In our prior post we looked at what Trends e-magazine editors had to say about the intersection of tech and jobs in the 21st century, noting news both good and bad. As promised at the end of that post, we’ll drop the other shoe today by talking in some fairly positive tones about what’s happening in manufacturing lately where output is up significantly despite admittedly fewer jobs.
While manufacturing jobs will likely never return to their all-time 1970s highs, the manufacturing sector remains a welcome bulwark of the American economy, in terms of output and profitability, much to the benefit of all of us. Consider the following…
Two years ago, according to the Reshoring Initiative the U.S. added 60,000 manufacturing jobs (versus 12,000 the year before). At the same time, we offshored about 50,000, resulting in a net gain (and versus 150,000 the year prior). Is this a trend? Perhaps: that 10,000 job gain in 2014 was the first in at least twenty years.
Even more important than offshoring may be the impact of technology. The U.S. manufacturing workforce peaked at 19.5 million in 1979 with output (in constant dollars) around $1.1 trillion. By 2010, U.S. output was $2 trillion with only 11.5 million workers. So while output nearly doubled, employment fell 42%. That output, by the way, surpasses that of Germany, South Korea, France, Russia, Brazil and the UK combined. Remember that when you hear that America doesn’t product anything anymore.
That the U.S. continuously seems to increase output with fewer workers – in other words, we improve productivity – should be seen as a sign of “economic strength and vitality, not economic weakness,” note the editors of Trends. Advances in technology in and around the factory floor have given rise to more output with fewer people, but with greater skills and training than in the past.
Output per worker in constant dollars more than doubled between 1955 and 1997, then more than doubled again in only 13 more years. In 2014 (according to a 2015 study) it was at an all time high of $171,538.
And if you look at output by profit per worker, they’re about 20% above where they were before the great recession, and nearly double those of the 1990s. All this improvement in productivity leads Trends editors a few key conclusions:
- U.S. manufacturing will continue to become more cost-competitive through at least 2025, due to high labor productivity, low real-estate costs, cheap energy, low-cost access to raw materials and robust export demand.
- Cost and revenue drivers beyond production costs will favor a U.S. rebound. The U.S. suffers from fewer language barriers and time zones than manufacturers in China and developing countries. Domestic production can result in small, more efficient (less risky) order sizes, and eliminates shipping costs and import duties.
- Manufacturing will continue to benefit from consumer-level patriotism and the pursuit of positive corporate images. Nearly half of all Americans according to a 2013 Gallup poll make a ‘special effort’ to buy American, and 64% said they would pay more versus a foreign product. Walmart has engaged in an ambitious plan to buy an additional $250 billion in U.S. product over the next decade.
- American manufacturing will have to overcome a few barriers however… Alot of regulatory and compliance burdens … building a better-coordinated supply chain… rebuilding the human capital necessary to 21st century manufacturing. There are great opportunities for those who can master the new skill sets.
You can read the full Trends piece here.