If you want to see the state of U.S. manufacturing these days, compare Massena, N.Y. and Pineville, La.
Massena, a town of 10,000 in upstate New York, lost a General Motorsplant while Alcoa has contemplated shuttering another. But Pineville, 128 miles northwest of Louisiana’s capital of Baton Rouge, is enjoying a manufacturing renaissance, helped by American Specialty Alloy’s decision to open a new facility there.
That is the state of the manufacturing universe in the United States. On the one hand, American products are making a comeback, helped by greater demand for more sophisticated products and modern assembly line processes.
But large pockets of the country face uncertainty as companies shut American factories to migrate to lower cost areas such as Vietnam and Indonesia.
Manufacturing, in its way, is following the path of agriculture a century earlier. In 1920, slightly more than 30% of all Americans lived on the farm; by 1987, it was 2%. Yet, total agricultural output between 1950 – the earliest data available – and 1987 doubled.
When John Kennedy was president, about one in four Americans worked in manufacturing, and consumers worldwide sought out U.S. products.
Now, fewer than 10% of the American workforce toils in goods-producing industries. Many other countries, including Japan and Korea, have caught up to the United States in terms of quality.
What the numbers show
In 2004, 14.3 million men and women earned a paycheck making things in the U.S. By 2014, that number had slid to 12 million, a drop of 10%.
In growth terms, the manufacturing workforce shrank by an average of 1.6% annually compared to the number of overall jobs, which expanded by almost 0.5% over the same period. Back in 2002, U.S. firms had a 28% market share in world manufacturing; within 10 years, that portion had shrunk to 16.5%.
Why? Some attribute the drop to unfair commercial practices overseas while others claim newly industrializing economies began making better-quality goods, reinforcing their labor cost advantage over more developed countries.
In the U.S., however, fewer firms are still more productive, despite having fewer employees.
Between 1995 and 2015, the dollar amount of factory-floor production equipment per American worker fell by 30%, resulting in assembly lines needing one-third less machinery to make the same number of products.
In this case, higher productivity means fewer jobs. American manufacturers have doubled production since 1984 and have done so with one-third fewer workers.
The United States is not alone in having a declining manufacturing workforce. Between 1990 and 2014, manufacturing jobs fell by 32% in the United States, 34% in Japan and 25% in Germany.
Even China has not been immune to losing manufacturing jobs. The number of workers in this area of the Chinese economy peaked in the 1990s and has been dropping ever since.
Making a comeback
However, thanks to innovation in its production processes and a variety of new products, including environmentally friendly ones, U.S. goods producers have made a comeback, with America’s share of global manufacturing up more than 17% since 2011.
Employment is also creeping up. For example, since 2012 California manufacturing jobs are up by 50,000 while those in Ohio are up almost 30,000.
More factories are running at full speed; the capacity utilization rate for U.S. manufacturers topped 75% in 2015, marginally less than the average since 1972.
Such results prompted the U.S. Council on Competitiveness to rate the United States as the second most competitive manufacturing economy after China.
Finally, the American service sector – where most employment growth has taken place – has become an important supplier to manufacturing, constituting 30% of the valued added, a higher portion than in China. That trend indicates there are more American service sector spinoff jobs for each one in manufacturing than in China.
In 1991, Robert Reich, the future U.S. labor secretary under President Bill Clinton, wrote in “The Work of Nations” that manufacturers were being split according to high-value and low-value jobs.
The low-value functions, such as assembly line work making standardized products such as corrugated boxes, rely upon cheap labor and probably inevitably would end up in Vietnam and China.
It is the more value-added functions, such as design and financing, which the United States should work towards retaining and, as the numbers improve, where the country appears to be succeeding.
Photo Credit: Pietro_Recchia, Twenty20