A Manufacturing Renaissance? Not Yet

While American manufacturing is a step ahead of the rest of the economy right now, it is still in a deep hole when one considers overall employment, output, innovation, human capital, and trade.


IHS Global Insight revealed last month that China has passed the U.S. to lead the world in manufacturing output, a position we’ve held for 110 years.

At last month’s pace of manufacturing job creation, we are still 24 years away from regaining the 5.5 million factory jobs lost over the last decade.

Let’s consider the relevant data on the size of our manufacturing sector. While manufacturing accounts for one-third of China’s economic output, and 15-20% for most of our industrial competitors, U.S. manufacturing accounts for less than 13 percent of GDP, and is falling every year:

• We have shed 5.5 million manufacturing jobs (over 33%) since 2000;

• While the U.S. economy expanded 17% from 2002-2007, manufacturing expanded only 5%;

50,000 manufacturing facilities have closed in the last 10 years;

• The last decade’s industrial production data showed the worst growth rate in our history;

• Our goods trade deficit has quadrupled since 1997;

Meanwhile, China is booming:

• China overtook Germany to lead the world in manufacturing exports, moved ahead of Japan in GDP, and ahead of the U.S. in auto sales;

• China will file more patents this year than the United States;

• China’s annual rate of manufacturing growth is 20 percent over the past three years. In the U.S., that figure is only 1.8 percent.

Many are quick to blame America’s manufacturing woes on labor and regulation. The fact is, average compensation for an American manufacturing worker, including benefits, is $32/hour. In Germany, the figure is $48/hour. Yet Germany’s manufacturing base is thriving. Germany has a trade surplus. German unions sit on company boards and make joint decisions about investments and strategy.

Why does being number one in manufacturing matter so much? First, manufacturing jobs are simply not replaceable. Workers who lose their manufacturing jobs end up in positions that pay far less. The tax base shrinks. Demand on government services grows. By contrast, if states had held their share of manufacturing jobs over the past decade, there would be no state-level budget crises, even in California.

Manufacturing drives innovation. Two-thirds of private sector R&D and 90 percent of patents come from manufacturing. Harvard research has demonstrated, when production leaves, innovation follows. We are now in the embarrassing position of importing solar, battery, and wind technologies previously invented here.

Fortunately, there is a way forward. We urgently need a national manufacturing strategy. We’ve put forward a plan to keep it made in America that has broad support from the American people—right, left and center. This new Congress is in its fourth month, yet no bill to create American manufacturing jobs has been sent to the President’s desk.

Why a manufacturing strategy? Well, Germany has one. China has one. South Korea has one. Every other industrialized nation has a network of currency, trade, tax, investment, innovation, and skills policies that promote domestic manufacturing. We stand alone in allowing our jobs to be freely outsourced.

America likes an underdog, and that’s exactly what manufacturing is these days. It’s about time our political leaders in Washington discovered that.

Scott N. Paul is Executive Director of the Alliance for American Manufacturing (AAM)