Sunday, December 9, 2012

American manufacturing is coming back. Manufacturing jobs aren’t.

The discussion of American manufacturing is often a muddled one, steeped in nostalgia for a bygone era and accompanied by a certain misty-eyed conviction that it is a sector in ceaseless decline.
A new study from the McKinsey Global Institute published Monday morning adds some welcome clarity. In 184 pages, the in-house think tank of the global consulting giant presents a picture of manufacturing as among the most dynamic sectors of the U.S. and global economies, driving higher productivity and standards of living. But it also shows that what we usually think of as a traditional manufacturing job isn’t coming back.

(Nanine Hartzenbusch/For the Washington Post)

American manufacturing may be vibrant, but that doesn’t mean it will create many jobs
Manufacturing contributed 20 percent of the growth in global economic output in the decade ending in 2010, the McKinsey researchers estimate, and 37 percent of global productivity growth from 1995 to 2005. Yet the sector actually subtracted 24 percent from employment in advanced nations.
“Manufacturing makes outsized contributions to GDP. It makes outsized contributions to overall productivity growth. It drives prosperity,” said James Manyika, one of the authors of the report. “But purely on employment, it has been declining over time.”
It is a story of robotics and other technologies improving at a remarkable rate, eliminating the need for factory floors crowded with workers doing manual labor. In the newest factories, one can look across an airplane hangar-sized floor and see only a small handful of technicians staring at computer screens, monitoring the work of the machines. Workers lifting and pushing and riveting are nowhere to be seen.
That means that the manufacturing jobs that do remain are very different from the old world, in which a man (it was almost always a man) without much education could show up at the door of a factory and have a multi-decade career at middle class wages assembling things.
Rather, at least 30 percent of “manufacturing jobs” are things that would look to most people like white-collar service jobs: Sales, engineering, design, that sort of thing. While machines have gotten very good at building cars, they can’t design a car or develop a marketing plan. That number is a remarkable 55 percent in a category of manufacturers that the McKinsey researchers call “Global technologies and innovators” and includes makers of semiconductors, medical devices, and other advanced goods.
In other words, the manufacturing worker of the future is more likely to have a graduate degree and wear a suit or a labcoat to work than to have only a high school education and carry a lunch pail.
(As an aside, the fluidity around what counts as a manufacturing job is nothing new. According to U.S. government statistics, as recently as 2001 I was a manufacturing worker; even though my job was to sit at a computer and write articles, it was for a company that was in the business of manufacturing newspapers. The Labor Department has since re-ordered its classification system).
That doesn’t mean all is lost in manufacturing as a creator of good jobs. Manyika said that besides positions for highly educated professionals, there is a need for qualified technicians, such as electricians and mechanics, that isn’t being satiated by community colleges today. But even that improvement may not be enough to solve one of the core problems afflicting the American economy. Only 64 percent of men over 25 with only a high school degree were employed in October; that number was 72 percent a decade ago.
“Manufacturing cannot be expected to create mass employment in advanced economies on the scale that it did decades ago,” concludes the report.
But apart from jobs, the outlook for American manufacturing is sunnier, in McKinsey’s analysis, than one might expect. The United States leads the world in market share of the global technologies and innovators category of manufacturing.
And another advantage for the United States is relatively affordable energy, thanks in no small part to lots of supply of natural gas. There are some sectors of manufacturing, such as of wood products, refined petroleum, and basic metals, in which energy is an overwhelming driver of costs. It is therefore most economical to locate production in the places with the cheapest energy, even if labor costs are high. That increasingly fits the United States to a tee.

1 comment:

  1. The slump in manufacturing put people out of work so it is good news to hear the outlook is improving. America could use the economic boost and addition of new jobs in the manufacturing sector.