Fascinating First-Of-Its-Kind US Manufacturing Report
By Sarah A. Webster
Editor in Chief
Manufacturing Engineering Media
Given the diverse nature of manufacturing across so many industries and locales, it’s historically been difficult to get a clear picture of what’s happening in the sector until it’s too late for meaningful policy changes.
By the time many fully understood the nature of the nation’s manufacturing job losses these past few decades, the frog was already boiling or boiled -- depending on what product one manufactured. And a few too many shrugged their shoulders as if it was too late to stop an irreversible slide.
But a report released May 9 from the Metropolitan Policy Program at the Brookings Institution offers the first comprehensive analysis ever of the metropolitan geography of US manufacturing. It paints an authoritative, data-backed picture of what manufacturing really looks like across America today.
The ho-hum title of the report, “Locating American Manufacturing: Trends in the Geography of Production,” belies its fascinating, important, and in many cases, counterintuitive findings.
The report is a story of economic change: what US manufacturing looks like after two big waves of decline and what lessons we can glean for a more robust future.
The report comes at a critical time. While the US has lost 8 million manufacturing jobs the past three decades, it has also gained 350,000 new ones between January 2010 and December 2011. Is this gain a post-recession blip or part of a larger renaissance? The answer might depend on how policymakers and industry leaders respond to the report’s findings, which, when taken together, suggest that geography should be taken quite seriously when executing a manufacturing policy.
Among the findings:
- The share of manufacturing jobs actually grew in America’s largest metro areas. “Despite large manufacturing job losses nationwide, more metropolitan areas depended on manufacturing as part of their economic base in 2010 than in 1980,” the report states. In fact, metros contained nearly 80% of manufacturing jobs in 2010.
- A key reason for the consolidation: The importance of idea sharing among the massive engineering, educational, management, legal and financial infrastructure needed to support manufacturers. Transportation and supply chain logistics are also among the many drivers here.
- As US manufacturing has consolidated, the nation’s large metros have become increasingly specialized around one of six broad manufacturing specialties. The report breaks metro areas down by their specialties, which aren’t always what you would expect. As you review the data, chances are you’ll find your conventional wisdom challenged. The report suggests that this clustering should lead to policy approaches guided by specialty and region.
- Manufacturing wages are higher than the national average but vary substantially by locale and its manufacturing specialty. Average annual earnings in manufacturing were $58,485 in 2010, compared to a national average of $47,290 for all jobs. But the San Jose, CA, metro, which is home to a mostly IT manufacturing market, is No. 1 with average annual manufacturing earnings of $144,899. At No. 25, transportation-centric Detroit pays an average of $67,804. This is also why the South generally pays the lowest manufacturing wages. “Metropolitan areas in the South specialize strongly in three low- to moderate-wage nondurable goods industries with established technologies (beverages and tobacco products, textile mills, and textile product mills).”
- Most manufacturing plants are smaller than you think. In fact, they are small. “The average metropolitan manufacturing plant has only 57.4 employees.” This matters not just because a lot of policy attention is given to big facilities, but also because of a growing phenomenon called “phoenix industries.” These are the high-tech small- and medium-sized manufacturers that are emerging from the “ashes” of the former manufacturing titans who’ve shed an awful lot of intellectual capital in the past few decades. Thankfully, all that wisdom hasn’t been sitting idle.
- The long-term shift of manufacturing jobs to the South came to halt in the first decade of the 21st Century, while the Midwest had the fastest manufacturing gains the past two years. While it’s too soon to know if this trend will continue, the report suggests that: “Recruitment of manufacturers on the basis of low labor costs and locational subsidies may no longer be an effective regional policy for attracting manufacturing jobs ….”
- On unions, which had driven many manufacturers South in first place, the report says they actually lead to more creative manufacturing: “In metropolitan areas where workers have more bargaining power, firms are more likely to innovate to offset higher wage costs.”
- Insourcing is in. Wages are rising in countries formerly known for rock-bottom pay, changing the analysis when it comes to cost, quality and supply chain risks. “Manufacturers are reconsidering the costs of offshoring and are beginning to bring some previously offshored production back to the US,” the report says.
- Ultimately, the report says its findings call for “high-road” policies to bolster US manufacturing, as opposed to the low-road approach where manufacturers chase low wages and big incentives. High-road policies, the report says, “require a federal platform that is sensitive to the ways in which manufacturing differs geographically. … This policy prescription differs from the general business attraction incentives that have dominated state and local economic development policy. These incentives (which cost state and local treasuries $70 billion annually) are problematic because they reduce the revenue available to fund investments in training and technology—investments that are essential to a high-road approach.”
Contact Sarah A. Webster at email@example.com.