Like a Steel Trap
Daniel Ikenson writes to refute the myths regarding the US steel industry:
The preference in the media for exceptional doom and gloom stories about job loss and manufacturing ghost towns over factual stories about the real state of manufacturing has definitely taken its toll.
Against this pessimism he offers statistics on . . . nothing to do with employment numbers in the steel industry. Maybe employment in steel is way up the last few years and Ikenson just doesn’t bother to tell us. Trying to swag some numbers on my own, Ikenson informs us that
U.S. steel industry shipments of 106 million tons in 2007 exceeded the industry’s 1970 shipments by 16 percent.
Hm. 16% net growth in 38 years. Sounds awesome. (Yes, I realize steel output != Teh Hole Economyz. Ikenson is specifically writing about steel.) Seems then that 1970 shipments should have been about 91 tons.
Output per worker has soared: in the 1970s producing a ton of steel required 12 man-hours; today it requires 1.2 man-hours.
I love productivity gains. Strictly in employment terms, though, making no value judgments for a moment, it would see that if man-hours per ton declines by 90% and output goes up 16%, that steel-sector employment would now be
1.16 x 0.10 == 12% of steel-sector employment in 1970.
Again, this is not necessarily bad in and of itself. But an employment decline of 88% over 38 years would certainly seem to offer the potential for a manufacturing ghost-town or two. The problem is that Ikenson either pretends or imagines that he can refute claims about employment from awful people like “Barack Obama, Hillary Clinton, the Congressional Steel Caucus, other members of Congress, Lou Dobbs, the United Steelworkers, the AFL-CIO, the Alliance for American Manufacturing, and other entities whose agendas require an environment of public fear” with statistics about profits. I’m all for profits, and even for “creative destruction,” but while profits are ceteris paribus good, they are not jobs. Ikenson hasn’t actually shown anything about the general-welfare claims of other entities, until he’s willing to do the work of making a general-welfare argument about profits from the steel industry, or to make a separate argument that steel-sector employment has been rising recently.
Contrarily, the fact of an 88% decline in steel-sector employment since 1970 doesn’t, by itself, prove the wisdom of steel tarriffs or subsidies or import quotas. But it remains an 88% decline in steel-sector employment, since things are themselves.
UPDATE: 2008-1970 == 38, not 28.
Comment by Gsnorgathon —
May 29, 2008 @ 2:03 am
When my wife first visited my folks in Pittsburgh in 1993, we went on a little tour of the city. At one point, we drove down a road bordered by cyclone fencing enclosing an enormous field of very tall grass.
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“See that over there? 20 years ago, 40,000 people went to work there every day,” my dad said.
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That’s the best capsule history of the steel industry I’ve ever heard.
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And from what I’ve heard, the death rate in Pittsburgh exceeds the birth rate. It’s not exactly a ghost town, but…
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(At least they’re not killing people with air pollution any more. When I first moved there as a kid, I felt like I’d ended up in one of those dystopian SF stories I hated. They were giving pollution counts in the weather forecast!)
Comment by Just a Quick Question —
May 29, 2008 @ 2:07 am
Check your math (re: years).
Comment by juilan —
May 29, 2008 @ 3:10 am
“Since things are themselves”
How great is that clause.
Comment by josephdietrich —
May 29, 2008 @ 4:16 am
Yeah, JaQQ is right. I wish I were only 30 years old, but since I was born in 1967 I’m pushing 41. But your main point remains absolutely true.
Comment by Jim Henley —
May 29, 2008 @ 7:27 am
Doh! Yes, the year count is irrelevant to the problem, but I will fix.
Comment by Just a Quick Question —
May 29, 2008 @ 8:41 am
Sorry for the nit-pick, it is indeed irrelevant to the point. It’s funny that when people cherry pick statistics to demonstrate a point end up grabbing stuff that totally contradicts what they’re saying.
Your Quick Question:
Who would like to see Daniel Ikenson read this wonderful article out loud on a corner of downtown Bethlehem (PA)?
