3 trends that have impacted the landscape of the U.S. manufacturing industry

Sept. 4, 2019
“We were once a manufacturing economy, and now we’re much less of one.”

In a recent episode of Manufacturing Tomorrow's Workforce podcast series, Amanda Del Buono spoke with Neil Ridley, state initiative director of Georgetown University’s Center on Education and Workforce. In the interview, Neil shared some great insights to expand on a new report the university released titled “The Way We Were.” The report provides a fascinating overview of the changes in the U.S. manufacturing industry from its hayday in the 1940s through 2016, and most notably, how the manufacturing industry has moved throughout the country.

AD: You recently released “The Way We Were” report, and I want to ask you, just to begin with, what is the goal of the report? What were you hoping to find when you went into it and what actually came with? Just kind of in broad strokes, how has the U.S. manufacturing industry changed since the glory days of the 1940s?

NR: Yes, we had two main goals when we set out with the report. The first goal was to paint a big picture view of what’s happened to manufacturing over the years, and we wanted to provide a broader historical look than you often find in many studies. And then, the second goal was to examine the changing geography of manufacturing, where manufacturing firms and workers have been concentrated over time across the United States. So, those were the two main goals, and I would say that our main findings were really summed up in the title: we were once a manufacturing economy, and now we’re much less of one. Back in the 1940s and 1950s as well, the United States was very much a manufacturing economy. Nearly 40% of economic output came from manufacturing, so it was a lynchpin of the economy. Nearly one-quarter of the U.S. workforce was employed in manufacturing, so a good, sizable proportion. Then, fast-forward to 2016, and the industry had a much smaller footprint, it had dropped to about 18% of economic output, so from 40% back in 1940, and only about 10% of U.S. workers are employed in manufacturing today.

AD: So, you had 18 states were listed in the report as having manufacturing industries that have dramatically changed, and generally declining, since the beginning of the 21st century. How would you say that this decline has affected the greater industry in the country as a whole?

NR: Yes, I think that the findings about the shifting geography of manufacturing are some of the most interesting parts of the report and, in fact, there’s a web tool that is a companion to the report that allows readers to go in and drill down to look at their particular state or even their county to see how the industry has changed over time. I do think the geography has changed a lot. Back in 1940, the industry was clustered, the biggest concentration of workers could be found in New England and the Midwest, those are some of the birthplaces of manufacturing in the United States. It was a top employer in 15 states. Then, during the rest of the 20th century, it spread to the southeast and the middle of the country, so that by 2000, it was actually a top employer in about 18 states, as you mentioned. Then by 2016, there was quite a drop-off – there were only two states where it was a top employer. And I think, the sharp decline in the number of states where it was the top employer really reflects the health of the industry, especially after 2000. Between 2000 and today, the country and manufacturing have experienced two recessions – one of them a major, major recession that really hit employment and other parts of the industry. So, I think that decline that you point to is really symptomatic of the overall health of the industry.

AD: Now, were there any states that were an exception to this rule? Were there any states experiencing a rise in manufacturing or bright points anywhere that might help level out the decline that we’re seeing in some areas?

NR: Yes, there are places where there has been growth in manufacturing employment and output, and where you find some of the growth in Western states, such as Utah, Nevada, some of the Plains states including North and South Dakota, and Wyoming to a lesser extent. You find this growth in states that had a relatively small base of manufacturing and have been able to expand it somewhat in recent years. I would say those bright spots, or those green shoots where manufacturing has grown, they are bright spots, but they don’t cancel out or counter the decline that’s happened in the Midwest or on the West Coast or in New England. 

AD: In the report, you introduce three trends in manufacturing that have had an impact on the evolving landscape of the industry: declining share of economic output as services gain a larger role in the economy; declining share of the workforce; and increasing output per worker. Can you expand on how these three trends have impacted the U.S. manufacturing industry?

NR: Yes, those are the trends that help to explain the changing geography of employment and the overall shift in employment that we examine in the report. The first, a big part of the story is that services industries grew by a lot and they grew as a share of economic output in the economy and also as a share of employment. Back in 1947, professional business services together with finance and large industry groups, represented about 10% of output, and this went up to about 30% by 2016, so the amount of output accounted for by services industries grew by quite a bit, and there was also a lot of growth in health services as well. As output grew, employment in services industries also grows. The second factor is that the flipside of this growth in services industries was a shrinking share of employment in manufacturing. So, manufacturing declined as a share of the U.S. workforce to the point that in 2016, only about 10% of U.S. workers were employed in manufacturing – a far cry from the 1940s or 1950s. And then, the third factor is a positive note, that productivity gains in manufacturing, the ability to produce more and better goods over time, that ability has meant that output has grown even as employment levels have remained the same or gone down. Productivity has been an important advantage for manufacturing – for the industry as a whole, but not necessarily for employment levels. Output has grown about 60% since 1991, and it’s grown steadily except during the major recessions starting in 2007. 

Click here to listen to the entire interview.

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