U.S. Manufacturing’s Productivity Depends on the Sector and Point of View

It’s an undisputable truth that there are fewer manufacturing jobs today than in the years prior to the digital revolution. As data from the Bureau of Labor Statistics indicates, the country has lost more than 7 million, or 37%, of its manufacturing jobs since 1979. But, as Bloomberg states, there are a number of stories depending on the point of view and sub-sector.

For instance, the monetary value of things made in America reached a record high in the first quarter of 2016, even after adjusting for inflation. With more products and money being made with fewer jobs, this indicates an increase in productivity.

Economist Susan Houseman at the W.E. Upjohn Institute for Employment Research says skewing the data is the fact that more than half of the growth in U.S. manufacturing output since 1997 has been in computer and electronics manufacturing. She told the Washington Post that excluding the computer industry would show manufacturing output at only 8% higher than in 1997 and 5% lower than before the Great Recession.

Bloomberg points out that while durable-goods manufacturing saw big productivity gains in the 1990s, that subsided in the past decade, with nondurable items (such as food, clothes, chemicals, paper and plastics) productivity having barely moved in the past three decades. “Productivity has been on an upward trend in textiles and plastics and rubber, and a downward trend in chemicals and food and beverages. Overall, it’s a wash,” Fox said.

Michael Bond, of Eller College of Management at the University of Arizona in Tucson, told the Wall Street Journal that the real value of manufacturing output in the U.S. has been a fraction of real GDP since 1960. He said that what has changed dramatically is the percentage of workers employed in manufacturing, down from 24% in 1960 to 8% now.

Bond said all data indicates it is largely due to “enormous” gains in manufacturing productivity. “Eliminating the current manufacturing trade deficit might increase the ratio to 10%. So around 90% of the relative decline in manufacturing employment is purely domestic,” said Bond.

Technology like automation, analytics and the Internet of Things is undoubtedly making manufacturing more productive and efficient. The 2016 State of Manufacturing Technology Report surveyed nearly 200 manufacturers and found that 90% had achieved growth in the past five years, with 35% of them attaining growth rates of 20% or more. Nearly half of the respondents attributed the growth to the use of technology to drive efficiency and meet customer demand.

Meanwhile, Houseman said that while many processes in manufacturing have been automated, automation also has been introduced throughout the economy. The difference is that unlike with other sectors, output in most manufacturing industries has barely increased since the 1990s. She says it’s the weak performance combined with the automation that has led to the massive job losses since 2000.

While the industry may look different than the manufacturing of past decades, there is still a strong case to say it’s on the upswing. An article at TechCrunch.com said that industrial robots and technology replacing manufacturing jobs is a “good thing.” The article points to the fact that there are currently two million unfilled jobs in the manufacturing sector and that robots aren’t stealing jobs, only improving them.

that In the past 20 years, real, inflation-adjusted U.S. manufacturing output has increased by almost 40% percent to an annual value of a record $2.4 trillion. Daniel Griswold, senior research fellow and co-director of the Program on the American Economy and Globalization from the Mercatus Center at George Mason University, told the Los Angeles Times. He said today’s workers are not only more productive, but better educated, have more sophisticated equipment and produce more valuable products.

“We produce more manufacturing value with fewer employees than in years past because today’s workers are so much more productive…And as a result, they are better paid, with total manufacturing payrolls rising during the last decade, even as the number of workers declined,” said Griswold.