Comment by quasibill —
May 29, 2008 @ 9:08 am
JaQQ -
The population of Bethlehem ain’t what it was 20 years ago. If Ikenson read that on a corner here now, he’d be reading to a bunch of financial planners, real estate agents, mortgage bankers, bond traders, real estate developers (although they are going bankrupt pretty quick themselves) and lawyers.
You have to look for the ex-steel workers now, and many of the younger ones have jumped into the two most recent bubbles (dot com and real estate) and don’t necessarily self-identify as steel workers anymore. They’re too busy begging the Fed to bail out the financial sector, now…
In more joyful news, they’re shooting the action sequences for the next Transformers movie at the old blast furnaces this weekend- apparently they are a good fill-in for an asian city (only asian extras). And a large part of the old steel mill is being transformed into a Sands casino as I type this.
Comment by Just a Quick Question —
May 29, 2008 @ 9:43 am
Excellent point. Ahh well, the image of a slowly gathering crowd of ex-furnace shop and rolling mill workers was a good one, just a couple decades out of context.
Comment by Barry —
May 29, 2008 @ 12:56 pm
Jim, I’m afraid that you’ll have to turn in your libertarian credentials now
Comment by Tony P. —
May 29, 2008 @ 1:53 pm
In a sane world, increased productivity would be an unalloyed good, since the flip side of productivity is leisure. A hunter-gatherer economy has low “productivity” because it amounts to full employment with a vengeance: everybody has to spend all his waking hours working, just to survive. The whole point of technological progress is to reduce the fraction of his lifetime that the average human has to spend working — i.e. to increase leisure.
In our somewhat demented world, leisure goes by another, uglier name: unemployment. The Great Depression featured more “leisure” than the average person could stand. But the problem was not too much free time — it was too little income. For better or worse, the world we actually live in does not distribute its output of goods and services among persons, but among workers.
Consider the health-care industry, and the near-universal calls to make it more “productive”. About one sixth of our GDP is spent on health care, and many people think that’s too much. But that’s exactly equivalent to saying that too many Americans are employed (i.e. paid) to produce “health care”. The only way to spend less on health care (or steel, or food crops) is to employ fewer health-care workers (or steelworkers, or farmers) in the future.
Unemployed farmers, steelworkers, health-insurance clerks, and so on, can in theory share their surplus of leisure with the rest of us. If every sector of the economy suddenly doubled its “productivity” tomorrow, we could theoretically all work half as much as we do today while enjoying the same GDP as we have today. I don’t necessarily mean everybody switches to 20 hours a week, 50 weeks a year, for 45 years; any combination of those three factors, yielding the same product, would do. Neither do I necessarily mean that we would choose to take all the productivity gain in the form of leisure and keep GDP constant; I simply mean we would have that choice available.
What would not be available is the choice of 50% unemployment. Using only half of what we currently call the workforce to produce all of what we currently call GDP would make everybody miserable. And yet the free market, by itself, could easily tend toward that outcome.
Luckily, we have other mechanisms than the free market at our disposal. Specifically, we have government. It was government, not the free market, which created the Leisure Redistribution Act (a.k.a. Social Security) in 1935. It was a political choice to provide some leisure, albeit lumped at the tail end of life, to all Americans. Contrary to dire predictions, this governmental meddling in the free market did not lead to a catastrophic collapse of capitalism.
We can, if we choose, take political action to redistribute leisure in other sensible ways. By “sensible” I mean “ways that make higher productivity a good thing for everybody”. Alas, a pig-headed devotion to a Panglossian view of “free-market capitalism” stands in the way: if “the free market” yields up more leisure to Paris Hilton than she knows what to do with, and more leisure to a former steelworker than he can afford, then that must be the best of all possible worlds according to some people. So we bumble along, as a society, with less productivity than we might otherwise enjoy.
– TP
Comment by Gsnorgathon —
May 29, 2008 @ 2:11 pm
“…increased productivity would be an unalloyed good, since the flip side of productivity is leisure.”
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But is that really the case? I always figured that if your co-worker got fired and you ended up doing their job as well – with no pay raise – that your productivity had gone up.
