Listening to the rhetoric around the disappearance of manufacturing in the US one would believe that manufacturing in this country was gone completely. In fact, output is increasing, the problem is that the jobs are not. The reason has very little to do with trade agreements and much more to do with disruption in manufacturing.
The manufacture of products will continue to return to the United States. We have seen growth in the sector since it dipped in 2008-2009 and today it is almost back to record high levels. Today the US economy produces twice as much stuff as we did in 1984:
However, while we produce twice as much stuff, we do so with a third less people.
Political, business and social rhetoric seems to suggest that we can bring the jobs back to the U.S. But we can’t, those jobs just don’t exist anymore.
To some extent manufacturing chased cheap labor out of the US, which made sense because labor was a significant component of the cost of manufacturing. Significant enough that the reduced salaries in other parts of the world made up for the logistical hassle of producing so far away.
What has changed is the labor component. Technology is making labor less necessary in manufacturing and in the reasonably near future labor will not be required in manufacturing at all. Entire factories will be machines that run day and night without variability, lunch breaks or complaints.
So with labor costs no longer a factor the hassle of producing in far off places outstrips the benefits and manufacturing returns.
But, since 2000, manufacturing, despite growth in output, has lost 5 million jobs. Those jobs aren’t coming back. No matter how much we squeeze labor and employees of manufacturing companies there is no way people will be able to compete with the efficiency of machines.
There will be jobs in design, maintenance, service and other areas but not in the physical manufacturing of stuff.
The challenge for our economy and our businesses is to figure out how to adapt. We can’t look backwards and expect to return to the world the way it was. It doesn’t exist. So we have to create a new one. We have to change and adjust in order to enable a stable economy, robust business, strong markets and good jobs.
There is no simple one-size-fits-all answer to this challenge. The only way to plot a path into the future is to develop the foresight to understand where the world is going, create flexibility through innovation and implement change through focus.
The only sure way to defeat is to focus on the past.
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