The total value of products manufactured is often taken as a measure of manufacturing production, but this figure contains so many duplications that it is no longer considered the best for the purpose. The value of the product necessarily includes the value of the raw and partially manufactured materials which the manufacturer had to buy in order to fabricate his product. Of two products of the same value, one may be produced from expensive materials with little labour cost, while the other may require inexpensive materials but a large amount of fabrication. The value of the product does not show that the manufacturing process in the latter case is more important than in the former.
Again, a manufactured product may in turn form the material for further manufacture in another industry, as, for instance, wood pulp, which goes into paper manufacture, while the paper or board produced from it may be used still further in the manu facture of boxes or in the printing industry. An industry in which the processes of manufacture are divided into different stages and result in separate products at each stage will show a relatively greater value of product than an industry where the processes are all within one organization, for in the latter case the product is counted only once, at the end of the line.
A better figure for measuring manufacturing output has been found to be the value added by manufacture. This is a figure computed by subtracting from the value of products the cost of materials used in making those products, and it thus represents the contribution of manufacturing to the value of the product. No matter how many industries an article must go through be fore reaching its final form, there is no duplication in value added by manufacture, for each industry's contribution is shown through these figures. As an example of the difference between the value of product and the value added by manufacture may be cited the two industries with the largest values of product in the census of 1925, viz., motor vehicles and slaughtering and meat packing. The former had a value of product of $3,198,000,000 and its value added by manufacture was $1,090,000,000, the difference between the value of products and the cost of ma terials. The slaughtering industry, however, instead of having the complicated processes of motor manufacture, represents a relatively simple process, and it is not surprising to find that its value added by manufacture was only $425,000,000 out of a total value of products of $3,050,000,000.
Figures given for values, whether value of products or value added by manufacture, do not reflect true conditions when com paring years of different price levels, such as 1914 and 1919.
When prices are high, as in 1919, totals given in values indicate a larger volume of activity or output than actually exists, while in a year of low prices industrial activity is minimized by using values. Figures on the number of employees give a measure of industrial activity that is not affected by price changes. The growth of mechanical power, however, has resulted in a con tinually increasing output of goods per employee, so that em ployment figures are liable to error on the conservative side. Power figures alone, on the other hand, show too rapid a growth to measure the increase in industrial activity, owing to the trend from hand to machine power. Thus it becomes necessary to resort to index numbers of the physical volume of production as a means for making such comparisons. These indexes are pre pared by combining the production figures for each commodity for which quantity figures are available, weighting each com modity by its relative importance. They are not included in the census reports, but have been specially computed therefrom and are published as a separate monograph. (See census monograph Growth of Manufactures, by E. E. Day and Woodlief Thomas.) The measure of physical volume of output for a commodity can be secured from the data on quantities of goods manufactured, which are given for most of the important industries. Such statistics have an added accuracy in that they represent, so far as possible, not only the goods made as primary products in one particular industry but also those goods made as secondary products in other industries. For instance, some steel castings are made directly in steel plants, while others are made in foundries, which are classified as a separate industry. The pro duction of steel castings cannot be found without totalling the production in both industries. It will be seen from this example that the statistics for an industry do not always coincide with those for a commodity, since the element of secondary products or side-lines is increasingly important in manufacturing in order to utilize the plant facilities to the fullest extent. Each plant is classified as a whole in some one industry according to its chief article of manufacture, and so it sometimes happens that an article belonging normally to one industry is made to a con siderable extent as a secondary product in other industries.