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“The only way to spend less on health care … is to employ fewer health-care workers …”
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That depends on what you mean by health care. An awful lot of “health care” expenditures in the US are administrative.
Comment by quasibill —
May 29, 2008 @ 2:32 pm
My (admittedly) fuzzy memory of undergrad anthropology tells me this statement is utterly false. Anyone with actual expertise on the question of the average amount of time spent by hunter-gatherers “working” want to chime in here?
My fuzzy recollection is that the folks who were paid to study this stuff came to a number around 30 hours/week.
Not to say that there weren’t problems associated with the “feast or famine” aspect of the lifestyle, but I’m just wondering if the state of the subject has changed so significantly since the early ’90s, or if Tony P. needs to try a different tack on supporting his argument?
Comment by Tony P. —
May 29, 2008 @ 4:16 pm
Gsnorgathon:
You figure right, as far as I understand the econometric definition of productivity. The economy as a whole gets more “productive” if it can arrange to pay one salary instead of two for the same output. The problem comes when we confront the fact that “the economy” is not all there is to “society” — your laid-off colleague still has to eat. We could let him starve, of course, but there are two problems with that:
1) We are too humane to do so; and
2) If we do let him stop eating, the economy now has one less consumer. The output which sufficed to feed you both is now more than what you (on your unchanged salary) can eat by yourself. So one possible development is that next month or next year you also get laid off because your other colleague can now generate the (reduced) necessary output.
One way to deal with this situation is to tax your salary to pay him an unemployment benefit. A different way is to legally oblige your employer to keep you both on. Neither of these is a “free market” approach. Both are political, meaning that (in theory) they are decided on by votes, not purchasing power — and your laid-off colleague does not lose his vote along with his salary.
Obviously, a better outcome would be for your colleague to find another job — i.e. to generate some other kind of economic output. This translates to more total output for the economy: you are still putting out what the both of you were doing initially, and he is putting out a new, additional increment.
Of course, if the two of you together are producing more output than you were to start with, but the two of you together are only consuming the same amount (because your salaries are both still the same) then we’re kind of back to the original problem: too much productivity
Again, you’re right. What I mean by “health care” is the sum total of all those economic activities that make up the one-sixth of GDP that economists call “health care spending”. As best I can tell, that $2 trillion or so can be calculated in two different ways: expenditures, or incomes. If you do it by adding up expenditures, then in my case you would add up my insurance premiums and co-pays, my Medicare taxes, and my occasional puchases of Alka-Seltzer. If you do it by incomes, you add up all the money people get paid out of those outlays. The answer comes out the same either way. If I get to pay less, somebody has to get paid less, is all I’m saying.
– TP
Comment by Avram —
May 30, 2008 @ 8:01 pm
Hunter-gatherer working hours:
According to Marshall Sahlins, the !Kung of Botswana spend about 20 hours a week on life-sustaining activities. Supposedly the Hadza of Tanzania spend about 14 hours.
On the other hand, some people dispute these figures, and there’s some argument about what constitutes “work”. And that Economist article I linked to claims that most modern hunter-gatherer societies spend a lot of time fighting, so there are downsides to having a lot of leisure.
Also, for Tony P:
I’m pretty sure owners have been known to take a cut as well.
Comment by Tony P. —
May 30, 2008 @ 9:39 pm
Avram,
What constitutes “work” is an interesting question in our own society, as well as in hunting-gathering ones. There’s a reason why highly-paid major league shortstops, say, are called baseball players. Rush Limbaugh talks on the air 3 hours a day, but his real job is to be Rush Limbaugh — a 24/7 occupation. Stamping out widgets in a factory 8 hours a day is a rather different order of “work”.
I can believe that hunter-gatherers spend a lot of time fighting the tribe across the valley rather than “working” at hunting and gathering. But I can equally well imagine that the fighting is largely about protecting or expanding the territory over which they do their hunting and gathering. Does that count as “work” at all?
And of course owners take a cut of society’s output. My point was merely that persons too young, too old, or too feeble to work — and too poor to own much — are not as persons entitled to a share of the economy’s output. Not on purely economic grounds, anyway.
– TP