Special report: Manufacturing and innovation<BR>Factories and jobs: Back to making stuff

FOR OVER 100 YEARS America was the world’s leading manufacturer, but now it is neck-and-neck with China (see chart 1, next page). In the decade to 2010 the number of manufacturing jobs in America fell by about a third. The rise of outsourcing and offshoring and the growth of sophisticated supply chains has enabled companies the world over to use China, India and other lower-wage countries as workshops. Prompted by the global financial crisis, some Western policymakers now reckon it is about time their countries returned to making stuff in order to create jobs and prevent more manufacturing skills from being exported. That supposes two things: that manufacturing is important to a nation and its economy, and that these new forms of manufacturing will create new jobs.

There has been plenty of research to show that manufacturing is good for economies, but in recent years some economists have argued that there is nothing special about making things and that service industries can be just as productive and innovative. It is people and companies, not countries, that design, manufacture and sell products, and there are good and bad jobs in both manufacturing and services. But on average manufacturing workers do earn more, according to a report by Susan Helper of Case Western Reserve University, Cleveland, for the Brookings Institution, a think-tank in Washington, DC (see chart 2, right).

Manufacturing firms are also more likely than other companies to introduce new and innovative products. Manufacturing makes up only about 11% of America’s GDP, but it is responsible for 68% of domestic spending on research and development. According to Ms Helper, it provides better-paid jobs, on average, than service industries, is a big source of innovation, helps to reduce trade deficits and creates opportunities in the growing "clean" economy, such as recycling and green energy. These are all good reasons for a country to engage in it.

Despite China’s rapid rise, America remains a formidable production power. Its manufacturing output in dollar terms is now about the same as China’s, but it achieves this with only 10% of the workforce deployed by China, says Susan Hockfield, president of the Massachusetts Institute of Technology (MIT) and co-chair of President Barack Obama’s Advanced Manufacturing Partnership, an initiative recently set up with business and universities to create jobs and boost competitiveness.

The "Hammering Man" catches a nostalgia for the kind of manufacturing employment which in the developed world barely exists any more. Factory floors today often seem deserted, whereas the office blocks nearby are full of designers, IT specialists, accountants, logistics experts, marketing staff, customer-relations managers, cooks and cleaners, all of whom in various ways contribute to the factory. And outside the gates many more people are involved in different occupations that help to supply it. The definition of a manufacturing job is becoming increasingly blurred.

Yet America’s productivity strides raise questions about how many manufacturing jobs, particularly of the white-collar variety, will be created. And some of the manufacturing breakthroughs now in the pipeline will bring down the number of people needed even further. "It is true that if you look at the array of manufacturing technologies that are coming out of MIT, many of them are jobs-free, or jobs-light," says MsPuma Rihanna