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U.S. Manufacturing Remains
a Global Force, But…
 
By Dr. Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association, International, in Rockford, Ill.

Despite declarations of doom and gloom coming out of Washington suggesting that the United States is rapidly losing its ability to compete in the world, the U.S. continues to play a huge role in global manufacturing. In terms of the total value of finished goods, the U.S. provides 45 percent—certainly not the sign of a nation that no longer matters in the global manufacturing community.

There are at least two major differentiations to note when talking about manufacturing in the United States. The first is manufacturing from a business perspective and the other involves manufacturing as a source of employment. The situation is very different depending on one’s perspective. So are the solutions that might be offered to deal with the issue.

The U.S. manufacturing sector has changed dramatically over the last decade and that change is not solely related to the competitive pressures from Asia and elsewhere. There is no such thing as a unified manufacturing sector, as each industrial sector has its own challenges and opportunities. Even on the sensitive subject of imports and exports there is no unanimity, as one sector gains from imports while another suffers.

There are very basic trends to note when talking about U.S. manufacturing. The first is that the sector has never been so efficient and productive. The other is that there has never been a time when there were fewer workers needed in the majority of manufacturing sectors.

These developments are not unrelated to one another, but from a political perspective this is problematic. The interest on the part of most serving in government is not related to manufacturing as a going concern (although there is interest in taxing those companies), but in manufacturing as a provider of jobs. Traditionally the sector was the place that employed those who would be described as low or semi-skilled, and this served as something of a safety valve for society as a whole.

In some respects, the manufacturing sector covered up some of the endemic failures of the system. Those that had been left behind in the education system could find work in the factories, and schools could essentially ignore the needs of the factory sector by assuming that the companies would provide all the on-the-job training themselves.

There are some interesting statistics on the output of U.S. manufacturing in what has been described as one of the most serious recessions in 50 years. The U.S. manufacturing sector produced $1.7 trillion worth of goods in 2008. That is more than the total output of the Russian economy, and the amount of these goods that were exported exceeded the total output of the Indian economy.

The U.S. manufacturing community is one of the most diverse in terms of global trade, exporting to every nation on the planet. This is quite remarkable when one understands that the bulk of what U.S. manufacturers make is consumed in the United States. The fact is that the U.S. makes a very wide variety of goods—from the immensely complex like a jet airliner to the very simple.

It is also true that many sectors of the U.S. manufacturing community have shrunk over the years. In some cases, the competition from overseas has been too much and plants have been forced to close. This has been especially true in more labor-intensive sectors such as textiles and clothing manufacturing. In other cases, the industry has suffered from over capacity and a collapse in demand—bringing the automotive sector to mind.

The fact is that the U.S. manufacturing sector is split when it comes to the impact of global trade. For every company that has seen its markets widen, there is one that has been put out of business by foreign rivals. This is what has created some of the challenges on the employment front. Twenty million people worked in manufacturing in 1980, and now that number is down to about 12 million.

Those industries that are labor intensive and don’t require much from their employees except for hard, repetitive work are migrating to those nations where the cost of that labor is cheaper. The companies that produce higher-value goods have gone more and more toward technical solutions and robotics. The modern manufacturer is now about as high tech as any industry.

This leaves the political system with a dilemma. The issue of job creation is at the top of any elected official’s list, and in the past that meant support for the local manufacturer. Now that this industry is not the job creator it once was, the political equation has been altered. The plant still needs workers, more than ever before, but not the workers it once employed. There is a serious disconnect between what the modern factory needs and the workforce that is being made available by the nation’s educational system.

Manufacturing remains a productive and important part of the U.S. economy, but it needs help to advance. The issue of training and re-training will come to dominate many discussions in the future, but thus far there has been much more in the way of good intentions than actions.

  
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Wednesday, October 22, 2014