Opportunities in Manufacturing - The Challenge: Increase Efficiency

If the word “manufacturing” makes you think of giant factories full of grimy, noisy machines tended by multitudes of workers in overalls and hard hats, you need to update your thinking. Yes, there are still some plants like that in the United States, but they are becoming rarer and rarer as technology and specialized training take over the factory floor. There are fewer workers on the floor these days, and the factories of tomorrow will have even fewer.

But manufacturing jobs are not vanishing. They are just changing. Opportunities are increasing in support occupations – marketing, information technology, delivery, etc. Educational requirements are changing as well. It will take at least a two-year degree – and probably soon, a four-year degree – to work on tomorrow’s high-tech factory floors. As a result, salaries will be higher.

What is behind all this change? The continuing challenge for manufacturing companies to create processes and equipment to help them produce goods more efficiently than their competitors.

In 2014, manufacturers contributed $2.09 trillion to the United States economy, according to the National Association of Manufacturers (NAM). This figure has risen steadily since 2009, when manufacturers contributed $1.73 trillion. Manufacturing accounts for 12 percent of the nation’s gross domestic product (GDP). And for every $1 spent in manufacturing, another $1.37 is added to the economy – the highest multiplier effect of any economic sector.

Manufacturing supports an estimated 17.6 million jobs in the United States – about one in six private-sector jobs. More than 12 million Americans – 9 percent of the work force – are employed directly in manufacturing. In 2013, the average manufacturing worker in the United States earned $77,506 annually, including pay and benefits. The average worker in all industries earned $62,546.

U.S. manufacturers are the most productive in the world, far surpassing the productivity of any other major manufacturing economy, leading to higher wages and higher living standards. In the United States, manufacturers perform more than three-quarters of all private-sector research and development (R&D). Taken alone, manufacturing in the United States would be the ninth-largest economy in the world.

And we should continue to be in great shape, at least in the near future. Since the recession, U.S. manufacturing growth has outpaced that of other advanced nations. Over the last five years, more than 800,000 manufacturing jobs have been created in our country. One contributing factor is energy. U.S. manufacturing companies continue to have access to cheaper energy than those overseas.

In late 2013, the Economic and Statistics Administration (ESA), a part of the U.S. Department of Commerce, analyzed the earnings of new hires relative to incumbent workers in both manufacturing and non-manufacturing. The agency found that new hires in the manufacturing sector earn more than new hires in other industries and have done particularly well since the recession began. At the end of 2011, the manufacturing earnings premium for new hires stood at about 38 percent. Since the recession began, real average earnings for new hires in manufacturing grew 3.5 percent, while earnings of incumbents in manufacturing grew about 2.4 percent. Over the same time, real earnings for hires in other industries were flat, and earnings for incumbents in other industries declined.

Some Americans will be surprised by this good news. They have become accustomed to seeing manufacturing jobs go overseas. But in recent years, some key American manufacturers have either brought jobs back from Asia and Latin America or have decided not to export the jobs in the first place.

Manufacturers have discovered the value of bringing production closer to the point of sale, where their employees can engage more directly with customers and adapt quickly to changes in the market. Other factors include rising salaries in China; new labor, environmental, and safety regulations abroad; and the higher cost of energy required to ship products halfway around the world.

But the jobs that are returning will not look much like the jobs that left. The old assembly line is mostly gone. Manufacturing workers will need to be smarter and better trained to get the best jobs in the industry.

Wednesday November 11, 2015

This article appeared in the July-August 2015 issue of Search & Employ Magazine