Do we really need Manufacturing Jobs

Political debate during elections (currently America) always hover around bringing back jobs. But do we really benefit from bringing back these manufacturing jobs which had gone overseas because of various reasons ? The empirical evidence does not support the political rhetoric.

made in usa

There is always a debate between Manufacturing and Services sector on which provides the highest employment. The days of manufacturing sector providing scores of employment and cities constructed for the sake of factories are over (except for a few in China and other parts of the world). Improvements in technology and robotics have created much needed infrastructure to manufacture goods with less human intervention. We expect the trend to continue and improvise over a period where human intervention in performing tasks may be necessitated only because of system failure.

A snapshot of the employment index for USA clearly demonstrates that services and related industries contribute to more than 80% of employment. The pattern is more or less similar across the developed world.

The primary reason for services to general highest level of employment is due to its trickling effect on allied/dependent industries and low upfront investments in majority of its sub-sectors. Take for example, Tourism industry, which generates employment not only in its core sub-sectors like hospitality industry, transportation and entertainment but also allied ones like food and beverages, retail trade, recreational services and other support sub-sectors.

As per World Travel and Tourism Council (WTTC) report 2015, Tourism is the one sector that created a major impact in terms of employment directly or indirectly. It provided direct and indirect employment to 284.0 million globally in 2014-15. Tourism industry employs 1 in 11 (approx 9.1%) of total global work force. The following diagram provides an overview of how tourism industry impacts different sub-sectors or how it drives the economy.



Even though there are many who feel that manufacturing is backbone for the economy, the future looks uncertain due to myraid of issues like unavailability of cheap capital and labour, local and political issues, large upfront investments, technology upgradation and economies of scale. Countries should focus on few core industries where it can bring differentiation instead of concentrating on many industries and burning fingers.

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