The Truth About American Manufacturing

By Dave Smith, Contributor for US Daily Review.

Whether it is President Barack Obama talking about “winning the future”, Donald Trump claiming that “we don’t make anything anymore” in America, or Republican Presidential candidates talking about “bringing back jobs that have been “shipped overseas”, a theme has developed that unites Democrats and Republicans, liberals and conservatives, labor and business: the idea that manufacturing in this country is dying, if not already dead.

According to the common narrative, everything is now made using cheap labor in places like China and India, and when it comes to the factories and production, the United States is losing out to the rising economic powers. With continuing high unemployment and the label “Made in China” on seemingly every product, it seems intuitive that the American manufacturing base is disappearing.

There’s only one problem with that narrative: it isn’t true.

First the picture everyone knows. Manufacturing employment hit its peak in 1943, when support for the war effort resulted in nearly 40% of the work force working in manufacturing. It stayed around 30% through the 1950s, and then started declining. According to data from the Bureau of Labor Statistics, less than 10% of the United States workforce is now deployed in manufacturing. Coupled with the historically high unemployment rate (still at 8.3% in January according to the BLS) as well bailouts being required in the past decade for steel companies and the auto industry and the rise of the Chinese, Korean, and Indian economies, it is easy to see where the narrative came from.

The key to the health of an industry segment, however, isn’t the number of people it employs. Technological innovation results in remarkable changes over time in how the workforce is deployed. At the start of the 20% century, approximately 10% of American workers were in agriculture; that figure is less than 2% today, yet we have more food production than ever before. Tractors, pesticides, fertilizers, and other innovations have improved yields and efficiency. Yet nobody claims that we don’t grow food anymore. Technological innovation has killed off many other jobs as well. I can’t recall ever having met a cartwright or an ice deliveryman; seeing the phone operators in classic TV shows from the 50s and 60s is as anachronistic as the thin ties and Homburg hats worn by the characters.

Since the purpose of manufacturing is to actually produce things, a much better yardstick for judging manufacturing is to look at output. Here’s where the common narrative gets turned on its head: using data from the BLS and the Federal Reserve, economist Veronique de Rugy of George Mason University’s Mercatus Center has shown that manufacturing output has more than doubled over the past 35 years – even while the number of manufacturing workers has decreased. Fewer people are employed in manufacturing because workers have improved their productivity by more than 300%. As quickly as China’s economy is rising, their output is still only equal to what the US was producing in the early 1990s.

The story has a bright outlook as well. In a December 2011 report, industry analysts at Price Waterhouse Coopers and the National Association of Manufacturers detailed how the “New American Energy Renaissance” could fuel a dramatic expansion in domestic manufacturing. From energy cost savings alone estimated at $11.6 billion per year, to increased demand for extraction and processing equipment, the PWC report estimates as many as 1 million new manufacturing jobs by 2025. American manufacturing could get an adrenaline shot that would make the past 35 years pale in comparison.

President John F. Kennedy famous said that success has a thousand fathers while failure is an orphan. The real story about American manufacturing is a story of amazing success, yet this story remains a largely unknown orphan because it doesn’t fit with the ideological goals of either liberal or conservative politicians, the doom and gloom that generates ratings for the media, or the goals of manufacturing companies themselves as they lobby the government for more special benefits. It’s time people learned the truth about American manufacturing.

Born in the same county as Davy Crockett in East Tennessee, Dave Smith has been living in Texas for over 10 years and involved in politics in for over 15 years.  He has been blogging for nearly 10 years, has contributed to Town Hall Magazine and other publications, and has been on ABC and Fox discussing election issues.  He is a graduate of Tennessee Tech University with a degree in chemical engineering.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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