Manufacturing Growth: Advanced Manufacturing and the Future of the American Economy

Stagnant and out-dated policy debates in Washington are the reason that advanced, high-tech products are mostly manufactured outside of the United States, according to a new paper jointly issued by two think tanks. The report, from the Breakthrough Institute and leading moderate think tank Third Way, argues that American manufacturing could experience a resurgence with a focus on complicated and technology-intensive manufacturing products.

"The Kindle has revolutionized how people read, but even though it was born in Silicon Valley, Amazon makes it in Taiwan," said Director of Third Way's Economic Program and the report's co-author, Ryan McConaghy. "When looking for the precision needed to build the e-reader, Amazon had to look abroad for experienced manufacturers because the technology was no longer available here. It's a huge missed opportunity."

"Manufacturing Growth: Advanced Manufacturing and the Future of the American Economy," released today, argues that the United States needs to radically rethink its approach to manufacturing to incentivize and enhance next generation "advanced manufacturing" and worker training.

Other findings in the report are:

  • Manufacturing is central to innovation and new technologies. Manufacturing firms account for nearly 70% of industry R&D
  • The United States lost 5.5 million manufacturing jobs in the last decade, but still employs 11.5 million workers
  • Manufacturing in the United States has declined to less than 12% of GDP. In Germany, manufacturing comprises 17% of GDP, in Japan, 21%
  • The lack of proactive manufacturing policy, not labor costs, is the reason why the U.S. is losing manufacturing competitiveness in high-tech industries
  • Germany, with labor costs 30% higher than the United States, is an advanced manufacturing leader, and supports its firms with a robust network of research institutes
  • Manufacturing is key to jobs and economic growth, and has the largest economic multipliers of any sector
  • The United States will not be able to close its large trade deficit without much greater exports of manufactured goods. Service exports are not enough

"The evolution of manufacturing demands a new discussion about the role of manufacturing for America's future prosperity," said Devon Swezey, Project Director at the Breakthrough Institute and co-author. "Other successful, high-wage nations figured out that manufacturing wasn't dying--it was changing. Through aggressive efforts, they made sure their nations transformed from old factory products to new ones. The federal government can play a proactive and reinforcing role in helping America's advanced manufacturers compete and help the U.S. be a global economic leader in the 21st century."

The report finds that while Germany, Japan, Korea, and many other foreign nations offer incentives for high-tech manufacturers to locate in their countries, the U.S. is lagging behind.

"America is unlikely to become a furniture manufacturing Mecca again because labor costs are so essential, but where technological expertise is concerned in fields like biotech, nanotech, aerospace, and IT, there is a path to growth at home," said Swezey.

The report makes plain that advanced manufacturing is not only central to technological innovation, but also generates widespread growth and employment throughout the economy, even if those jobs aren't necessarily on the factory floor. As the authors note, one job created in electric computer manufacturing generates 15 other jobs throughout the economy.

"Advanced manufacturing is a core component of our nation's innovation ecosystem," said McConaghy. "Indeed, when the United States loses its manufacturing capabilities in core technological industries, it's often left out of future innovations that spring from those industries."