Why We Need To Revive American Manufacturing

Manufacturing jobs are the foundation of our economy. Manufacturing creates the goods that bring in the income that supports the service economy. We can’t just cut each other’s hair and sell each other hamburgers; the income to pay for those haircuts and burgers has to come from somewhere.

For more than three decades, we have been shedding factories and manufacturing jobs—as well as the suppliers, contractors, shippers, trainers, managers and other jobs that go along with them. Between 1970 and 2009, according to the Bureau of Labor Statistics, goods-producing jobs in America shrank from 39 percent of the private-sector workforce to 17 percent (a decline of more than 54 percent). Since 2000, we’ve lost one in three manufacturing jobs.

This has coincided with an increase in the share of Wall Street’s portion of the economy, as we’ve sold off our manufacturing infrastructure and converted our goods economy into a paper (and debt) economy. In 2007, 40 percent of America’s corporate profits came from the financial sector. Meanwhile, we’ve had to sharply increase our borrowing to pay for things made elsewhere.

Middle-class workers have been the big losers. The service-sector jobs that replaced the manufacturing jobs that disappeared have an average weekly wage of $610, compared with $810 in the goods-producing sector, even when you include high-end professionals such as doctors, lawyers, and investment brokers. The disappearance of solid manufacturing jobs is a major reason why between 2000 and 2009 median household incomes dropped 4 percent.

At the same time, we’ve shortchanged our investment in our infrastructure and public facilities—from roads and bridges to water mains—as well as our people. According to the American Society of Civil Engineers, we need to spend $2.2 trillion during the next five years to restore our infrastructure—such as the one in four bridges that are today “structurally deficient or functionally obsolete—to just to minimal standards.

The result is that we are falling behind in the global economic race as other nations pass us in building the education systems, transportation networks and energy grids of a 21st-century economy.

The Progressive Solution

The next economy must be built on a solid platform. We need to rebuild our infrastructure, renew our manufacturing base and educate our people. America needs an economic strategy to help fit these pieces together. From workforce development to component manufacture, we need a strategic collaboration between the private sector and the government to reach our shared national goals. We need an opportunity for stakeholders to come together to remove obstacles, allocate resources, and create rules that work for everyone involved. And we need an economy in which everyone shares the benefits of the work that gets done, instead of the current paradigm in which all the incentives work toward eliminating jobs rather then sharing productivity gains with workers.

A commitment to revitalizing our infrastructure can jump-start our efforts to get Americans working again as well as prepare us for the challenges of the future. For example, $30 billion in school infrastructure development would create 240,000 jobs. And 35,000 jobs would be created for every billion dollars invested in our roads, rails and public transportation systems.

The transformation to new energy and the building of a 21st century infrastructure can provide the basis for reviving manufacturing—but only with a clear strategy to ensure that the jobs are created here.

Our nation needs to reexamine our global economic strategy, with a clear commitment to end the destabilizing global imbalances in exchange rates and trade. We need to reconsider tax breaks that create incentives to move production offshore and to provide fertile ground on which manufacturing can thrive. Our federal government can return to the role it played in years past: investing in a modern infrastructure and providing seed money for research and development in key sectors whose commercial application will come later—as it did with the Internet 30 years ago and is beginning to do with clean energy today.

For more, read our report, “Building The New Economy: Where We’re Going. How We’ll Get There.”