Job Creation in the Manufacturing Revival
Marc Levinson
Section Research Manager
July 1, 2011June 20, 2012
Congressional Research Service
7-5700
www.crs.gov
R41898
CRS Report for Congress
Prepared for Members and Committees of Congress
Job Creation in the Manufacturing Revival
Summary
The health of the U.S. manufacturing sector is of intense interest to Congress. Hundreds ofNumerous bills
aimed at promoting manufacturing are under consideration in the 112thhave been introduced in Congress, often with the
stated goal
of creating jobs. Implicit in many of these bills is the assumption that the
manufacturing sector is
uniquely able to provide well-paid employment for workers who have not
pursued advanced
education.
U.S. manufacturing output has risen significantly over the past two years as the economy has
recovered from recession. This upswing in manufacturing activity, however, has resulted in
negligible employment growth. Although a variety of forces seem likely to support further growth
in domestic manufacturing output over the next few years, including higher labor costs in the
emerging economies of Asia, higher international freight transportation costs, and increased concern about
supply-chain disruptions seem likely to support further growth in domestic manufacturing output
over the next few years
concern about disruptions to transoceanic supply chains, evidence suggests that that such a resurgence
would lead to relatively
small job gains within the manufacturing sector. For more on supply-chainsupplychain risk, see CRS Report
R40167, Globalized Supply Chains and U.S. Policy, by Dick K.
Nanto, and CRS Report R41831,
The Motor Vehicle Supply Chain: Effects of the Japanese
Earthquake and Tsunami, by Bill Canis.
The past few years have seen important changes in the nature of manufacturing work. A steadily
smaller proportion of manufacturing workers is involved in physical production processes, while
larger shares are engaged in managerial and professional work. These changes are reflected in
increasing skill requirements for manufacturing workers and severely diminished opportunities
for workers without education beyond high school. Even if increased manufacturing output leads
to additional employment in the manufacturing sector, it is likely to generate little of the routine
production work historically performed by workers with low education levels.
As manufacturing processes have changed, factories with large numbers of workers have become
much less common than they once were. This suggests that promotion of manufacturing as a tool
to stimulate local economies is likely to meet with limited success; even if newly established
factories prosper, few are likely to require large amounts of labor.
Congressional Research Service
Job Creation in the Manufacturing Revival
Contents
Introduction ...................................................................................................................................... 1
Employment in the Manufacturing Sector ....................................................................................... 1
The Changing Character of Manufacturing Work ........................................................................... 5
The Disappearance of the Large Factory ......................................................................................... 9
Start-ups and shutdownsUps and Shutdowns............................................................................................................... 11
Selected Policy Issues for Congress .............................................................................................. 13
Figures
Figure 1. Manufacturing Output and Employment .......................................................................... 2
Figure 2. Growth in Manufacturing since Cyclical Trough ............................................................. 3
Figure 3. Employment by Occupation withinWithin Manufacturing, 2000-20102011 ..................................... 6
Figure 4. Manufacturing Employment by Worker Education.......................................................... 8
Figure 5. Manufacturing Employment by Gender ........................................................................... 9
Figure 6. Jobs Created by Establishment Openings....................................................................... 12
Figure 7. Jobs Lost Due to Establishment Closings ...................................................................... 12
Tables
Table 1. Manufacturing Employment by Industry, 2001-20112012 ........................................................ 5
Table 2. The Size Distribution of Factories ................................................................................... 10
Table 3. Manufacturing Employment by Establishment Size........................................................ 11
Contacts
Author Contact Information ........................................................................................................... 14
Congressional Research Service
Job Creation in the Manufacturing Revival
Introduction
After a prolonged slump, the U.S. manufacturing sector is showing notable signs of revival. In
part, the upturn in manufacturing output is cyclical, as global economic growth recovers
following the downturn in 2008-092009.1 At the same time, however, there are indications that other
forces may be at work, as a variety of factors – highercontributing to the revival of U.S. manufacturing. Higher labor costs in the
emerging economies of
Asia, higher international freight transportation costs, increased concern about supply-chain disruptions –
and heightened
concern about the risk of disruptions to long, complex supply chains all increase the relative
attractiveness of the United States as a location for factory production.
