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Manufacturing in America – A Story of Global Competition

Originally posted on The Atlantic’s Ideas¬†Roundtable.

As the GE Working in America data visualization depicts, in 1960, manufacturing was the U.S. economy’s largest-employing sector, but today, it has fallen to sixth. What explains this historic decline in manufacturing jobs?

What’s interesting is that from 1960 to 1982, manufacturing remained America’s largest employer, and as late as 2000 the third-largest employer. It wasn’t until the decade of the 2000s that the precipitous decline in U.S. manufacturing employment occurred. Most analysts attribute this decline to productivity gains, arguing that as manufacturing becomes more productive, fewer workers are needed to produce the same level of output. But U.S. manufacturing productivity grew at roughly the same rate in the 1990s (53 percent) as it did in the 2000s (66 percent), yet in the former decade the country lost just 2 percent of its manufacturing jobs, whereas in the latter decade, one-third of U.S. manufacturing jobs were lost.

If loss of manufacturing jobs from productivity gains (while real) is not the primary culprit, something else must be. And that something else has been absolute declines in U.S. manufacturing output–itself a reflection of faltering U.S. manufacturing competitiveness. In fact, during the last decade, 13 of 19 aggregate-level U.S. manufacturing sectors experienced absolute declines in real output. And when measured properly, overall U.S. manufacturing output fell 11 percent over the last decade.

Thus, the conventional wisdom that U.S. manufacturing job loss is simply a result of productivity-driven restructuring (akin to how U.S. agriculture lost jobs but remains healthy) is fundamentally flawed. U.S. manufacturing lost jobs because manufacturing lost output; and it lost output because its ability to compete in global markets declined significantly. If the United States is to rectify this and restore U.S. manufacturing competitiveness and jobs, it must embrace a comprehensive national manufacturing strategy focusing on the “4Ts” of technology, tax, trade, and talent.

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