The 3 P’s of Manufacturing Success
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A colleague of mine recently said, “If U.S. manufacturing cannot compete in the world, the U.S. cannot compete.”
Manufacturing isn’t just another business sector—it has an outsize impact on our broader economy and influences the environment in which all of us operate. It generates $1.7 trillion in value each year—equivalent to nearly 12% of GDP. About 12 million Americans—or 9% of the workforce—are directly employed in the manufacturing industry. And for every 100 direct jobs, manufacturing supports about 58 indirect jobs. Millions of Americans work in industries that supply, support, or serve manufacturers. The manufacturing sector also drives more innovation than any other industry. U.S. manufacturers are responsible for two-thirds of all private R&D in the country.
So why do so many people think that American manufacturing is in decline? Because manufacturing jobs have dropped sharply from the 1979 peak of 19.5 million jobs to a new low of 11.4 million in 2010.
Where did those jobs go? Mostly to a country called “productivity.” Technological advancements and automation have enabled firms to boost output even as some have cut payrolls. These advancements are allowing us to make high-value-added products that drive growth, innovation, and competitiveness.
It is true that we’ve lost some jobs in low-value manufacturing industries because it’s too costly to produce those goods here. But critics often mischaracterize or overstate this point. Survey data consistently show that less than 1% of layoffs can be attributed to offshoring.
However, there are legitimate dangers to too much offshoring because there are certain things that we must continue making in America no matter what—particularly high-tech, high-value products. If we send our core competencies overseas, we will lose vital skills, knowledge, and innovation.
That’s why the U.S. Chamber must be engaged, and that’s why the business community should care about the state of American manufacturing and put some serious thought and effort into revitalizing it. In my view, it’s going to take three things to propel our manufacturing sector forward and strengthen our global competitiveness: People, Perspective, and Policies. I’ll give you the CliffsNotes version:
People. The manufacturing industry must have a workforce with the advanced skills and training needed on today’s technology-driven factory floor. There’s a major labor shortage in manufacturing—and it’s a symptom of a malignant skills gap in America.
Broadly, we need to fix our public K–12 education system, emphasize the critical disciplines of science, technology, engineering, and math (STEM), and reform our irrational immigration system.
More specific to manufacturing, we must do a much better job of preparing young people for today’s good manufacturing jobs by adopting customized certification programs and working with trade schools and community colleges.
Next, we need the right perspective. And that perspective must be global. Our leaders should embrace the idea that the United States should be the very best place in the world to do business—and they must advance policies that will make it a reality.
Even France and China have comprehensive national strategies for aligning the needs of business and government. Whether or not you agree with how they do it (and we often don’t), they are at least committed to the idea that their home country businesses should be internationally competitive and successful.
Finally, we need the right policies. Many of our standing policies have done fundamental, long-term damage to our manufacturing sector. Manufacturers have done pretty well in spite of this. But think of the potential for growth if we were actually cultivating a strong business environment through good policy.
A strong business environment requires a competitive tax system. It doesn’t burden manufacturers with overregulation and a broken tort system. It opens markets and embraces trade opportunities around the world. It is interconnected through a modern and well-maintained infrastructure system.
Finally, a strong business environment will have access to abundant and affordable sources of energy. And this is where we have a real advantage.
Bottom line: If we don’t adopt policies that let American manufacturers compete and thrive, the U.S. economy won’t compete and thrive.
With a robust manufacturing sector driving growth in our economy and sharpening our competitive edge, there’s no reason that America can’t reemerge as a global leader.
I hope that you will not only support the Chamber’s efforts to revitalize this dynamic sector but also those leaders who are willing to make the hard choices and do the right things needed to ensure the future of manufacturing—and the strength and competitiveness of our great country.