In his State of the Union address, President Obama said that creating manufacturing jobs is the nation’s “first priority.” To some, this may sound like a throwback to a long-lost era. After all, such jobs are being eliminated, outsourced or automated, right?
Not really. The United States remains a world leader in manufacturing, and that sector remains essential to our economic and technological future. Here are some misconceptions about U.S. manufacturing – and why the sector still matters:
•A manufacturing job is no longer a ticket to the middle class
There is no doubt that America’s manufacturing base has declined, peaking at 19.6 million jobs in 1979 and now at just more than 11 million jobs. But U.S. manufacturing jobs are still worth having. On average, full-time manufacturing work pays 20 percent more than full-time service-sector jobs.
•We can outsource manufacturing as long as product design stays here.
Andy Grove, the former chief executive of Intel, famously has argued that the best innovation takes place when design teams are integrated with production teams. Apple has said that it is investing $100 million in new U.S. plants – a move hailed as bringing manufacturing back to our shores. However, Apple has always done most of its prototype manufacturing in the United States. The company may mass-produce iPhones in China, but it has maintained U.S. factories as laboratories to perfect its products before launch. Now, rising wages in China and transportation costs have encouraged Apple to manufacture some of its Mac lines here.
Over the past decade, the growth of Chinese manufacturing has exceeded America’s, so for the first time China has taken the lead in global manufacturing. Yet the United States remains neck and neck with China in manufacturing output, and we still far outstrip such traditional powerhouses as Japan and Germany. China and the United States each produce about one-fifth of the world’s manufacturing, yet we do so with only about 10 percent of our economy devoted to that sector, compared with nearly 40 percent of the Chinese economy. What keeps us in the race is our productivity advantage. U.S. manufacturing workers are almost six times as productive as Chinese workers.
•Government is terrible at supporting manufacturing
America has long had a bipartisan consensus favoring government support for private manufacturers. In 1791, Alexander Hamilton argued that the nation should provide incentives and assistance to manufacturers to compete in the world economy. Even Thomas Jefferson came around to the view that government has a stake in building domestic manufacturing.
These principles influenced Herbert Hoover, who before he was president was regarded as a great commerce secretary and provided financial support for the aviation industry. Later, President Reagan supported Sematech to help our semiconductor industry.
Of course, America’s free-enterprise system is what enables our manufacturers to be the most innovative. And some bets on new companies, such as Solyndra, are bound to fail.
But such failures should not deter the government from investing in DARPA, a strategic agency at the Defense Department, or ARPA-E, a strategic agency at the Energy Department, which can propel innovation, new technologies and new industries.
We also must help keep manufacturers at home through tax incentives, attract immigrants and better prepare a skilled workforce. And we must continue the collaboration between government and business that helped make America an economic superpower.