Manufacturing Output is Great, so Why is the Manufacturing Workforce Shrinking?
I recently had occasion to take a look at the state of industrial employment in the United States. From the perspective of total employment the story looks pretty grim — great grist for the doom and gloom media mill. The following graph shows that industrial employment peaked in the U.S. in 1979. In fact, according to the Bureau of Labor statistics, manufacturing employment peaked at 19,553,000 in June of 1979, and has dropped 39% to less than 12 million in the latest reported monthly figures for June, 2012.
Without looking further you’d conclude that American manufacturing was toast. But the jobs data only paints part of the picture.
It turns out that, despite declining employment, manufacturing output has been trending upward the whole time. The only one major downturn in output was that suffered during the recent “Great Recession”. Following the recent drop, manufacturing output has made a considerable recovery.
So why is the U.S. manufacturing workforce shrinking? One word, productivity. The United States has become by far the most productive manufacturer in the world, largely as a result of technology. It’s a Dickensian proposition though, the best of times because we can even grow industrial output following a terrible recession, but the worst of times because fewer jobs are available to American industrial workers. To that you may say, so what, let them work elsewhere. But like most public policy and economic issues, this one is complicated and fraught with unintended consequences.
A declining manufacturing workforce means fewer new workers being hired. This is then reflected in the average age of manufacturing workforce, which has increased from 30 years of age in the 1970’s to 50 today. Half the manufacturing workforce is just 10 to 15 years away from retirement. That’s a lot of skilled manpower headed out the door. Many experts foresee a crisis brewing. The issue is will there be enough new skilled manufacturing workers available to replace the retirement bubble that’s coming?
Despite these issues, productivity gains have helped the United States remain the leading manufacturing country in the world, with 21% of all output. China is second with 15% and Japan is third with 12%.