Is Manufacturing Coming Back to the United States?

On Monday, the President’s Advanced Manufacturing Partnership (AMP), chaired by Rafeal Reif, President of Massachusetts Institute of Technology, and Andrew Leveris, CEO of the Dow Chemical Company, a Business Forward member company, released by a report on how to boost advanced manufacturing in America. Informed by these findings, the White House announced a number of executive actions in cooperation with the private sector targeted at fostering innovation, improving the skills of our workforce, and creating a better business environment. The initiatives included:

  • Innovation: NASA and the departments of Defense, Energy, and Agriculture will invest $300 million in three technologies the AMP found would be critical to U.S. competitiveness – advanced materials, advanced sensors, and digital manufacturing.
  • Talent: To address manufactures’ need for more skilled labor, the Department of Labor will launch a $100 million American Apprentice grant competitions to boost the industry’s apprenticeship programs. In addition, Dow, Alcoa, and Siemens have developed “how to” guides for other businesses on how best use these apprenticeship programs.
  • Business Climate: To help small manufacturers, the National Institute of Standards and Technology will launch a $130 million competition in ten states to help the 30,000 small manufactures it serves bring their products to market.

These initiatives could prove be a valuable step toward revitalizing American’s manufacturing sector, but many analysts continue to urge action on investments in the nation’s infrastructure, improving education and worker training programs, and reforming immigration, though all will likely require legislation from Congress.

Supporting a Comeback

Many analysts suggest that manufacturing may be experiencing a renaissance. Rising wages in Asia, a weaker dollar, and lower energy costs have made producing goods in America increasingly affordable in recent years. Exports reached an all-time high in 2013, and many businesses that moved manufacturing overseas are now considering reshoring. The Boston Consulting Group reported that over half of the executives they surveyed at American manufacturers with sales greater than $1 billion were planning to move production back to the U.S.

This is good news after the decline in manufacturing over the last two decades. Technological advances and increased offshoring cause the sector to shed jobs, and the recent recession was particularly damaging to manufactures. The sector lost over 2.2 million jobs at the lowest point, nearly one-fifth of its total employment. Since that time, manufacturing businesses have added over 700,000 jobs, but that represents only 30 percent of the jobs lost during the recession.

Even though the number of Americans working in manufacturing has declined over the past three decades, it is still an important part of the economy. Manufacturing has a larger multiplier effect than any other major sector of the economy: $1 of manufactured goods creates an additional $1.35 for the economy. Additionally, the manufacturing sector conducts nearly two-thirds of private sector research, spurring innovation that drives economic growth across the broader economy. The advanced manufacturing industry has potential to continuing growing, benefiting consumers and businesses up and down manufacturer’s supply chains.