U.S. could alter way jobs are counted
New measurement proposed
Gannett Washington Bureau
Most if not all of the 147,900 manufacturing jobs New York has lost over the last 10 years could be erased on paper under a government proposal to change how some jobs are classified, an idea critics say would mask damage caused by the offshoring of production.
The proposal by economists at several federal agencies would create a new measurement called Factory-less Goods Production, or FGP.
Factory-less production, according to a U.S. Labor Department website devoted to the topic, “undertakes all of the entrepreneurial steps and arranges for all capital, labor, and material inputs required to make a good.”
The new classification would attempt to capture what’s happening at American brands such as Apple and Nike that outsource their manufacturing.
Administration officials have proposed making this new business model part of the North American Industry Classification System, or NAICS, alongside agriculture, mining, utilities, healthcare, retailing and other industries.
The White House Office of Management and Budget announced in the Federal Register that a 2017 deadline to implement the new statistical measure will be indefinitely postponed.
“The relevant statistical agencies will now have the opportunity to complete the additional research, testing, and evaluation needed to determine the feasibility of developing methods for the consistent identification and classification of FGPs that are accurate and reliable,” Friday’s announcement said. Sen. Sherrod Brown, D-Ohio, a leading congressional critic of the proposal, hailed the delay as “a step in the right direction.” “I’m grateful the administration will halt a proposal that would undermine our ability to evaluate manufacturing job growth and trade imbalances,” Brown said in a statement. Accurately measuring the pulse of the U.S. economy is harder to do than ever, with the design, parts sourcing, production and marketing of many goods spread across international borders.
Critics of the proposed new classification say it would mask the ongoing loss of domestic manufacturing jobs and the true size of the U.S. trade deficit with countries like China.
Apple iPhones and iPads manufactured in China by the contractor Foxconn might be counted as U.S. exports instead of Chinese imports because Apple owns the intellectual property for building them, warns Robert Scott, an economist at the liberal-leaning Economic Policy Institute. Moreover, the iPhones and iPads could be reclassified as services — instead of electronic devices — because they’re marketed through phone companies, Scott said.
“I think this is an effort by the people who work and own multinational companies to support their views of the world,” he said. Brian O’Shaughnessy, chairman of Rome, N.Y.based Revere Copper and co-chairman of the Coalition for a Prosperous America, predicts the result would “blur” the nation’s trade statistics. “It doesn’t make any sense to the common man,” he said. O’Shaughnessy owns a majority stake in his employee-owned company, founded by the Revolutionary War hero Paul Revere. It supplies copper coils to other manufacturers. Its customer base has declined over the last 15 years as more and more U.S. factories have closed. O’Shaughnessy is sounding an alarm, as his company’s founder did to warn of the approaching British Army. His message for 2014: “There’s nothing that shouldn’t wake up Americans more than the loss of jobs overseas. We own the U.S. economy. We own the U.S. marketplace. We could control the U.S. marketplace and we would, if we knew.”
Government economists who are leading the effort to develop the FGP statistics say their goal is to provide a richer level of detail of the changing economy. They insist that critics are offering a worst-case characterization of what would happen.
“The fact is that we don’t really know what the impact will really be,” said David Friedman, assistant commissioner for producer prices at the Bureau of Labor Statistics. Federal agencies are inconsistent in how they handle this data and the underlying effort is to establish uniformity, he said.
“What we have seen in the last 20 years is companies that basically own the production process but they outsource the transformation part, the taking of inputs and production of outputs,” Friedman said. If they are successful, the government economists hope to provide data on three levels:
Â» Traditional manufacturers that design and produce their own goods.
Â» Newer factory-less companies that outsource production.
Â» Contract manufacturers operating as subcontractors.
Figuring out how to track all those pieces has taken years and is still a work in progress. In the meantime, The Department of Labor’s current system for industry classification will continue. Those statistics show that New York’s manufacturing employment fell from 600,900 in June 2004 to 453,000 in June of this year. That’s a 24.6 percent drop.