US Employment Deindustrialization: Insights from History and the International Experience

Robert Z. Lawrence (PIIE) and Lawrence Edwards (Cape Town University)
Policy Brief
13-27
October 2013

International factors, such as the dramatic increase in imports from emerging-market economies, especially China, have been widely blamed for the decline in manufacturing employment in the United States over the past decade. The authors argue, however, that far more important in causing that decline has been the slow overall growth in US employment and powerful historical forces that have affected all advanced economies: a combination of rapid productivity growth and demand that is relatively unresponsive to income growth and lower prices. To be sure, US manufacturing employment can grow in the short run. The labor content of the US manufacturing trade deficit remains significant and a vigorous US and global economic recovery could boost US manufacturing employment. Over the long run, however, absent new product innovations, or a shift in consumer preferences, the basic forces leading to declining manufacturing employment are unlikely to abate.