Hearing of the Joint Economic Committee - Economic Outlook

Federal News Service

HEADLINE: HEARING OF THE JOINT ECONOMIC COMMITTEE

SUBJECT: ECONOMIC OUTLOOK

CHAIRED BY: SENATOR ROBERT BENNETT (R-UT)

WITNESS: ALAN GREENSPAN, CHAIRMAN, FEDERAL RESERVE BOARD

BODY:
SEN. COLLINS: Thank you. Good morning, Mr. Chairman. I'd like to get your thoughts on an issue that is very important to my home state of Maine, and that is the loss of manufacturing jobs that we are seeing. Over the past three years, Maine has seen some 18,000 manufacturing jobs disappear. It has really hurt our economy. In fact, we have had the greatest loss on a percentage basis of manufacturing jobs than any other state.

The recent news on the jobs front has been very encouraging, but it's unlikely to help a lot of these individuals who worked in our paper mills and other factories in Maine for many, many years.

And I want to point out that I realize that job losses in the manufacturing sector are not a new phenomenon. If you look back from World War II on, the percentage of employment in the manufacturing sector has declined as a share of total manufacturing; and in absolute terms the number of American manufacturing jobs has fallen each year since 1997.

Recognizing that the job losses in the manufacturing sector reflects a long-term trend, I would welcome your thoughts on what you see as the outlook for the American manufacturing sector and what policy options you believe Congress should be looking at to help stem the loss of jobs in this very important sector.

And just one final comment. Another reason why this is of such great concern to me is the new jobs that are being developed-at least in my state-pay far lower wages and have fewer benefits than the relatively high-wage manufacturing jobs that we are losing.

MR. GREENSPAN: Senator, as you point out, quite correctly, this is a long-term phenomenon, and it's essentially the result of two long-term-probably in one sense very strong trends. One is that this economy is inexorably becoming more conceptual; that is, an greater proportion of our gross domestic product is made up of ideas and less in the way of physical things. And you know obviously transistor radios do what large Stromberg Carlsons used to do in the 1930s. And there's all sort of miniaturizing and essentially eliminating physical things in the value-added. In a sense, it's our ideas that have created so much value. For example, the identification of the possibility of the transistor itself has induced a huge increase in wealth in the sense of what it is we produce.

On top of this, I might add as a consequence of this, with less physical things, manufacturing per se has gradually reduced its proportion of value added in the total GDP.

More importantly, however, has been the extraordinary advance in productivity in manufacturing. It is just awesome what these people have been able to do. The regrettable secondary collateral damage, if I may put it that way, of that process-this means they need fewer and fewer people to produce any particular level of output. And that process will continue on. But I must say that with the turnaround in the economy-and we are beginning to see obviously significant improvement in manufacturing in recent months, we're fortunately in an up cycle, and I think that things will improve over the longer run.

The issue of what public policy should be in this regard I think is a very complex issue, and I don't think I could address it in any way which-one, if I knew what to do, I could express it very simply. But, not knowing, all I can do is give you various alternatives-and I'll be glad to do that at some time, if you'd like.

SEN. COLLINS: That would be very helpful. Thank you.