Fact vs. Myths About Manufacturing

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Posted by: briansittley Comments: 0 0 Post Date: June 25, 2015

mythsvsfactsSince most of our clients are Midwestern manufacturers, today we look at three myths about manufacturing.
Michael Hicks is a professor of economics and director of the Center for Business and Economic Research at Ball State University in Muncie, Indiana.  He recently commented in an article in the June 15th South Bend Tribune about Indiana’s recent annual report card and an attempt to debunk some pervasive myths about manufacturing in general throughout the United States.
In the Good News department, Indiana continues to do well, “earning a top spot.”  The state improved in key areas including human capital, unfunded liabilities and maintaining a strong fiscal environment.  On the downside, our state saw an increase in health premiums relative to other states.
Of greater interest though were some of the myths needing to be dispelled.
For one, a lot of otherwise smart people think the manufacturing base is shrinking which, Hicks notes, is simply not true.  “On an inflation-adjusted basis, last year was the record year for manufacturing production in the United States.”  And we’re on track to surpass that record in 2015.  Hicks points out that the data are “stunningly simple to obtain” from the Dept. of Commerce website.
A second myth he debunks is “that we are losing huge numbers of jobs to foreign trade.”  Hicks points out that, in the first decade of the 21st century, we saw the largest declines of manufacturing employment in history.  But after applying some math, it turns out that “87% of job losses in the last decade were due to productivity gains.”  As Hicks points out, “we are simply very good and getting better at manufacturing, and trade deficits accounted for no more than 0.08% of annual job losses per year over the last decade.”
Finally, Hicks dispels the myth that new manufacturing jobs pay less.  The average new hire in manufacturing in Indiana makes over $20/hour.  While that may be less than the pay rates of today’s retiring plant workers, it’s simply a reflection of the fact that younger millennials are replacing older, higher-paid boomers, and the new manufacturing jobs are still by today’s standards very high-paying opportunities.  It’s still good money.
Manufacturing production is growing and, after accounting for retirements, Indiana alone will have 125,000 manufacturing job openings every year for the next ten years.  By way of comparison, Hicks points out, we will have only 70,000 high school graduates per year.
So while we may have work to do on issues from taxes to trade to currency manipulation, still, Midwestern manufacturers – and their employees – appear to have much for which to be thankful.
In the end, as Hicks notes, the “real problem may be the need to better prepare folks to take these jobs.”
In keeping with our theme of ‘manufacturing’ for just one more post, in our next post we’ll see what a noted policy maker says about how U.S. manufacturing policy is getting it all wrong, and what we must do about it.  Stay tuned…

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