How Manufacturing Builds Wealth in America
Manufacturing is the backbone of the United States economy and creates wealth and prosperity—for both the national economy and the manufacturing workforce. Employees earn good wages and benefits that allow them to buy a home, support a family, put kids through college and retire comfortably.
However, manufacturing in the U.S. has experienced some challenges over the last 30 years, especially with the rise of China as a formidable, low-cost foreign producer. Although China accelerated the offshoring trend, manufacturing jobs as a percentage of total U.S. employment have steadily declined since the end of World War II. In May 2017, manufacturing workers comprised about 8.5 percent of the total U.S. workforce—the lowest level since the U.S. Department of Labor began tracking these statistics.
Even with this attrition, manufacturing is still a powerful force that drives the U.S. economy. In 2016, manufacturing accounted for 11.7 percent of the U.S GDP. According to National Association of Manufacturers (NAM), manufacturing “currently employs 12.3 million manufacturing workers in the U.S., 800,000 of whom have been hired since the end of the Great Recession.”
Further, manufacturing also helps other industries build wealth and expand their reach. The NAM indicates that, for every dollar spent in manufacturing, another $1.81 is added to the economy—the highest multiplier effect of any economic sector. In addition, notes Harry Moser, president and founder of the Reshoring Initiative, “every manufacturing job supports 3.6 additional jobs.”
Equally impressive is that, even though manufacturing’s share of the U.S. economy has declined, “it still draws more than a third of all foreign direct investment in the country,” writes Krishnadev Calamur in a recent article on The Atlantic titled, “Has the Death of American Manufacturing Been Exaggerated?”
Calamur notes that foreign companies still employ nearly 20 percent of the national manufacturing workforce, creating more good-paying jobs for Americans. In 2015, foreign direct investment in manufacturing exceeded $1.2 trillion for the first time ever.
Good Pay, Better Skills
“Manufacturing leads to a larger middle class, with a higher standard of living,” states Moser. From the standpoint of wealth creation, the estimated net worth of American households more than doubled from 2000 to 2016, increasing from $44 trillion to $90 trillion—and manufacturing, with 11.7 percent of the GDP, contributed significantly to that growth.
NAM has pointed out that the average manufacturing worker in the U.S. earned about $81,289 annually in wages and benefits in 2015. In comparison, the average worker in all nonfarm industries earned $63,830. So far in 2017, the average manufacturing wage has been $26/hour.
Manufacturing wages will also likely increase in order to fill the two million unfilled manufacturing jobs that are expected to exist by 2025, due to the “skills gap.” Even now, many manufacturers are frustrated by the shortage of qualified applicants for skilled and highly-skilled production positions. Workers who develop these skills (including STEM—science, technology, engineering and math) will therefore be in high demand and can mandate top compensation. Manufacturers will have to offer competitive wages to recruit the best talent, for current and future positions, and provide any additional necessary training. Employer-funded training, apprenticeships and post-secondary education all broaden an employee’s skill and provides him/her with greater value within the industry.
Making It Happen
To keep U.S. manufacturing competitive as a wealth-generator, federal, state and local governments must work together to provide manufacturers what they need to thrive and expand. For instance, a fully modern transportation infrastructure (including intermodal) is critical to maximize efficiency, productivity and speed to market. Crumbling roads and bridges won’t cut it.
Technology, such as such as additive manufacturing, automation, robotics, data analytics, the Internet of Things and Industry 4.0, must be embraced, not rejected. And although some traditional manufacturing jobs will not be as relevant as they once were, others will be created—both to manage the new technologies and staff expansions that happen as a result of the improved revenue streams.
Finally, a robust workforce suitable for this evolving landscape must be built. This involves apprenticeships, post-secondary training and especially education at the K-12 level children that manufacturing careers are dynamic, rewarding, and pay well. This is where every manufacturer can play an important role, including presentations in the classroom, tours of plant facilities, mentoring promising students, supporting STEM education and supporting/financing other initiatives at the local, state and federal levels.
Some opinions expressed in this article may be those of a contributing author and not necessarily Gray.