By Patricia L Johnson  

While reading an article today, I came across the following – what do you think?  Is the statement the author made an accurate representation of the facts?

Author comment

"Right-wing economists like Greg Mankiw, the former chairman of Bush’s Council of Economic Advisors, who infamously suggested that assembling cheeseburgers at a Stuckies should count as a manufacturing job …"

THE FACTS:

Greg Mankiw did not suggest flipping burgers should count as a manufacturing job; his burger comment was actually a question in reference to the Economic Report, directed to the government agencies that collect data on manufacturing jobs.  He was making the point that the definition of what constitutes a manufacturing job is so blurred it is difficult to make a distinction between what is a manufacturing job and what is considered a service.

"The Definition of Manufacturing

This year’s Report contains a chapter on the challenges facing manufacturing, discussing both the longer-term trends and the recent business cycle downturn. There is no question that the recent downturn was particularly hard on manufacturing industries. Manufacturing was affected by the latest economic slowdown earlier, longer, and harder than other sectors of the economy. We discuss why this has been the case and how the President’s policies will help to restore and maintain growth in manufacturing and other job-creating industries.

A box in the Economic Report discusses an important consideration in assessing policies that apply to manufacturing: the definition of what constitutes manufacturing is far from clear. For example, when a fast-food restaurant sells a hamburger, is it providing a service or combining inputs to manufacture a product?

The government agencies that collect data on manufacturing are well aware that the distinction is blurry. According to the Bureau of Labor Statistics, bakeries, candy stores, and custom tailors are all part of manufacturing. But one could walk into such a retailer and see many service activities taking place. Sometimes subtle differences can change how an activity is classified. Mixing water and concentrate to produce a soft drink is classified as manufacturing. If that activity is performed at a snack bar, however, it is considered a service.

In the past, it has not mattered to firm owners whether government data collectors classified a business as a manufacturing firm or a service provider. But the blurriness of the definition would matter if policies were based on it."