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.

BREAKING DOWN '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.

RELATED TERMS
  1. Economist

    An expert who studies the relationship between a society's resources ...
  2. Flexible Manufacturing System - ...

    A method for producing goods that is readily adaptable to changes ...
  3. Growth Recession

    An expression coined by economists to describe an economy that ...
  4. Manufacturing Cells

    Sets of machines that are grouped by the products or parts they ...
  5. Capital Goods Sector

    A category of stocks related to the manufacture or distribution ...
  6. Low-Cost Producer

    A company that can provide goods or services at a low cost. In ...
Related Articles
  1. Investing

    Global Manufacturing: Exploring Revenue Trends and Fundamentals

    Learn about the significant global trends influencing the manufacturing sector, and the effect these trends are having on both emerging and developed countries.
  2. Investing

    Why a Strong U.S. Manufacturing Industry Matters (UTX)

    Consider manufacturing’s contributions to employment and GDP growth by engaging other industries, both upstream and downstream, from the manufacturing process.
  3. Investing

    More Waiters and Bartenders Than Manufacturing Workers Spells Trouble

    Learn how jobs in bartending and waiting tables are displacing manufacturing jobs, and how this is troubling to the overall U.S. economy.
  4. Investing

    Global Service Sector Slows, Contracts in the U.S.

    Markit and its partners released February service-sector purchasing manager indices (PMIs) for 12 countries and the global economy Thursday, which show that service sector growth in five countries ...
  5. Insights

    Is a U.S. Industrial Recession on the Horizon in 2016?

    Find out why the industrial economy may be teetering on an industrial recession and what could prevent it from going over the cliff.
  6. Personal Finance

    Advance Your Career With A Finance Job Overseas

    Many finance jobs have moved overseas, creating exciting opportunities. Find out how to get in on the trend.
  7. Trading

    Volatility In The Yen Has Brought On Big Changes

    There's a difference between translation effects and the real effects that FX swings bring. We look at the difference, and how it's changing Japan.
  8. Small Business

    What is Globalization?

    As a business term, globalization refers to the tendency of international trade, investments, information technology and outsourced manufacturing to weave the economies of diverse countries together.
  9. Insights

    U.S. ISM Expansion a Bright Spot After Lower GDP

    US manufacturing data for July still strong despite coming in below expectations. Eurozone data mixed and the UK slowing more than others.
  10. Insights

    The 5 Industries Driving the U.S Economy

    Jobs are being created by the millions, wage growth is picking up and foreign trade is only 30% of the nation’s GDP.
RELATED FAQS
  1. What developed countries have the largest proportion of industrial companies?

    Examine the industrial sector in developed countries, and learn about the shift in manufacturing production to emerging market ... Read Answer >>
  2. How does globalization impact comparative advantage?

    Learn how comparative advantage is becoming increasingly relevant due to globalization and how this has affected both advanced ... Read Answer >>
  3. Are there any downsides to globalization?

    Understand the commonly cited detriments of the globalization process and its impact on the work force, environment and costs ... Read Answer >>
  4. What is the automotive sector?

    Explore the automotive sector, which includes manufacturers, retailers, wholesalers and original equipment manufacturers, ... Read Answer >>
  5. What countries contribute the largest weight to the global electronics sector?

    Learn how China, America and Germany are contributing to producing and exporting electronics globally as the top countries ... Read Answer >>
  6. Why do some analysts argue that trade deficits aren't bad for the economy?

    Understand the reasons why trade deficits, reviled by many economic analysts, are not always a bad thing in the eyes of many ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center