Manufacturing Status Report
Manufacturers of all types account for approximately one-third of GDP and national employment. For every employee in the industrial base, four others are employed elsewhere based on that manufacturing output.
It is essential to know that the vast majority of American manufacturing firms are quite small. Data from a few years ago shows 251,774 companies in all manufacturing sectors with all but 3,813 considered small (fewer than 500 employees) and with three-quarters of the small businesses having fewer than 20 employees. Nearly two-thirds of all are pass-through entities such as S corporations or sole proprietorships. Together, all manufacturing firms employ nearly 13 million workers – with 8 million workers in durable goods and 5 million in nondurable goods.
Data of a year ago shows the average U.S. manufacturing worker earned $84,832 annually, which includes pay and benefits. Of the 92% of these workers eligible for health-insurance benefits, 84% participated in their employer’s plan. These workers’ productivity has grown two-and-a-half-fold in the past two decades, with durable goods productivity growing threefold.
It is expected that nearly 3.5 million new manufacturing jobs will be needed over the next decade, with 2 million going unfulfilled due to a sagging skills gap. Regardless, world trade in goods produced by U.S. manufacturing industry increased roughly threefold in the first 15 years of this century to $12.2 trillion annually, which (taken alone) makes U.S. manufacturing equivalent to being the ninth largest economy in the world. Today, this is second only to China.
It is key to know that American manufacturers perform more than three-quarters of all private-sector research and development, much more than all other sectors combined. In doing all this, the “makers of things” in our country consume 32% of all energy used in our land each year (over 32 quadrillion BTU) and, in spite of constant efficiency improvement, pay an average per employee of $19,600 to comply with federal regulations. Except for the last bit, this all paints a very healthy and optimistic picture for America’s future and economy.
Yet it is obvious that there are challenges, many of which this writer and many readers cannot relate to in any way, due to rapid changes in culture and technology over the past several decades. First, as previously stated, a 2.5 to 3 million shortfall in manufacturing workers is predicted by 2025. This shortfall must be met by workers with skillsets involving new technology, proficiency in mathematics and analytics and different abilities than in decades past to interface with data and information concepts of a non-physical reality.
Today, manufacturing industry utilizes project service automation software that uses smart machines to manage and leverage real-time data on cycle time, production runs and the injection of new information derived from data-mining capacities. All this might, for example, manage predictive maintenance and analytics or move from repair-or-replace maintenance models to predict-and-fix models for operating machinery. Technology changes are beyond belief. A lot of manufacturing industry today is different from yesterday, when a guy poured hot metal into a mold and then used a mill or a lathe to make a part.
There are many additional aspects to consider in the world of industrial manufacturing. The skilled-labor shortage is flavored with young people’s view of their culture as part of your business and how your company’s image is presented to the user world you serve. Then there is change in the world of cybersecurity (ransomware attacks increased 50% last year) and what is becoming an increasingly important need to instruct all employees on how to deal with its many aspects.
The matter of global competition requires recognition even by the “little guys” as they make their place known in the marketplace while protecting their technology. Then there is the matter of U.S. government regulation with everything from tax codes to trade agreements to export licensing to what you do with what’s in your waste basket.
All things considered, American manufacturing is doing well. In spite of the fact that factory workers have fallen from the 1950 peak of 30% of the workforce to only 8.5% today, the world of most readers of this journal is strong. Congratulations!