Manufacture This

The blog of the Alliance for American Manufacturing

Will America be ready for it?

“An automobile manufacturing plant can now be run by one-third as many people as it took in 1965, while the quality, sophistication, timely delivery, and variety of vehicles have all dramatically improved.”

That observation comes from a new report prepared by an expert panel for the National Academy of Engineering (downloadable for free here), which concludes that rapid technological change, a globalized economy, and unforeseen changes to business practices (ever heard of Kickstarter?) are rearranging the face of the economy. And in the near future, the report’s authors say, this confluence of forces will have a profound effect on work as we know it.

How profound? As traditional manufacturing blends more and more with the tech and service sectors – think of how Apple makes its own computer chips, maintains a massive cloud of data storage, and sells and fixes millions of Apple products a year – 50 percent of all U.S. jobs could be at risk for disruption in the near future, notes the report.

Not all of their conclusions were solid. From At an event to release the report, Chad Syerson of the University of Chicago pointed out that labor productivity increases have coincided neatly with a steep drop-off in U.S. manufacturing employment since 2000. And while that point unfortunately doesn't account for trade policy decisions that took place at the same time – or that government measures of productivity have been called into dispute – the report’s at-large recommendations to improve business practices, foster a culture of innovation, and begin retooling the American workforce of the future are all pretty spot on. They’ll all be needed as a fast-paced and highly competitive global economy only grows faster.

Here are a few of the report’s recommendations.

For businesses:

  • Businesses should examine their business models to search for missed opportunities to leverage distributed tools and coordinate manufacturing and product lifecycle services. Radical gains come from producing new solutions not provided by others. The ability to provide such solutions requires understanding customer needs and desires and developing an innovation strategy that differentiates a business’s offerings from those of its competitors.
  • Manufacturers should implement principles and practices, such as lean production, that enable employees to improve productivity and achieve continuous improvement.
  • Researchers should further investigate and codify best practices for innovation and develop effective methods of teaching them.

For the American workforce:

  • Businesses should establish training programs to prepare workers for modernized operations and invest in advancing the education of their low- and middle-skilled workforce. Employers gain large returns from such investments, in some cases as high as 100 to 200 percent.
  • Businesses, local school districts, labor, community colleges, and universities should form partnerships to help students graduate from high school, earn an associate’s or bachelor’s degree, and take part in continuing education in the workplace.
  • Congress and state legislatures should create tax credits or other incentives for businesses to invest and be involved in education programs that provide students and displaced workers with the knowledge and skills needed for higher-paying careers.

For the sake of U.S. innovation:

  • Researchers, the National Science Foundation, and other research funders should put a priority on understanding why the rate at which new businesses are created has declined in the United States during the past three decades.
  • Metro area and state governments, industry, higher education, investors, and economic development organizations should partner to create local innovation networks. Any one of these stakeholders can spearhead the creation of such a network. In addition to providing resources for innovators, these networks should support them by sharing best practices and helping small businesses learn how to export.
  • Federal agencies and interagency offices such as the Advanced Manufacturing National Program Office should convene stakeholders to identify and spread best practices for value creation, particularly for software, user interfaces, and high-tech services where best practices are less developed than production.

On American fiscal policy:

  • Congress should modify the capital gains tax rates to incentivize holding stocks for five years, ten years, and longer. The current tax structure, which does not provide incentives for investments longer than one year, encourages a preference for quicker returns over the long-term investments needed to create new products and businesses.
  • Congress should make the research-and-development tax credit permanent to allow businesses to have longer-term horizons in their investment decisions.

On improving American infrastructure:

  • Local governments, state legislatures, and Congress should invest in a world-leading wireless infrastructure that makes it easier for individuals and machines to communicate and process information is essential for future innovation along the value chain.
  • Federal information technology and computing programs should facilitate access to a world-leading infrastructure for high-performance computing, which can drive improvements across the value chain and enable entirely new types of products and services.

Download the whole report here.