The strengthening of U.S. manufacturing is a subject of intense interest in Congress. Hundreds of
bills introduced in the 112th Congress would support domestic manufacturing activity in various
ways, from providing government loans to improving vocational training in manufacturing skills
to promoting research and development to mandating that airport security screeners’ uniforms be
made in the United StatesMembers
have introduced bills intended to improve vocational training in manufacturing skills; mandate
that airport security screeners’ uniforms be made in the United States; provide financial support
for domestic production of solar energy systems; offer tax incentives for new factories; promote
domestic research and development; and support manufacturing activity in a variety of other
ways.
In public discourse, the revival of manufacturing is often associated with a variety of policy
objectives, particularly with respect to employment. Most notably, proponents of support for the
manufacturing sector often associate increased manufacturing activity with the creation of jobs
for workers without higher education. Evidence suggests, however, that even strong growth in
manufacturing output could well have only modest impact on job creation, and is unlikely to
reverse the declining demand for workers with low levels of education.
Employment in the Manufacturing Sector
At the start of the twenty-first21st century, 17.1 million Americans worked in the manufacturing
sector. This
number declined during the recession that began in March 2001, in line with the
historic pattern.
In a departure from past patterns, however, manufacturing employment failed to
recover after that
recession ended in November 2001 (see Figure 1), even though U.S.
manufacturing output
increased over the next seven years. By the time the most recent recession
began, in December
2007, the number of manufacturing jobs in the United States had fallen to
13.7 million. Currently, 11.7
12.0 million workers are employed in the manufacturing sector.
1
See CRS Report R41434, Job Growth During the Recovery, by Linda Levine.
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Job Creation in the Manufacturing Revival
Figure 1. Manufacturing Output and Employment
Employment in millions; output indexed, 2007=100
105
17
100
16
95
15
90
14
85
13
80
12
75
11
70
10
65
9
60
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Manufacturing Employment (left)
Manufacturing Output (right)
Source: Bureau of Labor Statistics, Current Employment Survey, and Federal Reserve Board, Industrial
Production Index.
NotesNote: Data are seasonally adjusted.
The output of U.S. manufacturers hit a cyclical bottom in June 2009. Since that time, a 1319%
increase in manufacturing output has been accompanied by negligible change in manufacturing
only a small increase in
manufacturing employment (see Figure 2). The low point in manufacturing employment was
reached in
December 2009 January 2010, but since that time the manufacturing job count has risen only 24%.2 The
employment recovery in manufacturing lags far behind the cyclical norm following past
recessions.
2
Manufacturing output, as discussed in this section, is derived from the Federal Reserve Board Industrial Production
Indexes for manufacturing and for various manufacturing industries, seasonally adjusted,
http://www.federalreserve.gov/releases/g17/Current/default.htm. Employment figures used in this section are from the
Bureau of Labor Statistics’ monthly Current Employment Statistics database, http://www.bls.gov/data/, and are based
on seasonally adjusted data.
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Job Creation in the Manufacturing Revival
Figure 2. Growth in Manufacturing since Cyclical Trough
Index, June 2009=100, SA
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Industrial Production in Manufacturing
Manufacturing Employment
Source: Seasonally adjusted data from Federal Reserve Board (Industrial Production), and Bureau of Labor
Statistics (employment).
There is no single cause of the weakness in manufacturing employment. A sharp increase in the
bilateral U.S. trade deficit with China following that country’s accession to the World Trade
Organization in 2001 contributed importantly to manufacturing job loss in the first half of the last
decade, but the stabilization of the bilateral trade balance since 2006 has not resulted in greater
hiring of factory workers in the United States.3 Cyclical forces aside, there are at least three
distinct factors that limit the prospects for job creation in the manufacturing sector, even if
domestic production gains market share from imports.
•
Some manufacturing industries, notably apparel and footwear, are tied to laborintensive production methods that have proven difficult to automate. With labor
costs accounting for a much higher share of value than in manufacturing as a
whole, declining import barriers allowed imports from low-wage countries to
displace domestic production. From 1.3 million workers as recently as 1980, U.S.
employment in apparel manufacturing has fallen below 156to 150,000. Shoe
manufacturing manufacturing
has seen an even steeper employment decline. Over the same
period, U.S. output of apparel and footwear fell by almost 80%.
