To borrow a phrase from Mark Twain, tales of the demise of U.S. manufacturing have been greatly exaggerated. Yes, times have been tough. Yes, the U.S. economy has been stuck in the doldrums of an oppressive, multi-year recession. And, yes, the manufacturing industry, once the foundation of the U.S. economy, has experienced a decline never before seen in our country’s history.
Reasons abound for this rather grim reality. Certainly off-shoring by U.S.-based companies has played a part in the significant job loss among manufacturing workers. In fact, over the past two decades the U.S. has lost nearly six million manufacturing jobs or nearly one-third of the workforce, while the number of off-shore workers employed by U.S.-based companies has nearly doubled. China has surpassed the U.S. as the world’s largest manufacturer, ending America’s 110-year dominance in manufacturing.
Can we blame the companies in search of a cheaper means to produce their wares? After all, global competition has made it more difficult than ever to turn a profit. In addition, many believe that the decline in manufacturing is simply a natural outcome of the ongoing transition to a service-based economy, and offshoring an evitable outcome of free trade. After all, agriculture a century ago employed 40% of our workforce, yet today employs only 2%.
Despite the grim statistics, manufacturing remains a vital piece of the U.S. economic pie and remains an important component of sustaining future prosperity. Manufacturing is the most capital-intensive and productive sector of our economy, and is key to developing and commercializing new technologies. Manufacturing also has the largest employment and output multipliers of the economy, creating many indirect jobs and making it a key catalyst of broad economic growth. It is also central to the U.S.’s ability to reduce its large trade deficit.
Factories get smarter
While it’s hard to argue that manufacturing is not in decline, there are reasons to be optimistic as we all look towards the New Year. According to the Schwartz Initiative on American Economic Policy’s report on Manufacturing Growth, the manufacturing industry isn’t dying. It’s simply changing. The move to advanced manufacturing gives promise to a second life for one of the most culturally and substantially significant sectors of the U.S. economy.
According to the report, the U.S. manufacturing industry is experiencing a period of transition, and those companies that evolve throughout this period will emerge stronger and more competitive. Gone are the days of strenuous manual labor or operating heavy machinery on a factory floor. The sector is changing from low-tech, labor-intensive to one that is technology-intensive, high-productivity, and at the heart of our nation’s innovation systems.
According to the Schwartz report, with a wide variety of breakthroughs in technology, productivity, and management, a new manufacturing industry is taking hold. This new or “advanced” manufacturing has modern factories heavily reliant on technology that allows manufacturers to engage in more and precise and increasingly productive work.
The transition to advanced manufacturing will increase the sector’s role in fostering innovation and developing and commercializing new technologies. Advanced manufacturing industries, such as semiconductors, computers, pharmaceuticals, clean energy technologies and nanotechnology, will plan an outsized role in generating the new technologies, products, and processes that ultimately drive economic growth.
Advanced manufacturing requires higher-skilled workers
As the manufacturing factory becomes more “advanced” so will the workers employed at those plants. Instead of running a machine press or using hand tools, today’s manufacturing worker is more likely to be operating computer-controlled precision equipment to build advanced medical devices, make new drugs, or assemble wind turbines.
This new breed of manufacturing worker must possess a wide range of abilities, including the production skills to set up and operate processes, design and development skills to continuously improve those processes, as well as proficiency in maintenance, repair and supply chain logistics.
This dynamic shift will require educational reform to provide individuals with the skills they need to succeed in advanced manufacturing. This includes an emphasis on developing science, technology, math, and engineering skills at the K-12 level and providing incentives for companies to make on-the-job training available for workers interested in improving their skill sets.
There is evidence that the U.S. workforce is currently ill equipped to deal with these changes. According to the National Council for Advanced Manufacturing, more than 80% of the companies responding to a study conducted by the National Association of Manufacturers (NAM) indicate their members are experiencing a shortage of qualified workers, making it difficult for them to achieve production levels, increase productivity and meet customer demands.