Still Here: the Evolution of American Manufacturing
What I learned from a summer in the manufacturing sector
On a job hunt for the summer, I somewhat randomly landed with the New Jersey Manufacturing Extension Program (NJMEP) — a federally-supported consulting firm that aims to invigorate small manufacturers and help them become more competitive. When I started, I figured there was not much work to be done, under the impression that American manufacturing was dead. After all, this election cycle has highlighted the empty factories and the disgruntled unemployed in Michigan, Ohio, and western Pennsylvania. I had assumed that all production had moved overseas and convinced myself that there was no place for manufacturing in our increasingly more service-based economy.
However, this summer, I observed the modern production sector up close, and I can confidently state that manufacturing in the states is alive and well.
While many Americans and policymakers have a pessimistic perception of manufacturing, here are some figures from a report compiled by the National Association of Manufacturers that might surprise you. In 2015, manufacturing contributed $2.17 trillion to the US economy and employed 12.3 million workers? That’s 12.1% of our GDP and 9% of the workforce — a pretty sizable chunk for an industry presumed dead. To put that in perspective, if American production was its own economy, it would be the ninth largest in the world. By itself, manufacturing accounts for 75% of private research and development, becoming the preeminent innovative force in the country.
Have a lot of the large factories and lever-pulling jobs disappeared from America? Yes — but that’s because the industry in America is evolving. Automation has resulted in a shift away from a need for low-skill labor and mass production; now, smaller firms produce speciality small parts, drive STEM-based innovation, and set a global focus. As a result, this industry also offers high-paying job opportunities. As of 2014, the average manufacturing worker earned a total annual compensation of $79,553 — about $15,000 more than the average worker across all industries. Workers are also more productive; output per capita has increased 2.5 times in the last thirty years.
It is clear that manufacturing is still a strong and vital workhorse of the American economy.
However, there is still broad, uninformed societal consensus of pessimism surrounding the manufacturing industry and stigma against jobs in the field. This harmful to the rapidly-expanding sector, as we are expected to need over 3.5 million more manufacturing workers over the next decade.
Fortunately, with more awareness — on both the public and political levels — we can stoke the flames of this industry and, along with it, continue to grow our economy. Here are some first steps:
First, we must address the skills gap. 80% of manufacturing firms report a shortage of employees who can fill highly-skilled positions, mostly due to a lack of adequate training. We must fundamentally rethink how we value jobs that do not require a college degree. A reality check on the job description and earning potential of manufacturing work, as well as supporting vocational training for post-secondary students and publicly funding retraining for workers whose jobs moved overseas, will reinvigorate the production sector workforce with more skilled employees.
Second, we must recognize the benefit of global trade for our manufacturing industry, and continue to build on it. In the past 25 years, the exporting of American-manufacturing goods has quadrupled, now accounting for over $1.3 trillion in goods. Jobs with trade-engaged firms pay more, too — on average, manufacturing workers in exporting companies make almost $94,000 per year. Free trade agreements play an important role in this; American sees a $12.7 billion trade surplus in the manufacturing sector when it engages with free trade partners. Contrary to popular belief, when we expand free trade, American manufacturing benefits.
Third, we must make public investments in manufacturing. Studies have shown that every $1 invested in manufacturing sees a return of $1.80, the best margin of any industry. Thus, programs like NJMEP are a great use of public funds. An affiliate of the National Institute of Science and Technology under the Department of Commerce, NJMEP is able to keep costs for its clients low through a federal matching system. Helping foster growth in the manufacturing industry, NJMEP offers workforce training initiatives, navigation through compliance and regulations, implementation of more efficient production processes, and guidance on grant applications. Smart spending can be an effective stimulus, especially in a high-yielding industry like manufacturing.
In my mind, the role of government is to continue to invest in the prosperity of our nation by promoting a diverse economy and instituting policies that encourage expansion. Clearly, manufacturing still has a place in this economy as a driver of innovation, creator of jobs and generator of wealth. After getting a first glimpse at the groundbreaking work in New Jersey manufacturing, I would love to see more focus on the success of this industry and an expansion of policies to encourage its further growth.