•
In other industries, technological improvements have led to large increases in
labor productivity that have reduced the need for workers. Steelmaking offers
3
of apparel fell by 81%, and output of footwear fell by 72%.
3
On the impact of China on manufacturing employment, see David H. Autor, David Dorn, and Gordon H,. Hanson,
“The China Syndrome: Local Labor Market Effects of Import Competition in the United States,” working paper, June
22, 2011May
2012, http://econ-wwweconomics.mit.edu/files/6613. On U.S.-China trade more generally, see CRS Report RL33536, ChinaU.S. China-U.S.
Trade Issues, by Wayne M. Morrison, and CRS Report RL33577, U.S. International Trade: Trends and
Forecasts, by Dick K. Nanto
Brock R. Williams and J. Michael Donnelly.
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Job Creation in the Manufacturing Revival
•
In other industries, technological improvements have led to large increases in
labor productivity that have reduced the need for workers. Steelmaking offers
such an example: the 97such an example: the 88,000 people working in the industry today produce
roughly as much steel asat year-end produced
9.5% more steel in 2011 than nearly 400,000 workers did in 1980.4
•
Secular shifts in demand have dimmed employment prospects in some industries
despite the general recovery in manufacturing output. Paper consumption, for
example, was once closely associated with economic growth, but no longer; as
electronic communication supplants print in many uses, paper output is down
about 20% over the past decade, contributing to a lower industry employment. As
22% from its peak in 1999, contributing to a 36% drop in industry employment
over the same period. As cigarette consumption has waned, output in tobacco
products manufacturing is
off almost by half down by 39% since 2001, andwhile employment has fallen at a similar rate
fallen by half. Neither sector shows signs of a production upturn.
These changes have resulted in a significant shift in the composition of manufacturing
employment as well as in the level of employment. Food manufacturing, which two decades ago
accounted for one in eleven1 in 11 manufacturing jobs, now accounts for one in eight1 in 8. The fabricated
metal products
sector has also become a much more important part of the manufacturing sector,
as has
miscellaneous manufacturing, a category that includes medical equipment and instruments—
– although these sectors have not been immune from the decline in employment. On the other
hand,
apparel, textiles, and computers and electronic products now account for substantially
smaller smaller
shares of manufacturing employment than was formerly the case (see Table 1).
4
In 1980, an average of 398,829 employees produced 83.9 million tons of steel; see American Iron and Steel Institute,
Annual Statistical Report 1980 (Washington, DC, 1981), pgs. 8, 21. U.S. steel shipments in 20102011 were 83.491.9 million
tons, according to the Institute; see
http://www.steel.org/en/sitecore/content/Global/Document%20Types/News/2011/December%20Steel%20Shipments%
20Up%208%20point%206%20Percent%20From%20November.aspx2012/~/
media/Files/AISI/Press%20Releases/2012/SHIP%201112.ashx. BLS gives average steel-industry employment in
2010 as 85,400 2011
as 93,600.
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Job Creation in the Manufacturing Revival
Table 1. Manufacturing Employment by Industry, 2001-20112012
Shares of total manufacturing employment and thousands of workers
Industry
Food
2001 Share
2001
Employment
20112012 Share
2011 2012
Employment
9.08%
1,554
12.45%
1,44720%
1447
Transportation Equipment
11.64%
1,992
11.64%
1,35212.01%
1424
Fabricated Metal Products
10.28%
1,759
11.39%
1,32361%
1377
Computers and Electronic
Products
10.93%
1,871
9.60%
1,11534%
1108
Machinery
8.49%
1,453
8.76%
1,0189.17%
1088
Chemicals
5.71%
977
6.66%
77472%
797
Plastics and Rubber
5.45%
932
5.42%
63040%
640
Miscellaneous Manufacturing
4.25%
728
4.94%
57487%
577
Printing
4.66%
798
4.10%
4763.89%
461
Primary Metals
3.55%
608
3.40%
403
Paper
3.50%
599
3.42%
397
Nonmetallic Mineral Products
3.25%
556
3.18%
370
Primary Metals
3.55%
608
3.18%
36931%
393
Electrical Equipment
3.41%
583
3.13%
371
Nonmetallic Mineral Products
3.25%
556
3.12%
370
Furniture
3.96%
677
3.03%
3522.95%
350
Apparel
2.67%
457
1.36%
158
Textiles
2.13%
364
1.03%
120
Food
26%
158
Source: Current Employment Statistics survey, Bureau of Labor Statistics.
