you
“Dollars of labor cost per unit of
output”
2 out of 3 involve controlling
workers’ purchasing power
Low wage rates
Low value of Dollar
The third competitiveness factor
Productivity
–Increases competitiveness of U.S.
companies, but
–Decreases the number of jobs if
Global demand does not grow even
faster, and/or
U.S. does not gain increasing share of
market
Growth in Productivity Abroad
1990-2003
Canada
Australia
Japan
Korea
Taiwan
Belgium
Denmark
France
Germany
Italy
Norway
Sweden
United Kingdom
79 %
109 %
145 %
247 %
284 %
134 %
73 %
164 %
77 %
45 %
43 %
179 %
132 %
Changing Shares of Global Mfg
Value Added
Share of Value Added in Manufacturing
1982
1994
2004
30
NET CHANGE: 1982-2004
25
Korea 3.0%
Germany -3.5%
China 7.5%
20
Share
Japan -2.7%
U.S. -1.1%
15
10
5
0
U.S.
Japan
China
Germany
France
Korea
Percent Change in Mfg
Employment 1992-2003
5
Rate
-10
-15
-20
-25
-30
Data for The Netherlands and China are for 1990-2002.
Source: W.A. Ward, Manufacturing Productivity and the Shifting U.S., China, and
Global Job Scenes, 1990-2005. Center for International Trade, Clemson
University, Clemson, SC.
Japan
Australia
Germany
China
U.K.
U.S.
Belgium
Netherlands
Korea
France
Sweden
Italy
Taiwan
Norway
-5
Canada
0
Global Loss of Mfg Jobs 1995-2002
Region
Africa
Americas
Asia
Europe
Oceania
Mfg Jobs
1995
(000)
4,242
31,944
76,594
58,319
1,321
Mfg Jobs
2002
(000)
3,926
31,691
58,395
55,657
1,395
Change
(000)
- 317
- 253
- 18,199
- 2,662
+ 74
Globally
172,421
151,066
- 21,355
China Mfg Employment
98 million Mfg jobs in 1995
80 million Mfg jobs in 2001
83 million Mfg jobs in 2002
Out of global total of 150-200 Million
200 million potential new workers
yet to come out of rural China
Mfg Jobs in Industrial Countries
US about 14 million
Canada less than 2 million
UK less than 4 million
Japan about 11 million
Germany about 8 million
EU (25) as a whole about 25 million
Ireland a few hundred thousand
“Competitiveness”
SC must help keep Mfg COMPANIES
competitive
Nevertheless implying reductions in
traditional Mfg employment
And implying need for new strategies
for work and wealth besides Mfg job
creation
Thus, verifying the importance of
work of the OTHER presenters
End of Presentation
Supplementary Slides Follow
1. Shifting sectors of employment
2. Declining Mfg share—selected
countries
3. Mfg jobs mirror Ag jobs in 20th
century
Shifting Sectors of Employment
1990-1992
Male
Upper Middle Income Countries
Agriculture (1)
22%
Industry (2)
32%
Services (3)
46%
High Income Countries
Agriculture (1)
6%
Industry (2)
38%
Services(3)
55%
United States of America
Agriculture (1)
4%
Industry (2)
33%
Services (3)
62%
2000-2002
Male
8%
22%
70%
4%
19%
76%
1%
14%
85%
Declining Mfg Share of Jobs
United States
Canada
Australia
Japan
France
Germany
Italy
Netherlands
Sweden
United Kingdom
1990
18.0%
15.7%
15.0%
24.3%
21.0%
31.6%
22.6%
19.1%
22.3%
22.3%
2004
11.8%
14.4%
11.3%
18.3%
16.3%
22.7%
21.8%
14.0%
14.9%
14.9%
Manufacturing Productivity and Employment
in Early-21st Century
Mirror Agriculture in 20th Century
Year
1919
1930
1940
1950
1960
1970
1980
1990
1999
Farm Workers
As % of Total
US Employment
32.8%
29.8%
25.3%
18.0%
11.5%
6.0%
3.9%
2.6%
1.3%