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Supply Chain The State of American High-Tech Manufacturing: Part 1 By Philip Stoten (@philipstoten) T
he U.S. presidential election season has long been a stage for the discussion of jobs. And
no discussion of U.S. jobs is complete without serious conversation about the nature of various jobs, and the desire to create more of them in the manufacturing sector. Whatever the government poli-
cies have or have not been over the past 35 years, it’s clear they have done little to slow the decline of U.S. manufacturing. The number of man- ufacturing jobs has contracted signif- icantly and consistently over the last three and a half decades. In fact, the last time the U.S. had approximately the 12.3 million manufacturing jobs, as it does today, was during the months immediately preceding the attack on Pearl Harbor. What is perhaps even more con-
cerning than the absolute drop in manufacturing jobs, is the relative proportion of jobs in the U.S. that are actually in manufacturing. Today, about 1 American in every 13 works in manufacturing, vs. roughly 1 in 5
Concentration of researchers vs. total population.
U.S. has been the country’s longterm slide in its trade balance of high-tech manufactured goods. Less than 20 years ago the U.S. was a significant
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goods than it exports, and this trend shows no sign of stopping. In fact, with most of the world embarking on stimulative monetary policy meas- ures, such as quantitative easing, at the same time the U.S. is on the verge of raising interest rates, this trend is likely to accelerate in the short term as the dollar continues to strengthen against the currencies of its major trading partners.
Americans 35 years ago. Consistent with the decline in manufacturing employment in the
net exporter of high-tech goods. To- day,
the U.S. imports about $100,000,000,000 more in high-tech
beginning to take a backseat to many industrialized countries in research as well, in spite of the fact that re- search productivity in the U.S. re- mains among the highest in the world. According to the latest available
figures (2013), the U.S. is proportion- ally much higher than China, based on approximately 1.3 million re- searchers for a national population of about 330 million. China ranks the lowest in proportion, with about 1.5 million researchers out of its 1.5 bil- lion total population. Although the U.S. still leads
many countries, including most de- veloping countries in research and development, many of the economic benefits of this research are accrued by other countries in the form of high-tech manufacturing jobs. The U.S. is still the world’s leader in in- novation, although today much of its innovation goes toward products that are then manufactured offshore. Perhaps the most startling sta-
tistic is the total percentage of high- tech exports — as of 2013, 27 percent for China and only 18 percent for the United States. These figures fly in the face of much of the conventional wis- dom and economic theory today re- garding the exodus of manufacturing jobs out of the country. The loss of
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High-tech exports' share of manufactured good exports. The loss of high-tech manufac-
turing jobs means a longterm loss of skills in manufacturing, especially in the engineering and material science disciplines needed to support it, and the associated manufacturing pro - cess innovations. In May of 2013, an article pub-
lished in Industry Week by Ron Kei- th, founder of supply chain specialist Riverwood Solutions, extolled the need for an ‘Industrial Foundation Policy’ to stem the loss of technical skill sets for U.S. manufacturing. This assessment remains highly rele- vant to the problem today. Besides now being a laggard in
general manufacturing and especial- ly in the high-tech sector, the U.S. is
U.S. manufacturing jobs, especially to China, has not merely been in the pro- duction of low-cost consumer goods that utilize unskilled labor, as is often espoused by economic pundits. While the specific causes, and
the potential remedies are far from being clear, the story and statistics are transparent. More and more of the United States’ research and inno- vation is leading to products that are produced mainly offshore, and then exported back to the country. In part two of this series we will
address some of the reasons behind America’s long slide from being a manufacturing power and will offer a few suggestions for industry policy- makers to reverse this trend. r
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