Why Does Manufacturing Matter? Which Manufacturing Matters? A Policy Framework

Manufacturing matters to the United States because it provides high-wage jobs, commercial innovation (the nation’s largest source), a key to trade deficit reduction, and a disproportionately large contribution to environmental sustainability. The manufacturing industries and firms that make the greatest contribution to these four objectives are also those that have the greatest potential to maintain or expand employment in the United States. Computers and electronics, chemicals (including pharmaceuticals), transportation equipment (including aerospace and motor vehicles and parts), and machinery are especially important. Productivity and wages vary greatly within as well as between industries. In any industry, manufacturers that are not already at the top have room to improve their performance by adopting “high-road” production, in which skilled workers make innovative products that provide value for consumers and profits for owners. American manufacturing will not realize its potential automatically. While U.S. manufacturing performs well compared to the rest of the U.S. economy, it performs poorly compared to manufacturing in other high-wage countries. American manufacturing needs strengthening in four key areas: research and development, lifelong training of workers at all levels, improved access to finance, and an increased role for workers and communities in creating and sharing in the gains from innovative manufacturing. These problems can be solved with the help of public policies that do the following: promote high-road production; include a mix of policies that operate at the level of the entire economy, individual industries, and individual manufacturers; and encourage workers, employers, unions, and government to share responsibility for improving the nation’s manufacturing base and to share in the gains from such improvements