The Truth About U.S. Manufacturing Jobs

The Truth About U.S. Manufacturing Jobs

August 18, 2016 | U.S. Manufacturing

“Made in America” is more than a slogan — it means jobs throughout the United States. But the country is struggling to regain valuable factory jobs lost to offshoring and the recession.

In 2010, China became the world’s largest manufacturing country, knocking the U.S. out of that spot, according to an April 2016 report from the Congressional Research Center. During the recession of the 2000s, 40 percent of all large factories in the country closed their doors, according to the Obama Administration, although the government says the trend has reversed.

Job loss to offshoring has slowed. According to the Reshoring Institute, nearly a third of senior manufacturing executives surveyed plan to add production capacity in the U.S. within five years. And the number of companies actively reshoring (returning jobs to the U.S.) has increased by 250 percent since 2012.

But growth stalled in early 2016. In June the Manufacturers Alliance for Productivity and Innovation (MAPI), said it will be the fourth quarter of 2018 before the U.S. achieves full recovery to the pre-recession production level of the last quarter of 2007.

A report from the National Association of Manufacturers (NAM) in June showed increased optimism among that group. Sales were up 1.6 percent and production up 1.5 percent, but there was a 1.5 percent increase in employee wages and an 8.3 percent growth in health insurance costs. Still, 61.7 percent of manufacturers were confident about their company's outlook, although they cited a need for market-opening trade agreements, reducing regulatory barriers and comprehensive tax reform, to spur continued growth in the sector.

Despite the loss of manufacturing jobs before and during the recession, more than 12.3 million Americans — or nine percent of the workforce — work in factories. And in 2014, their average pay was near $26 per hour, not including benefits, according to the National Association of Manufacturers. That's slightly above the national average hourly wage for private, non-farm employers.

Although there appears to be a comeback, no one expects the manufacturing sector to achieve the prominence it once had in the U.S. economy. The changing nature of manufacturing, along with global factors, creates new challenges.

A November 2012 report by the McKinsey Global Institute explored global challenges of the manufacturing sector, including its changing role in society. In fact, it suggests the decline of manufacturing in the U.S. and other developed nations is a product of the evolution of the economy: “…when economies industrialize, manufacturing employment and output both rise rapidly, but once manufacturing’s share of GDP peaks — at 20 to 35 percent of GDP — it falls in an inverted U pattern, along with its share of employment. The reason is that as wages rise, consumers have more money to spend on services, and that sector’s growth accelerates, making it more important than manufacturing as a source of growth and employment.”

There are other challenges, as well. Automation means that factories operate with fewer people than in the past. Data from the Organisation for Economic Co-operation and Development examined by the Oxford Martin School and Citi in a report released in January 2016 showed that on average 57 percent of jobs are susceptible to automation worldwide; compared to 47 percent in the U.S. The number rises to 69 percent in India and 77 percent in China. But robots are not stealing jobs, according to a survey of the Manufacturing Institute. Only 17 percent stated that they expect advanced technologies to result in fewer employees; 45 percent expect no impact on hiring and 37 percent said new technology means they will hire more employees — if they can find them.

In February 2015, Deloitte and the Manufacturing Institute released a study showing that 84 percent of manufacturing executives believed there was a talent shortage.

“Our research estimates that the cumulative skills gap—or the positions that likely won’t be filled due to a lack of skilled workers—will grow to 2 million between 2015 and 2025,” said Craig Griffi, vice chairman, Deloitte LLP. Education and industry officials have given attention to the problem with efforts across the nation to better prepare students, particularly with STEM (science, technology, engineering, and mathematics) programs.

But a June 2016 report by the Manufacturing Institute shows more work is needed. Currently, about two-thirds of manufacturers say they have some difficulty finding the talent they need. And more than two-thirds of those surveyed think it will become harder to find qualified workers.