Just The Facts: Modern Manufacturing Driving Economy, But Faces Bumpy Road

According to “The Facts About Modern Manufacturing,” manufacturing output is high, but challenges loom.

According to “The Facts About Modern Manufacturing,” released Wednesday by the National Association of Manufacturers, the manufacturing sector, while helping to drive the economy, has encountered a bumpy road.

“The Facts book sets the record straight about manufacturing’s central role in the U.S. economy,” said NAM President John Engler. “Manufacturing output in America is at the highest level in US history and continues to support our economy. At the same time, manufacturers in the United States face unprecedented challenges—from rising energy and health care costs and increased global competition to a serious shortage of skilled production workers, scientists and engineers that will intensify as the baby boom generation retires.”

Dennis Cuneo, Senior Vice President at Toyota Motor North America, which sponsored the report, said there's a mistaken belief that manufacturing in the United States is in decline because of the continuing evolution of global sourcing and competition.

"In fact, U.S. manufacturing is vibrant, robust and contributes greatly to the dynamic American economy,” Cuneo said. The report noted that if the U.S. manufacturing industry were its own country, it would be the eighth largest economy in the world.

The book describes six “pillars” to show how manufacturing is supporting the economy:

- At 15 percent, manufacturing was the highest contributor to real Gross Domestic Product (GDP) growth from 2001-present. Food, computers and electronics, and motor vehicles account for 30 percent of manufacturing GDP.
- Manufacturing accounts for over 70 percent of private sector R&D, driving American technology development, cutting energy use and being environmentally-friendly. Over the past 30 years, improvements in the industry's energy efficiency have cut energy intensity from 30,000 BTU in 1970 to 15,600 BTU in 2004.
- Its high productivity rate has increased over 50 percent in the past 10 years.
- Manufactured goods account for over 60 percent of US exports, which helps cover the cost of imports.
- Wages and benefits for manufacturing jobs are nearly 25 percent higher than for non-manufacturing jobs. And manufacturing jobs have become safer, with the rate of occupational injuries going from 12 per 100 workers in 1994 to less than 6 in 2004.
- Each dollar from manufacturing generates $1.37 in economic activity.

However, the areas of cost, competitiveness and encouraging young people to pursue manufacturing careers are challenges facing the industry. In a time when baby boomers are looking to retire, there is a gap between the skills that workers need and those that younger workers have.

The results of a 2005 NAM study show 81 percent of participants felt that they could not find qualified workers to fill job openings. The book cites inadequate career guidance and coursework among future workers as the reason for their lack in necessary skills. Those necessary skills include math and science skills, the ability to problem-solve and think analytically, communicate effectively through writing and speech, and work well in both a team environment and alone. 

Manufacturers in the U.S. also have high levels of domestic costs that foreign competition does not have. For example, unit labor costs for U.S. manufacturers are over 30 percent higher than some competitors.

“The underlying pressures that make it difficult to manufacture in the United States should be a top priority for policymakers and anyone running for office during this election cycle,” Engler added.

To read the full edition, go to www.nam.org/facts.