The world is a lot different now than it was just a few decades ago because the traditional industrial working-class is all but gone. GDP percentage from manufacturing is practically half of what it was 50 years ago. Nevertheless, manufacturing is still very vital to our economy, resulting in half our exports and supporting practically all other related service and retail sectors.
Even though the US manufacturing sector makes up a lower percentage of GDP and even though it’s growing slower than that of many of its trading partners, US manufacturing still continues to expand. US exports have quadrupled in the last twenty five years and continues to grow faster than any of its closest competitors. However, much of this growth is very contingent upon not only effective free-trade agreements but also a very highly skilled workforce.
Today, the US manufacturing sector makes up a mere 11 percent of US GDP, and manufacturing jobs make up only 8.6 percent of the US workforce. We are now in what is considered to be a “service” based economy, with new industries focusing on customer support, aid and assistance.
This service economy, along with its constituents, is heavily dependent upon very complex and rapidly changing technologies. Ironically enough, despite low percentages in overall GDP and jobs, US manufacturing still drives more innovation than any other economic sector, comprising seventy-five percent of all private-sector R&D.
Manufacturing jobs are vital to both working and middle classes as well as to all economic sectors, including the service sector. When a manufacturing employee is hired, another four are hired in other sectors. Also, the average salary for non-manufacturing positions is less than two-thirds of the average manufacturing sector salary, and for export related manufacturing positions, the gap is even wider.
The US comprises a large percentage of the global workforce, with much higher than average income, but our workforce lacks the skills to fill many of the open positions. In addition to a dwindling working class, the middle class is shrinking each day, with the gap between the wealthiest and the poorest consistently widening.
Computers, 3D printing and robotics are leading to increased production, but hiring in manufacturing positions is actually declining, despite sector growth. As expected, one reason for this drop is that new technologies diminish the need for direct physical manpower. A second reason is that these technologies are becoming so complex that it’s difficult for manufacturing companies to find qualified job candidates, so many positions simply remain unfilled.
But lack of skilled workers isn’t the only threat to our manufacturing sector. The US manufacturing base is the largest in the world, but operating costs are a barrier to entry and an obstacle to expansion. Our taxation ends up being much higher than major competitors, including many Asian countries, much of the Middle East, most of Central Europe and even most Western and Northern European countries. US manufacturers are required to abide by regulations which other countries aren’t so a disproportionate chunk of sales revenue goes toward meeting regulatory requirements. This is not even taking into consideration labor costs.
Despite the barriers, at least for now, foreign investment in US manufacturing has grown and continues to grow. Manufacturers like doing business here because of our quality infrastructure, innovative technologies and lucrative consumer market. But infrastructure requires maintenance and innovation results from new venture growth and a highly skilled workforce.
A weaker dollar can be good for domestic exporters, but the Feds are raising interest rates which in turn strengthens the dollar. Growing domestic oil and gas production means lower gas prices and a rising standard of living in other parts of the world. A stronger dollar, a higher standard of living and unionized wages, make it much more difficult for a US based manufacturer to compete globally.
Our workforce has adequate opportunities to maintain a middle class income. We just lack the capacity to keep up with the rapidly advancing technologies. We also lack the wherewithal to withstand the temptations offered by the debt boom and bust cycles. Remember, corporations run our political systems, but small businesses drive this economy, not corporations.
If you haven’t already, think about …
- Developing a learning-centered mindset and remaining consistently innovative in all of your planning and processes. The technology you know today can very well be obsolete tomorrow.
- Starting your own business, even if just a simple part-time home based venture, writing or freelancing. You can no longer base your entire livelihood totally upon a career in the traditional corporate setting.
- Minimizing or staying away from the debt trap as much as possible, saving up and paying cash for things or getting short-term lower interest loans.
- Most importantly, choosing to buy products from, doing business with and working for companies that actually matter, who truly care and contribute- the small to mid-sized businesses.