And I realized that for many things in the world that I wanted to happen, products needed to be made to enable it. That really intrigued me. Knowledge Wharton: The conventional view is that manufacturing in the U. Do you think that perspective is still valid or is it out of date, and why? Rose: It is both valid and outdated. It is valid in the sense that many basic and low value-add products have moved out of the U. It is outdated in the sense that the U.
In aggregate, we produce the vast majority of what we consume in the country. We have moved on to innovative products that require engineering and sophistication. While that transition has been painful in many parts of the country, it is not necessarily a bad thing.
We just need to make sure that we support our workers so they can continue to support their families and communities. Knowledge Wharton : Since you look at what is happening in manufacturing from a global lens, how have changing cost structures altered the map of global manufacturing?
Rose: For the last 30 years, people have talked about the globalization of supply chains. My belief is that in the next 30 years we are going to see that unwind. There are three main reasons. First, costs are evening out globally. The average wage for a manufacturing labor was less than a dollar an hour.
But that has changed. All of these are creating frictions in the global supply chain in the immediate term. And probably most interesting is the forward-looking perspective, and that is all about technology. Industry 4. Therefore, over the long term, the advantage from being a low-cost country starts to go away.
If I take a step back, what does that all mean? It means we move from global supply chains to regional ones. There is still a role for lower cost manufacturing, but that would be served more by near shore countries. As you can imagine, that is a pretty dramatic shift, a real unwinding of the last 30 years of international order. Knowledge Wharton : What are the implications of these changing cost structures for U. The western hemisphere in general and North America in particular, is an enormous trading block.
But it is important to remember it is not a given. Just because of these longer-term trends, U. That is a place where we have seen a lot of slippage in the United States in the last 10 years that needs to really be re-energized.
Knowledge Wharton : One thing we keep hearing, especially when people talk about manufacturing in China becoming more expensive, is that the competitive advantage may not necessarily shift back to the U. Do you think initiatives like Make in India and the ascent of manufacturing in other parts of Asia have a chance of succeeding? Rose: A lot of people say China is becoming relatively more expensive, and therefore manufacturing is going to shrink there. The fact that they are getting more expensive does not spell doom for them.
The Chinese consumer market is mushrooming. In a world of regionalizing supply chains, I see Chinese manufacturing simply reorienting to make more of what they would have historically exported, for their own Chinese consumers. In terms of other countries like India, Vietnam and Thailand, there is absolutely a great deal of opportunity for them.
I see real progress in all those countries. My clients are increasingly considering sourcing from them for basic parts. But there are real structural issues there. Several years back, I looked at Vietnam, and it turns out they only had one-twentieth of the port capacity of China. So realistically, how much manufacturing could overnight, or even in the short term, pick up and move from China to Vietnam? The direct impact of manufacturing is only a part of the picture. First, jobs in the manufacturing sector are good middle-class jobs for millions of Americans.
Those jobs serve an important role, offering economic opportunity to hard-working, middle-skill workers. This creates upward mobility and broadens and strengthens the middle class to the benefit of the entire economy. These are higher-skill service jobs that include the accountants, bankers, and lawyers that are associated with any industry, as well as a broad range of other jobs including basic research and technology development, product and process engineering and design, operations and maintenance, transportation, testing, and lab work.
Many of these jobs are critical to American technology and innovation leadership. When the basic manufacturing leaves, the feedback loop from the manufacturing floor to the rest of a manufacturing operation—a critical element in the innovative process—is eventually broken. To maintain that feedback loop, companies need to move higher-skill jobs to where they do their manufacturing. And with those jobs goes American leadership in technology and innovation.
This is why having a critical mass of both manufacturing and associated service jobs in the United States matters. The experience of the Great Recession exemplifies this point.
Although manufacturing plunged in and early along with the rest of the economy, it is on the rebound today while other key economic sectors, such as construction, still languish. Diversity in the economy is important—and manufacturing is a particularly important part of the mix. Another partial explanation for the loss of manufacturing jobs may be attributed to how industries are counted in official statistics.
Some functions, such as accounting and marketing, are outsourced and therefore now counted as part of services rather than manufacturing. In other words, the U. See Berlingieri G. Outsourcing and the shift from manufacturing to services. Hicks MJ and Devaraj S. The Myth and the Reality of Manufacturing in America.
Knight W. April 26, MIT Technology Review. Kenny C. Why Factory Jobs are Shrinking Everywhere. April 28, Four Fundamentals of Workplace Automation. November McKinsey Quarterly. Two examples illustrate how the loss of manufacturing has been more than replaced by some service industries at either equal or higher wages.
While in manufacturing represented Bureau of Labor Statistics — Industries at a Glance. Department of Labor, Bureau of Labor Statistics. Occupational Outlook Handbook. Table SA25N. In , there were 2,, manufacturing jobs in the 11 western states with , in non-metropolitan counties, representing 6 percent of total. Oregon Office of Economic Analysis. Wood Products Productivity, an Update.
Forest Products Journal 61 8 : Lumber and wood products manufacturing employment figures were obtained from: U. Figures showing the relationship between sawmill productivity and harvests can be found at: Oregon Office of Economic Analysis.
By keeping your manufacturing firm in the United States, your taxes will support the community that you and your employees live in in terms of infrastructure, social programs, and more. Together, these benefits present a solid case to keep manufacturing companies in the United States. While overseas manufacturing might seem like a cheaper option for many companies, in the long term, the benefits of keeping your manufacturing facility domestic far outweigh the short-term benefits of moving your facility abroad.
The Rodon Group is a family-owned and operated company that has been manufacturing on American soil since Supporting American manufacturers supports us all. Overseas Manufacturing , Reshoring. Why Choose Us? Blog News Contact. More Jobs for Americans Choosing U. Shorter Lead Times Not only does manufacturing in the U.
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