Note: Not all manufacturing industries are included.
The Changing Character of Manufacturing Work
In the public mind, the word “factory” is associated with the concept of mass production, in
which large numbers of workers perform repetitive tasks. While mass production is still an
important aspect of manufacturing, routine production functions, from welding joints in truck
bodies to removing plastic parts from a molding machine, have proven susceptible to automation.
This has had important consequences for the nature of work in manufacturing establishments and
for the skill requirements of manufacturing workers.5
Goods production is no longer the principal occupation of workers in the manufacturing sector.
Fewer than 40% of manufacturing employees are directly involved in making things, and that. That
proportion fell by nearly four percentage points between 2000 and 2010 (see Figure 3), and rose
only slightly in 2011 despite the overall employment growth in manufacturing. Some 31. Some
30% of all
manufacturing workers now occupy management and professional jobs.6
5
On the changing sources of value in U.S. manufacturing, CRS Report R41712, “Hollowing Out” in U.S.
Manufacturing: Analysis and Issues for Congress, by Marc Levinson.
6
Bureau of Labor Statistics, Current Population Surveys for 2011 and previous years, Table 17.
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Job Creation in the Manufacturing Revival
Figure 3. Employment by Occupation withinWithin Manufacturing, 2000-20102011
Percentage of total manufacturing employment
50%
40%
30%
20%
10%
2000
2005
Transportation
and material
moving
Production
Construction,
extraction,
maintenance
Sales and
office
occupations
Service
occupations
Professional
Management
0%
20102011
Source: Bureau of Labor Statistics, unpublished data from Current Population Survey, Table 17.
In many manufacturing sectors, the shift to higher skill requirements is even more pronounced.
Total employment in the U.S. computer and electronic equipmentproduct manufacturing sector has
declined declined
due to automation, sharp falls in demand for certain products once produced in the
United States
(notably television tubes and audio equipment), and changed production economies
that cause
manufacturers to concentrate worldwide production in a small number of locations. Of
the 1.1
million people employed in this sector in 2010, only 2011, 29% were engaged in production
work, for which
a high school education may be sufficient;67 21% of the industry’s workers were
in architecture
and engineering occupations and another 1213% in computer and mathematical
occupations, for
which much higher education levels are required. Similarly, some 2831% of the
workers in the
pharmaceutical manufacturing subsector are involved with production. Many of
the rest have
scientific skills associated with higher education levels. 78
The increasing demand for skills in manufacturing is most visible in the diminished use of “team
assemblers” – —essentially, line workers in factories and warehouses. In 2000, 1.3 million people
were employed as team assemblers. By 20102011, employment in this occupation, which typically
requires little training and no academic qualifications, had fallen to 900,000952,300. Of those, 693,000703,740
worked in manufacturing, representing 6% of manufacturing jobs. This type of job, once the core
of manufacturing, has become so unimportant to many manufacturers and warehouse operators
that one-seventh of all team assemblers work for employment agencies, which furnish workers to
other companies on an as-needed basis.8
6
7
For example, Texas Instruments, a semiconductor manufacturer, requires a completed high school education or
equivalent for “manufacturing specialists.” See http://www.ti.com/careers/manufacturing/specialist.shtml.
78
Data from Bureau of Labor Statistics Occupational Employment Statistics database,
http://data.bls.gov/oes/occupation.do.
8
Ibid.
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Job Creation in the Manufacturing Revival
that nearly one-sixth of all team assemblers work for employment agencies, which furnish
workers to other companies on an as-needed basis.9
There are also far fewer manufacturing workers performing individual tasks on a piecework basis.
