Americans Aren't Letting Go of Their Craft Beer, Wine and Whisky
(Bloomberg View) -- One of the fun things I discovered looking through the jobs data released by the Bureau of Labor Statistics last week was that, during a generally impressive stretch for manufacturing employment growth, "breweries, wineries and distilleries" was among the industries leading the way.
This wasn't a one-year fluke, either. Over the past seven years, the breweries, wineries and distilleries sector has been adding jobs at an 11.1 percent annual rate, compared with 1.7 percent for nonfarm payroll employment as whole. The contrast with the other half of the beverage manufacturing industry, soft drinks, is quite something:
Part of what's going on here is that Americans are drinking more alcoholic beverages while soft drink consumption has declined. But that can only explain some of the job growth. Alcoholic beverage sales in the U.S. rose 21 percent in dollar terms from 2010 to 2016, while employment more than doubled.
No, what's really changed is how alcoholic beverages -- beer and spirits in particular -- are being produced. For a long time, both industries in the U.S. were dominated by a few giant players. Over the past decade, both have seen an explosion in new entrants. The number of wineries has also grown, but it was already growing steadily before 2011. These numbers are from the Quarterly Census of Employment and Wages, a BLS data source that's not as timely or available as far back as the payroll numbers in the monthly jobs report but gets into far more detail:
There are eight times as many breweries in the U.S. as there were a decade ago, and seven times as many distilleries. The accompanying employment growth, while not quite as spectacular, is also impressive:
I am not the first person to remark upon this! Derek Thompson had an article on the craft-beer boom in the Atlantic in January, and economist Ian Hathaway followed up with more data on craft brewing and on small distilleries -- which revealed, among other things, that all the new brewery jobs have been created at establishments of 499 employees or fewer and almost all the new distillery jobs at establishments of 99 employees or fewer. Ryan Avent wrote a rumination on craft distilleries and craft other stuff for the latest edition of the Economist's 1843 magazine. And my Bloomberg View colleague Noah Smith wondered if craft brewing might be a model for how to lift more Americans into the middle class.
That's not the only interesting question this trend raises. Another is how, in an age of growing industry consolidation and concentration, something like this could have happened. Matt Stoller of the Open Markets Institute in Washington offered this explanation last week:
Maybe so! Thompson discusses the origins and impact of this regulatory structure in his article, and he mentions another key government action: the 1978 congressional vote to allow home production of wine and beer. These laws and regulations were in place 10 years ago, though, and there weren't nearly as many small breweries and distilleries. Several states have recently created new, less onerous licensing requirements for small distilleries, but while government policy has certainly enabled the craft-booze boom, in the end it is demand -- from affluent consumers looking for unique products and affluent professionals looking for more fulfilling work -- that seems to have been the key driver.
Which brings me to yet another interesting question. Is this craft-everything boom making us richer or poorer? Consider this history mini-lesson from Avent:
The destruction of the old craft economy was an essential component of humanity’s great transformation from a species chronically at risk of starvation to one that happily spends $6 on a cup of coffee.
In economic terms, what has driven the spectacular rise in living standards over the past couple of centuries is rising productivity, and employing twice as many people to produce just 21 percent more dollars' worth of beer, wine and spirits technically represents a decline in productivity. Just ask the BLS, which releases annual productivity estimates for the beverage manufacturing industry:
Beverage manufacturing is probably too small an industry for this decline to have had a discernible impact on overall productivity growth, which has slowed over the past decade-plus. Also, multifactor productivity, which measures output relative to inputs including "labor, capital, energy, materials and purchased services," hasn't dropped nearly as much in beverages as labor productivity has. Maybe that's because small breweries, wineries and distilleries are less capital-intensive than big ones are. Or maybe it's just because multifactor productivity is really hard to measure.
All this reminds me of a famous manufacturing productivity study published by McKinsey & Co. in 1993. The firm compared value added per hour worked in various industries in Germany, Japan and the U.S., and it found that U.S. manufacturing workers were much more productive overall than their counterparts in those other two manufacturing hotbeds, although workers in export-focused industries in Germany and Japan were quite productive.
One of the industries studied was brewing. Reported Sylvia Nasar in the New York Times:
Brewers in Germany, for example, are far less productive than Japanese or American beer makers. But the reason is hardly that the Germans lack the technology. The more efficient American and Japanese brewers use machinery imported from Germany.
Also, the Germans made better beer! They surely could have made it more efficiently, but custom, law and, one presumes, customer demand for a more artisanal product kept them from doing so. So ... were German brewers less productive, or was McKinsey's productivity measure too narrow? The same goes for the current BLS numbers. The agency adjusts its price and productivity measures for a number of different products for changes in quality but doesn't try to do so for beers, wines and spirits. So the fact that consumers have more and better drink choices now than they did a decade ago doesn't show up in the productivity statistics. Neither do the psychic rewards earned by people like the former lawyer and biotech scientist whose Washington distillery figures prominently in Avent's article. (Neither do the societal costs of increased alcohol use, for that matter, although it may be that craft booze is mainly just displacing non-craft booze.)
Twenty years ago, New York University and London School of Economics sociologist Richard Sennett published a haunting little book, "The Corrosion of Character: The Personal Consequences of Work in the New Capitalism," that began by contrasting the career of lifelong janitor Enrico (a subject of an earlier Sennett study) with that of his technology consultant son, Rico, who made lots more money than his dad but seemed to experience less career fulfillment. Rico, Sennett wrote, "feared that the actions he needs to take and the way he has to live in order to survive in the modern economy have set his emotional, inner life adrift."
The book was praised in the U.S., but it found its true audience in Germany, where it became a No. 1 bestseller. In Germany, craftsmanship never fell entirely out of fashion. Now that it's making a comeback in the U.S., maybe Sennett's book is due for a revival, too. They could probably sell copies at every craft brewery, distillery and winery in the country.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
This chart ran with my column last week on manufacturing jobs. As I noted then, I took some liberties in constructing it. The more-than-three-NAICS-digit category with the biggest job gains was actually agricultural, construction and mining machinery, with 24,100 new jobs, but I thought it would be more informative to go instead with its two subcategories with the biggest gains, mining and oil and gas field machinery and construction machinery.
In BLS lingo an establishment is "the physical location of a certain economic activity for example, a factory, mine, store, or office. A single establishment generally produces a single good or provides a single service. An enterprise (a private firm, government, or nonprofit organization) can consist of a single establishment or multiple establishments."
He also has a newer book called The Craftsman that I now want to read.
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