Although the American economy has come a long way since The Great Recession, the need for economic renewal in the United States is still urgent. Years of mediocre job growth and stagnant incomes continue to wear on many Americans, especially those who find themselves living paycheck to paycheck. At the same time, innovative new technologies—running the gamut from self-driving cars to artificial intelligence to 3D printing and virtual reality—are cultivating genuine excitement in our country. Even so, this technological progress, however promising, also complicates the future of employment–especially in the eyes of those who fear robotics and Artificial Intelligence could replace human labor.
A month doesn’t go by without my hearing about the future of work. News stories and media personalities never fail always to bemoan the decline of American manufacturing. And yet, these complaints strike me as rather abstract and are often difficult to understand. In the spirit of discerning manufacturing fact from fiction, I have sorted through three common myths surrounding American manufacturing today. Here is my take:
Myth #1: Automation will replace human labor in the next decade.
Truth: The concept and meaning of “work” may change significantly in the coming decade.
Few economic themes capture the attention of the media, politicians, and the American public like the worry that automation is threatening blue collar jobs and employment. The concern is easy to understand: robots are now ubiquitous within manufacturing, a sector that has lost 5 million workers since 2000. And it’s easy to identify specific occupations, like travel agents, that have all but disappeared due to digital technology and the internet. But is automation really to blame? According to the dominant narrative, says a 2015 report from the Information Technology & Innovation Foundation (ITIF), “low-paying, low-skilled jobs that Americans do not want or need were outsourced to nations such as China that compete only on cost. Offshoring then freed up the American economy to focus on business services and advanced technology products where its comparative advantage truly lies.” In other words, manufacturing employment losses could be explained by the presence of cheap labor and production abroad and a natural shift away from manufacturing toward a knowledge-based service economy.
Myth #2: Currently, domestic factories need fewer workers because they’ve become much more productive.
Truth: While it’s true that manufacturing labor productivity has doubled since 1994, scrutinizing a metric known as “multifactor productivity” reveals something different.
Multifactor productivity measures how efficiently a factory makes use of all its inputs—i.e. just labor but equipment, energy, purchased parts and services, software, and research. Some economists believe this metric accounts for a more inclusive range of of inputs and costs, and thus, it is a more accurate indicator of how innovative and competitive the manufacturing industry truly is.
Myth #3: Manufacturing looks the same throughout the United States, as the manufacturing sector has diffused and become increasingly decentralized from its historic geographical locations. Moreover, this decentralization doesn’t affect manufacturing firms’ overall productivity.
Therefore, geography is a crucial factor to consider in discussing the future of manufacturing in the United States. Different regions of the country and different metropolitan areas are home to divergent manufacturing industries, technology levels, wages, and plant sizes. Moreover, manufacturing industries have clustered systematically in different types of cities.
An analysis conducted by the Brookings Institution suggests that geographic considerations are central to deciphering whether the slow growth of manufacturing jobs in the U.S. points to a renaissance in American manufacturing, or merely a transient pause before a probable long-term decline. Data on employment, earnings, and American businesses indicates that America’s advanced industries (and notably, manufacturing) have undergone a significant geographical shift in the last 50 years. This shift mirrors a larger national trend toward urbanization. Cities, especially large metropolitan areas, contain the great majority of manufacturing jobs in this country. In addition to this geographical clustering, manufacturing has also become more specialized. Though this shift carries negative implications for unemployment in more rural areas of the U.S., it doesn’t necessarily signify a decline in manufacturing.