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Mike Walden's You Decide:  How are farming and manufacturing alike?

Dr. Mike Walden
North Carolina Cooperative Extension

  

I have a soft spot in my heart for both farmers and factory workers. One of my grandfathers was a farmer in Ohio during the early 1900s. My father – the eldest son – told me many stories of awakening before sunrise to do numerous chores before he walked to school. My grandfather’s skill in raising both livestock and crops, as well as my grandmother’s abilities to cook, can and sew, kept their farm running almost as a self-sustaining unit.
 
My wife’s father worked for decades in a factory in New York, making equipment for post offices. He was the typical factory worker of the time – wearing overalls and a slouched hat, carrying a lunch pail with his mid-day meal as he left for work.
 
At their peaks, farming and factory jobs ruled the employment world. In the early 1900s farming jobs in North Carolina accounted for more than half of all jobs, and in the 1970s more than one-third of our state’s workers were in factories. If you weren’t employed on the farm or in the factory, you were a unique worker.
 
But not today. Only 11 percent of workers in North Carolina now leave home for the factory. And just 1 percent of workers now say farming is their primary occupation.
 
Does this mean we no longer raise crops and livestock or manufacture products? Absolutely not: Farming and manufacturing are still very important to the North Carolina economy.
 
Today’s output of farms in our state is eight times more than in 1900, four times greater than in 1950 and twice as much as in 1980.
 
The gains are just as significant for manufacturing. The output of North Carolina’s factories is six times greater than it was in 1950 and three times higher than in 1980.
 
Of course, what is grown and raised on the farm and made in the factories has dramatically changed over time. North Carolina farmers have shifted from growing crops -- mainly tobacco -- to raising more animals, primarily hogs and poultry. During much of the 20th century, North Carolina’s manufacturing was dominated by furniture, textiles and tobacco products --cigarettes. In the last quarter century, firms in technology, pharmaceuticals, food processing, machinery and vehicle parts have become manufacturing leaders.
 
Thus, both farming and manufacturing have followed similar paths. They have significantly increased production but cut employment. Yet how could this have happened? With fewer workers, shouldn’t both farming and manufacturing be declining rather than expanding?
 
The answer requires a brief (I promise!) detour into the economics of production. The making of any product or service uses three inputs – land, labor and capital. Land is the site of the production, labor is workers, and capital includes machinery and technology.
 
Over time, businesses can use different proportions of land, labor and capital. Indeed, this has happened “big time” in both farming and manufacturing, where the trend for the last 50 to 100 years has been to use less labor and more capital. Thus, whereas today’s farm and factory use fewer workers, they have added machinery and technology in large amounts. Tractors, irrigations systems, robots, computer programs and sensors have replaced people. The substitution has been done in a way to actually increase output.
 
There have been two big benefits of this shift from labor to machines and technology.
 
First, both food and manufactured products have become less expensive for consumers. In the last 100 years, food costs as a percent of disposable (after-tax) income have dropped 40 percent. Also, in the last 30 years, the prices of manufactured products have fallen 30 percent relative to other prices.
 
Second, since labor costs tend to be cheaper in many foreign countries, without the switch from labor to capital more domestic food production and more factories would have moved overseas.
 
These production trends in farming and manufacturing likely won’t reverse. In fact, they will probably become stronger. This means we shouldn’t necessarily judge the economic significance of farming and manufacturing by the number of workers the sectors employ. Still, we should focus on the kinds of jobs that individuals who would have been farmers or factory workers are able to find.
 
Today’s farm isn’t my grandfather’s farm, and today’s factory isn’t my father-in-law’s factory. Both are increasingly high-tech, machine-intensive operations with extraordinary high levels of productivity but relatively few workers. Their employment impacts are mainly “downstream” on their suppliers or “upstream” on marketers and retailers. There are between two and four jobs created in other economic sectors for every job in farming or manufacturing. 
 
So the farm and factory are, by no means, dead – but they are very different than their predecessors. You decide if this represents a step ahead! 

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Dr. Mike Walden is a William Neal Reynolds Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of N.C. State University’s College of Agriculture and Life Sciences. He teaches and writes on personal finance, economic outlook and public policy. The College of
Agriculture and Life Sciences communications unit provides his You Decide column every two weeks. Previous columns are available at
http://www.cals.ncsu.edu/agcomm/news-center/tag/you-decide

Related audio files are at
http://www.cals.ncsu.edu/agcomm/news-center/category/economic-perspective/

More news from the College of Agriculture and Life Sciences is
available at http://www.cals.ncsu.edu/agcomm/news-center/

 
  
   

   
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