Manufacturing continues to be one of the most important bellwethers regarding the health of the U.S. economy, and the prospects for growth remain robust over the next decade. After a sluggish few years, manufacturing is humming along nicely once again, and business leaders in the sector are very optimistic about their company outlook. This includes healthy expected increases in sales, production, exports and employment. In fact, the ability to attract and retain a quality workforce was in a virtual tie in the latest National Association of Manufacturers survey as the top concern among manufacturers, cited by nearly 72 percent of those responding.
Yet, analysts continue to posit that manufacturing is less important to economic growth today than it once was. After all, they suggest, manufacturing accounts for almost 12 percent of GDP today, down sharply from 31 percent 50 years ago, and employment in the sector is a smaller share of the total pie. Moreover, conventional wisdom is that manufacturing is in “decline,” a trend that will no doubt continue moving forward, many argue. Along those lines, the most recent occupational projections from the Bureau of Labor Statistics forecast a 0.6 percent decline in manufacturing employment over the next decade, making it one of the laggards in the economy as it relates to job growth.
Yet, such flawed analysis undersells how important manufacturing is for overall economic growth. Manufacturers contributed more than $2.2 trillion to the U.S. economy in the most recent data, demonstrating how intertwined manufacturing firms are with the rest of the economy. Indeed, business leaders often tell me about the hundreds or—for larger firms—thousands of suppliers they interact with every single day.
Manufacturing has the highest multiplier effect of any major sector. For every dollar spent in manufacturing, another $1.89 is added to the economy, and for every manufacturing worker, there are another four employees hired elsewhere. Indeed, shifts in manufacturing can affect the larger economy significantly. More importantly, millions of Americans rely on manufacturing as a path to the middle class. There are 12.45 million manufacturing workers, with average compensation of $82,023 in 2016, including pay and benefits.
Beyond those figures, we know that manufacturers have hired nearly 1 million additional workers on net since the end of the Great Recession, and there were nearly 400,000 job openings in the sector in the latest monthly data. In addition, a recent study by Deloitte and The Manufacturing Institute found that manufacturers will need to hire 3.5 million workers between now and 2025, largely to replace those individuals who are retiring and to account for growth in the sector, but because of worker mismatches, firms will struggle to fill 2 million of those jobs.
Meanwhile, the United States is seen increasingly as a viable location for global manufacturers, with foreign direct investment in the sector exceeding $1.5 trillion in 2016, an all-time high. In addition, new technologies have the ability to alter radically the way manufacturers innovate, produce and sell their products moving forward, improving efficiency and competitiveness.
In fact, manufacturing today is more globally competitive, and I continue to be quite bullish about its long-term prospects in the United States. This includes employment growth. With more technology and an always-evolving sector, the workforce will likely change dramatically, a trend that we have already seen take place. Manufacturing is more advanced today and so is its workforce.
The employee mix 10 years from now will likely look completely different from today—much like the sector itself. We will need more workers in the trades but also more high-tech employees with science, technology, engineering and math skills. We need more women and military veterans to pursue a career in manufacturing to expand the potential workforce available to manufacturers and to help close the skills gap. And we need to change perceptions about how advanced modern manufacturing really is.
The future of manufacturing is bright, with the sector on the cusp of transformative changes that will help it better compete and prosper for years to come. That should not only benefit employees and the overall economy but also require new thinking about what the workforce of the future in manufacturing really looks like.