The movement of production work offshore has been politicized over the past several months as a terminal disease within Corporate America. And while it is uncertain if or how many of the millions of manufacturing jobs lost in the U.S. over the past few years will return, I would appreciate hearing your thoughts regarding the future of U.S. manufacturing. Before you respond, give some thought to the following observations. First, William Strauss, senior economist and economic adviser for the Federal Reserve Bank of Chicago, points to the Federal Reserve Board's monthly Industrial Index showing manufacturing-output growth has averaged more than 3.6% since World War II.
This translates into nearly a 600% increase in manufacturing output or productivity over the same time period. What makes this productivity improvement even more remarkable is that employment has not changed dramatically — averaging between 15 and 20 million jobs over the past 60 years.
Only true productivity and exploiting automated machinery to produce an escalating amount of manufactured goods could lead to growth like this year after year. In fact, over the past two decades, advancements in technologies like CNC, personal computers, multitasking machines, and more have increased productivity to the point that the manufacturing sector of the U.S. economy has grown faster than the overall economy. According to Strauss, this strong growth in industrial production reveals the double-edged sword of trading employment growth for productivity gains.
In addition, Strauss predicts economic expansion will continue in 2004 and the business sector will have its best year since 1998. He also expects the unemployment rate to decline each quarter, reaching 5.7% by year's end.
On the other side is Richard E. Dauch, Co-Founder, chairman and CEO of American Axle & Manufacturing and Chairman of the National Association of Manufacturers (NAM). He believes manufacturers are caught between the proverbial rock and a hard place.
Citing a recent NAM study that concludes that external-overhead costs associated with taxes, regulations, rising energy prices, healthcare, pensions, and runaway litigation conservatively add 22.4% to the price of domestic production, Dauch wants our local, state, and federal government to take action.
He contends that the uneven playing field that U.S. manufacturers are forced to compete upon must be fixed not winked at. We must correct illegal trade barriers, abnormally high tariffs and taxes to U.S. products, and the engagement of currency manipulations to survive in a global economy. “Manufacturing must become a high-level national priority, and government needs to take steps to buttress a future for the American auto industry,” says Dauch.
While I think there is a lot of food for thought in these two opinions, I also think we all view global manufacturing as a reality. So the real question is: Can U.S. manufacturing survive in this global environment, or are we ready to roll over and play dead?