Hollowing Out

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DEFINITION of 'Hollowing Out'

The deterioration of a country’s manufacturing sector when producers opt for low-cost facilities overseas. Some economists argue that the economies of Japan, the United States and other developed nations are being hollowed out, posing a threat to full employment. 

INVESTOPEDIA EXPLAINS 'Hollowing Out'

Of the past few decades, the manufacturing sectors of some of the world’s leading economies have contracted significantly. After peaking in 1979 at more than 19 million (L2, p. 2), the number of U.S. manufacturing jobs shrank to roughly 12 million in 2013 (L4, p. 28). Other advanced economies have experienced a similar trend. In Japan, for example, manufacturing has fallen from 35% of output in the 1970s to 18% in 2009. This has had a disproportionate impact on cities and rural communities that relied heavily on nearby plants for employment.

Not all economists argue that the outsourcing of manufacturing jobs hurts society, however. They suggest the domestic economy has an opportunity to pivot toward high-skill, high-wage jobs such as product design and marketing. They also say consumers often benefit from lowers prices when the products they buy are made overseas.

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