Contrary to what you may have heard, manufacturing is flourishing in America. The problem is that factories don’t need as many people as they used to because machines now do so much of the work.
This fact was most recently pointed out in an article by Paul Wiseman, who writes about the economy for the Associated Press. We bring his comments on manufacturing to your attention today — as we often comment on the topic – given that the majority of our ERP clients are in manufacturing, and deeply invested in the subject.
A few facts: Manufacturing employment peaked around 1979 in this country. Since that time, we’ve lost about 7 million jobs, even though actual factory production more than doubled since then, reaching almost two trillion dollars last year (just below the record year set in 2007). That makes the U.S. number two in manufacturing in the world, second only to China.
It’s popular today to say that many of those jobs have been lost to ‘global trade’ and other countries’ theft of those jobs. And indeed, many of those jobs have been lost to trade, especially to China, since China joined the World Trade Organization in 2001. Foreign, low-wage competitors have gutted some industries, like textiles for example.
But as Wiseman points out, research shows that that “automation of U.S. factories is a much bigger factor than foreign trade in the loss of factory jobs.” A study from Indiana’s Ball State University last year found that trade accounted for just 13% of lost U.S. factory jobs. The majority, 88%, were taken by robots and other “homegrown factors that reduce factories’ need for human labor.”
Simply put: we’re making more with fewer people, as Howard Shatz, a senior economist at Rand Corp. has noted. For example, GM now employs only one-third of the 600,000 workers it had in the1970s, yet produces more cars and trucks than ever. In steel, the U.S. has lost 265,000 jobs since 1997 – a 42% plunge – while production has actually surged by 38%, thanks to super-efficient mini-mills that make steel mostly from scrap.
And the robot revolution is only the beginning. Boston Consulting Group predicts 10% growth in industrial robots per year in the 25 largest export nations for the next ten years – a big increase over today. One silver lining in the employment implications has been that increased use of robots coupled with higher labor costs in China and developing nations means reduced incentive for companies to chase low-wage labor around the world.
Even better, companies are rethinking where they manufacture (especially after earthquakes and tsunamis in Japan disrupted auto parts shipments, and a large Korean shipping firm went under). So companies have been returning to the U.S. for production, “capitalizing on savings provided by robots, cheap energy and the chance to be close to customers,” notes Wiseman.
In conclusion, it appears the global scramble for cheap labor is fading. It’s being replaced by more intelligent use of current resources, including robots, closer to home. And thus, the real manufacturing jobs of the future will go to those best able to program, manage, repair and otherwise thoughtfully deploy the equipment and the supply chains that will be at the heart of the new manufacturing.