Political leaders and media commentators often express concern that since 1995, U.S. manufacturing employment has fallen by nearly 12 percent. Their comments often imply that other countries must be capturing those lost manufacturing jobs. In fact, many other countries have also experienced declines in manufacturing employment. Since 1995, the number of people making goods in factories has also decreased by 12 percent in Russia and South Korea. The United Kingdom has lost about 13 percent of its manufacturing jobs, and manufacturing employment has declined by 16 percent in both Japan and China. In Brazil, the number of manufacturing jobs has fallen by 20 percent.

Technological improvements experienced worldwide have enabled manufacturing industries to substitute capital for labor as wages have increased. Many of the approximately 22 million people who used to be employed in the world’s factories have obtained jobs in such industries as telecommunications networking and software design and support.

If global prices of capital goods used in manufacturing increase substantially during the next decade, would you expect employment in factories to continue to decline?