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Manufacturing's Economic Impact Goes Beyond Jobs

Posted By Jeff Moad, April 05, 2013 at 4:07 PM, in Category: Industrial Policy

In recent weeks, several pundits and a few economists have begun to question the importance of manufacturing to the economy because, they say, manufacturing doesn't create enough jobs. This concern is understandable, particularly given news this week of weak U.S. job growth in March. Why should manufacturing get special policy attention, these folks ask, when, thanks to automation-inspired efficiency gains,manufacturing employment isn't growing nearly as fast as manufacturing output?

It's a good question, I suppose. And here's the answer, posted this week in a blog by Scott Andes and Mark Muro of The Brookings Institute: "Mass employment is not the fundamental reason we need a healthy and vibrant manufacturing sector," the authors say. "Manufacturing--or rather advanced manufacturing--is essential to the U.S. economy because it is the main source of innovation and global competitiveness for the United States. Simply put, advanced manufacturing is the U.S. pipeline for new products and productivity-enhancing processes."

Andes and Muro point out that, although manufacturing accounts for just 11% of the U.S. economy, manufacturers conduct 68% of the private sector R&D. At the same time, manufacturers contribute more than their share of efficiency-producing process improvement. And, perhaps most importantly, manufacturers account for 60% of U.S. exports.

"If the U.S. economy becomes one in which the U.S. imports all of the machinery that makes the service sector productive and no longer exports any products or our own, then inevitably we will consume more than we produce, and incomes in services and manufacturing will decline."

In other words, the value of the manufacturing to the overall economy shouldn't be measured in job-creation alone.

Category: Industrial Policy
Written by Jeff Moad

Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit


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