The Facts About Modern Manufacturing
With campaign season in full swing, politicians on both sides of the aisle are paying lip service to manufacturing. Unfortunately, they don't always support goals and policies that will actually encourage manufacturers to invest in America.
Manufacturers can help policymakers better understand their needs: first, by helping lawmakers gain a true appreciation for manufacturing's importance to economic growth; and second, by alerting them to the very real challenges that American manufacturers face, many of which stem from negligence on the part of policymakers. To this end, MAPI has done the research for NAM's 9th edition of The Facts About Modern Manufacturing, a snapshot of how American manufacturing is faring in this evolving global marketplace.
Based on our latest research, here's a select list of facts—both good news and bad—that politicians should know about manufacturing:
- Products “Made in America” are all around us. A lot of Americans think we no longer “make anything” in this country. Next time you hear someone make that claim, tell them that if the U.S. manufacturing sector were its own country, its $1.7 trillion worth of annual value-added would make it the ninth-largest economy in the world—bigger than the entire economies of countries such as India, Canada, Mexico, and South Korea.
- Manufacturing supports millions of other jobs in the United States. More than 1 in 7 U.S. private sector jobs depend on manufacturing. In all, the factory sector supports almost 18 million jobs here, including nearly 12 million directly within manufacturing and roughly 6 million jobs indirectly in sectors such as professional services, wholesaling, transportation, and agriculture. (Some studies suggest that high-tech manufacturing supports many more non-manufacturing jobs!)
- Manufacturing drives innovation. Manufacturers account for 70 percent of all private sector R&D in this country. American innovation is driven by manufacturers as “spillover” effects from their R&D investments help spread new ideas from industry to industry and sector to sector across the economy.
- Manufacturing generates more economic activity than any other sector. Every dollar of final sales in manufacturing generates $1.34 in economic activity throughout the rest of the economy, giving manufacturers a higher multiplier effect than any other sector.
- Manufacturing drives productivity growth. Increased productivity leads to higher living standards, and U.S. manufacturers are leaders in this area. Because manufacturers are the most intensive users of capital equipment and technology, their productivity consistently outpaces the growth in other sectors. In the past decade, manufacturing productivity grew at an average annual rate of 3.5 percent, more than twice the rate of service sector productivity.
- Manufacturing has the lion’s share of exports. U.S. manufacturers exported $123 billion in goods per month last year to 238 different countries. Manufactured products represent almost half of all American exports, helping bridge the country’s significant trade gap.
- The age gap between the industrial and non-industrial workforces is widening. The manufacturing sector is experiencing disproportionate ramifications of an aging American workforce. Today the median age in manufacturing is 44.1 years versus 42.1 years for the total non-farm workforce, and the gap continues to spread. Policymakers and manufacturers need to team up on a strategy to attract today’s youth to the modern world of sophisticated manufacturing.
- American students are falling behind in math and science. U.S. manufacturers are increasingly challenged to find workers suitably skilled in math and science. No wonder: the latest international assessment of high school students finds American 15-year-olds below the international average in math literacy and just slightly above the average in science literacy. German, Canadian, Japanese, and British youth all rank ahead of their American counterparts in these areas. Policymakers at all levels need to focus on strategies to improve our math and science capabilities.
- U.S. manufacturers have a structural costs disadvantage. MAPI, NAM, and The Manufacturing Institute track the excess burden that various structural costs—corporate tax liability, employee benefits, tort litigation, regulatory compliance, and energy—place on U.S. manufacturers relative to their counterparts around the world. Combined, these raise costs 20 percent higher for American manufacturers than for those producing within the borders of our nine major competitors. Without this cost disadvantage, the United States would be a lower-cost platform for manufacturing than all of our major trading partners except China, Mexico, and Taiwan.
The United States remains one of the great manufacturing powerhouses in the world, but the competition around the globe to attract industry has become fierce. American policymakers need to understand that manufacturing is the key to future economic growth and take appropriate measures to encourage production in this country.