Is Shifting from Manufacturing to Services Good for Wage Growth?

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Jobs in US manufacturing have fallen substantially while jobs in the services industry have been growing. Some argue that this is a good thing. The US is losing manufacturing jobs because of high productivity. The problem, however, is that productivity in the services sector is not as high as it is in manufacturing. Consequently, those who move from manufacturing to services jobs have seen their wages reduced by 3-11%.

Rodrik also shows that hundreds of thousands of US manufacturing jobs have been offshored to China. This has contributed to the sectoral shift from the higher productivity and higher paying manufacturing jobs in the US to the lower productivity and lower paying service jobs in the US. This is reflected by lower growth in US wages.