Manufacturing efficiency affects productivity
June 14, 2009
What is happening to manufacturing? In two words, higher productivity.
As productivity rises, employment falls because fewer people are needed (not including today’s economic meltdown).
Manufacturing is following the same trend as agriculture. One hundred years ago, almost 40 percent of the American labor force worked on a farm. Today, fewer than 5 percent work in agriculture. This does not mean that the U.S. has failed in agriculture. Quite the opposite. American agriculture is a huge success story. America can generate far larger crops than a century ago with far fewer people.
Since 1995, even as manufacturing employment has dropped around the world, global industrial output has risen more than 30 percent. Twenty-two million manufacturing jobs disappeared between 1995 and 2005. The United States wasn’t even the biggest loser. We lost about 11 percent of our manufacturing jobs in the period, but the Japanese lost 16 percent of theirs. Brazil suffered a 20 percent decline, and China had a 15 percent drop.
Who do we blame? Blame new knowledge. Knowledge created the electronic gadgets and software that can now do almost any routine task. This goes well beyond the factory floor. Supermarket checkout clerks are being replaced by automatic scanners. The Internet has taken over the routine tasks of travel agents, real estate brokers, stock brokers and even accountants. With digitization and high-speed data networks, a lot of back office work can now be done cheaper overseas.
A quarter of all Americans now work in jobs that weren’t listed in the Census Bureau’s occupation codes in 1967.
A growing percent of every consumer dollar goes to people who analyze, manipulate, innovate and create. These people are responsible for research and development, design and engineering. Or for high-level sales, marketing and advertising. They’re lawyers, journalists, doctors and management consultants. Most of their work is analyzing, manipulating and communicating through numbers, shapes, words, and ideas.
What we are paying more for these days is services rather than manufacturing. On the back of every iPod is the notice “Designed by Apple in California, assembled in China.” Check your Nikes. You can bet designers get a bigger share of the purchase price than its production.
So, with fewer people in manufacturing, now is the time to set our sights on attracting the best in advanced manufacturing by remembering the six key components of a positive business climate: education, infrastructure, taxation, regulations, entrepreneurship, and most importantly attitude.
Nevada Business Connections believes that small to medium sized manufacturers from California are still our greatest target market. They offer the greatest benefits to our communities and produce the multiplier effect. We use the Capital Region’s number one selling point which is our large manufacturing employment base. The Carson City area is “the manufacturing center of the state.” “We love manufacturers because they make long term commitments by investing in real estate, equipment and use heavy utilities, they’re not leaving overnight,” said Brian Wallace, Nevada State Development Corporation. “You don’t pay a person $5.00 an hour to operate a half a million dollar piece of machinery,” Wallace noted.
The region has 360 manufacturers in 20 industry clusters. They pay the highest wages, provide the best benefits and offer opportunities for advancement. “We think they bring advanced technology and synergy for existing manufacturers” says Ray Bacon, Nevada Manufacturers Association. According to Bacon, “Manufacturing product innovations have driven nearly all the productivity gains in the country – agriculture, transportation, energy, medicine, households and even most services. Manufactured products are the main contributor to our way of life and the productivity gains in our homes and lives. We currently are working on a manufacturer’s Directory with NBC and the NV State Small Business Development Center which will help encourage local, business to business networking.”
As we (NBC) prepare for our fifth business recruitment mission to California next month, we would like to ask you for ideas, suggestions or leads on companies or businesses that we may visit. Contact us at 882-8306 or email@example.com.
*Sources: Manufacturing Works, Fred Zimmerman (2002) and The Future of GM and American Workers, Robert Reich (2009)