January 25, 2010
How to Make it in America
In an article for the new issue of Atlantic Magazine, Planet Money's Adam Davidson leads us through the major changes that have transformed the manufacturing sector in the United States and asks whether manufacturing can ever again be an economic touchstone for middle class Americans.
Davidson notes how advances in productivity and heightened international competition have led manufacturing employment to crater, even as output increases:
Factories have replaced millions of workers with machines. Even if you know the rough outline of this story, looking at the Bureau of Labor Statistics data is still shocking. A historical chart of U.S. manufacturing employment shows steady growth from the end of the Depression until the early 1980s, when the number of jobs drops a little. Then things stay largely flat until about 1999. After that, the numbers simply collapse. In the 10 years ending in 2009, factories shed workers so fast that they erased almost all the gains of the previous 70 years; roughly one out of every three manufacturing jobs--about 6 million in total--disappeared. About as many people work in manufacturing now as did at the end of the Depression, even though the American population is more than twice as large today.
The increasing use information technology, robotics, and high-precision tools means that factory workers must have greater skills than those of previous generations:
Before the rise of computer-run machines, factories needed people at every step of production, from the most routine to the most complex...skilled workers now are required only to do what computers can't do (at least not yet): use their human judgment.
As we noted in "Manufacturing Growth," our recent report on advanced manufacturing, the new era of manufacturing requires a new type of worker:
today's manufacturing worker must possess a new set of skills. Instead of running a machine press or using hand tools, today's manufacturing worker is likely to operate computer controlled precision equipment to build advanced medical devices, make new drugs, or assemble wind turbines. This fundamental shift has created new opportunities for high-skilled employment and has profound implications for the U.S. manufacturing workforce.
New manufacturing workers must have a wide array of abilities including the production skills to set up and operate processes, design and development skills to continuously improve those processes, as well as proficiency in maintenance, repair and supply chain logistics.
There are still some reasons to keep low-skill goods production in the United States, including quality assurance, transportation costs, and time to market considerations. But low-skill manufacturing jobs, once a gateway to the American middle class, have all but evaporated. As a result, overall manufacturing employment may never reach the level of previous decades.
Yet even as manufacturing's relative share of employment has declined, it has in fact become even more important for sustaining American economic prosperity. Manufacturing drives innovation, and accounts for the bulk of industry investment in research and development (R&D). Manufacturing generates high levels of employment and output in other sectors of the economy--higher, in fact, than any other industry. As demand for manufacturing grows, it it spurs investment, job creation, and innovation throughout the economy. Lastly, the United States large and growing trade deficit can only be reversed through an expansion of manufactured products for export, as the large majority of U.S. trade is still in goods.
Building a competitive, 21st century advanced manufacturing economy will require a new set of policies focused on the future of manufacturing and not its past. It will require policies that boost productivity, that continually upgrades the skill and technological know-how of manufacturing workers, and foster public-private partnerships to accelerate the development and commercialization of new manufacturing technologies.
With a focus on the next generation of technology-intensive industries such as semiconductors, computers, pharmaceuticals, clean energy, and nanotechnology, to name a few, America can continue to be the global innovation and economic leader in the coming decades.