Manufacturing has a long history in the U.S., as both an economic mainstay and key source of American ingenuity. That will likely continue to be the case, but post recession American manufacturing is otherwise characterized by slow growth and lots of change. So what can we expect from our recovering patient? Like most diagnoses, the future of American manufacturing contains the good, the bad, and the not-too-ugly.
Compared to previous years, manufacturing in America has been getting undeniably stronger. According to the American Manufacturing Partnership Steering Committee, manufacturing has added over 700,000 jobs in the last five years, experiencing steady growth after more than a decade of decline.
In fact, U.S. census data from 2012 shows that manufacturing was a top 3 employer in 25 states. The sector provided jobs to about 11.9 million people with an average income of $53,500. Both these figures are an increase from the year before, when manufacturing employed 11.7 million with average incomes of $52,300. That upward trend continued with over 190,000 jobs added in 2014.
A slow shift back to American shores has added to the uptick in U.S. manufacturing jobs. Until recently, overseas production in countries like China offered cheaper options for manufacturers looking to build factories. However, the rise of China’s economy has seen an increase in wages for Chinese workers. Now, companies like Beijing-based Lenovo, who recently opened a manufacturing line in Whitsett, N.C., are finding it more cost effective to manufacture inside the U.S.
The resurgence of U.S. manufacturing has been slow. There are currently about 12 million Americans working in manufacturing, but it will probably be a long time before the sector sees the number of factory jobs return to the levels of the 1990s, when there were more than 17 million factory positions. Manufacturers are also seeing, and coming to expect, higher output from fewer workers thanks to technological improvements. This means that industry leaders may not necessarily require all the employees they would have hired 25 years ago.
In fact, higher per-worker output within the U.S. is part of what’s driving foreign manufacturers to consider opening factories on American soil. U.S. manufacturers now produce three and a half times more output per worker hour than they did in 1979 when manufacturing peaked at 19.7 million jobs. This increase in productivity is great for the economy but it limits the availability of jobs. This is because many gains in productivity come from sending low-value jobs overseas and replacing workers with machines.
Changes in manufacturing technology are also changing what manufacturing jobs mean. That is, as new manufacturing methods like 3D printing become more common, the jobs the industry creates may not be the jobs that potential employees are prepared to fill.
American manufacturing may not be in the position to drastically expand job openings, but moving their facilities back to the U.S. is still a very good thing. It’s also very plausible. According to the Boston Consulting Group the U.S. could have lower manufacturing costs than Japan or Europe this year, which would drastically improve the likelihood of large-scale manufacturing movement to the U.S.
Also, although the recent upswing in manufacturing has been small compared to decades past, any improvement is still good for the economy and provides jobs. Those jobs may not be the same as they were in the 1980s, but it’s important to remember that the impact of technological change on work and wages has been generally positive. Of course, smarter machines require smarter workers, so education is key.
So What’s the Bottom Line:
It’s difficult to predict the long-term future of manufacturing in the United States, but a few things are clear. The first is that manufacturing remains a mainstay of the U.S. economy. It accounts for 12 percent of GDP and continues to grow. The second is that the sector continues to become more technologically sophisticated in its efforts to increase productivity and remain competitive in the global market. That means that in the future, the pool of workers will likely be smaller, smarter and more adaptable.
In a recent NPR interview about the future of American manufacturing, Planet Money’s Adam Davidson put it like this, “If you want to succeed for the coming decades, you don’t just need to be trained and then a few years later retrained. You need a continuous improvement in your education. The main skill you need is the skill to learn more skills.”
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