US Must Keep Manufacturing in the Economic Driver’s Seat
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Manufacturing needs to stay front and center in bolstering the U.S. economy according to a panel hosted by Fabricators & Manufacturers Association, International.
The association assembled experts to kick off the nationwide celebration of Manufacturing Day, which takes place on October 7, to highlight the need for the manufacturing sector to remain a positive force in the economy.
Sharing insights at the “How Manufacturing Drives the Economy” program were Stephen Gold, president and CEO of the Manufacturers Alliance for Productivity and Innovation; Scott Mayer, chairman and CEO of QPS Employment Group; Dr. Chris Kuehl, managing partner at Armada Corporate Intelligence and FMA economic analyst; and Kenneth Voytek, chief economist for the Hollings Manufacturing Extension Partnership Program (MEP).
“Manufacturing is a much more significant factor in our economy than official government statistics show, as those numbers only measure the value of the upstream supply chain and only include goods sold to ‘final demand’,” Gold said.
As an example, he cited motor vehicle manufacturing, which includes production and transport of materials, R&D and corporate services in the upstream chain.
“When you include the downstream sales chain, the impact is magnified and multiplied,” he said. In his example, this encompasses retail auto dealers, transport and import of the finished vehicles, wholesale operations and aftermarket services.
Using the traditional upstream supply formula across all segments, manufacturing represents 11% of GDP and 9% of employment, Gold said.
The downstream sales chain analysis provides a more complete, robust picture – a remarkable 33% of GDP and 33% of employment.
Chris Kuehl looked at the significance of U.S. manufacturing from a global perspective. “The manufacturing sector is the dominant player in U.S. exports, particularly with heavy machinery and other capital goods,” he said. “And, the U.S. is more export dependent than people realize; it accounts for 14% of GDP, almost matching export-driven Japan at its 14.7% of GDP.
What most people don’t recognize is that the U.S. accounts for 30% of all global manufacturing by value. China accounts for only 10%.”
According to Gold, it is important for policymakers to understand the dramatic impact manufacturing brings to the economy and to develop public policy to ensure a dynamic manufacturing base is ever-present. Such developments can help manufacturers themselves gain greater confidence to spend more capital and invest in new productivity techniques.
Smaller Manufacturers as Catalysts
These scenarios described by Gold are particularly pertinent given Kenneth Voytek’s remarks. Although acknowledging the sector’s rebound over the past several years, Voytek said manufacturing performance has leveled off and slowed, the result of several broad macro trends that include a stronger dollar, declining commodity prices (particularly oil) and weaker demand globally for manufactured goods.
Voytek sees smaller firms as the key to combatting these trends. The fact that a whopping 99% of manufacturers fall in this category (less than 500 employees) reflects the increasing share smaller establishments bring to the manufacturing landscape and the impact such organizations may have.
“It must be recognized that small firms do face a different set of challenges when compared to larger firms,” he said. “They don’t have the deep pockets and deep resources like those competitors. But opportunities are available for them to improve in the areas of operational excellence, strategies, new product development and entering new markets.”
One obstacle to addressing these opportunities is reflected in a compelling statistic presented by Voytek. A new study of the greatest challenges manufacturers face revealed that employee recruitment concerns have increased the most in recent years, cited by 45% of respondents in 2015, but only 19% in 2009.
Another chart shared by Voytek highlighted how job openings are outpacing hiring in manufacturing.
“Every day the baby boomers are retiring at a high rate and a new generation of workers in this sector is needed,” Mayer said. However, filling this gap continues to be an issue.
According to Mayer, high school teachers and counselors continue to direct too many students to attend college for traditional four-year degrees when a large number of young people may be better suited to focus on the skilled trades.
“You can’t put everyone in the same bucket,” he said. “There is not enough recognition that manufacturing today offers many good, well-paid middle-class jobs. Sadly, such jobs are usually not considered an ‘in’ thing.”
Mayer points to a need for more “grass roots” efforts that involve parents and educators alike. “Parents need to steer their kids in the right direction when it comes to career choices,” he said. “And, kids are impressionable and will listen to their teachers. Words mean a lot.”
Manufacturing Day Shines Spotlight on Needs, Opportunities
Each panelist asserts that Manufacturing Day – marking its fifth year anniversary October 7 – exemplifies this comprehensive grass roots approach and delivers effective, educational programs. Thousands of manufacturers will again host students, teachers, parents, job seekers and community leaders at open houses, plant tours and educational sessions to showcase modern manufacturing technology and the attractive jobs that are available. It is a chance for students to see diverse career options that are innovative, impactful and durable, and understand how to apply their studies in math and science to those careers.
“Manufacturing Day truly dispels old, negative myths about manufacturing and highlights the shift from a labor-intense environment to one of high-tech, robotics and computers,” said Kuehl. “It also provides opportunities to communicate how manufacturing is a big part of GDP and our economy.”
Both Gold and Mayer note the 3,000 events to be held throughout the country raise the profile of the industry and eliminate images people may have of dirty, dangerous factories from days of yore.
In addition to the program’s ability to “put manufacturing on the map,” Voytek views Manufacturing Day as a way to highlight a distinctive personal benefit for those who select the industry as a career.
“Manufacturing enables workers to show their accomplishments in a very tangible way,” he said. “They can say, ‘I made this piece of machinery, equipment or product.’ It’s another way to position manufacturing in a positive light.”
And that kind of mindset is good for the future of manufacturing – and the economy.
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