One of the great human achievements of the past couple of centuries has been our ongoing ability to do more with less. We now make things for a fraction of the cost, and there’s no sign of the trend letting up.
The Federal Reserve Bank of Chicago has posted a nice summary of these gains following World War II. Consider these observations by Senior Economist William Strauss and marvel:
—Manufacturing productivity growth has averaged 2.9 percent since 1950, meaning only 184 workers accomplish the same amount of work as 1,000 workers in the year when Harry Truman approved production of the hydrogen bomb.
—Technology caused productivity to explode. Computer numerical control drove manufacturing productivity growth at a 3.3-percent annual pace between 1980 and 2009, a period in which productivity in the rest of the economy grew only 2 percent a year.
—Great productivity gains in manufacturing have kept a ceiling on prices. Prices for new vehicles rose 1.7 percent from 1980 to 2009 while the overall Consumer Price Index moved up 3.7 percent.
While it might be hard to imagine manufacturers continuing to wrest even more from less, Strauss sees no end to the improvement.
“The manufacturing sector remains vibrant and innovative. Manufacturing output has been rising at a solid pace over time,” he said.
As Strauss notes, some of these gains have come with wrenching pain for workers whose labor is no longer needed. Others have complained that U.S. trade policy effectively outsourced manufacturing to Asia, which drove down prices through cheap labor, in order to encourage economic stability in the region.
What are your thoughts?