Piecework compensation used to be the norm in industries such as apparel and shoe
manufacturing, as each worker was responsible for a specific step in the production process and
was paid according to the number of units he or she processed. In recent years, however, many of
the surviving U.S. apparel plants have reorganized production workers into groups that are
collectively responsible for multiple aspects of production. According to the Bureau of Labor
Statistics (BLS), “Many companies are changing to incentive systems based on group
performance that considers both the quantity and quality of the goods produced.”910 A similar
change appears to be occurring in other sectors, as firms seek to move away from pay systems
that reward workers simply for the quantity of goods produced rather than for quality and
problem-solving.1011
The changing occupational mix within the manufacturing sector is mirrored by changing
educational requirements. In 2000, 53% of all workers in manufacturing had no education beyond
high school. Between 2000 and 20102011, that share dropped by fiveseven percentage points, even as the
proportion of manufacturing workers with college or graduate degrees rose by six percentage
more than six
percentage points. Given that college-educated workers generally command significantly higher
pay in the
labor market than high-school drop-outs and high-school graduates, it is unlikely that
manufacturers would willingly hire more educated workers unless there were a payoff in terms of
greater productivity.
It is noteworthy that, despite the loss of 4.54 million manufacturing jobs over the decade, the
since 2000, the number of
manufacturing workers with graduate degrees increased by 1013% (see Figure 4).
Demand for
workers with associate (community college or proprietary school) degrees in academic fields, which
which qualify the recipient to pursue education to the bachelor’s degree level, was not as weak as
declined far less
than demand for workers without degrees beyond high school. Workers with academic-track
associate degrees fared much better than those with associate degrees in
occupational fields,
which prepare students for immediate workforce entry into specific careers,
fared more poorly than those with vocational degrees.11
9
vocational entry and typically require less coursework in
English and mathematics. As manufacturing employment has recovered from its cyclical low in
January 2010, manufacturers have shown a strong preference for workers with academic-track
associate degrees; from 2010 to 2011, the manufacturing sector added 61,000 workers with
academic-track associate degrees, even while eliminating 27,000 jobs held by workers with
occupational degrees.12
9
Ibid.
Bureau of Labor Statistics, “Textile, Textile Product, and Apparel Manufacturing,” Career Guide to Industries, 201011
2010-11 edition, http://www.bls.gov/oco/cg/cgs015.htm.
1011
Susan Helper, Morris M. Kleiner, and Yingchun Wang, “Analyzing Compensation Methods in Manufacturing: Piece
Rates, Time Rates, or Gain-Sharing?,” National Bureau of Economic Research working paper 16540, November 2010,
http://www.nber.org/papers/w16540.
1112
Unpublished data from Bureau of Labor Statistics, Current Population Survey, “Employed Persons by Intermediate
Industry, education, sex, race, and Hispanic or Latino ethnicity (25 years and over),” 20102011 and prior years. It is unclear
whether the higher demand for workers with academic associate degrees reflects higher skill levels among those
workers or is a result of individuals with greater ability enrolling in the academic rather than occupational programs at
community colleges.
10
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Job Creation in the Manufacturing Revival
Figure 4. Manufacturing Employment by Worker Education
Percentage change, 2000-2010
20%
10%
0%
-10%
-20%
-30%
-40%
Higher degree
Bachelor's
degree
Associate
degree,
academic
Associate
degree,
occupational
Some college
High school,
no college
Less than
high school
All workers
-50%2011
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
All workers
Less than high High school,
school
no college
Some college
Associate
degree,
occupational
Associate
degree,
academic
Bachelor's
degree
Higher degree
Source: Bureau of Labor Statistics, unpublished data from Current Population Survey.
Women now account for 2827.3% of manufacturing workers, the smallest share since 1975 (see
Figure 5). Women have long accounted for an unusually large share of employment in some of
the industries that have experienced the steepest drops in employment, notably apparel, textiles,
and electrical manufacturing. That workforce was significantly less educated than the male
workforce in manufacturing: in 2000, 41% of female manufacturing workers had any education
beyond high school, compared with 61% of their male counterparts.
This gender gap in education has closed over the past decadesince 2000, due largely to the departure of these
less less
educated women from the manufacturing workforce. The number of female manufacturing
workers with no education beyond high school fell 4745% from 2000 to 20102011. As a result, the
number of years of schooling of female manufacturing workers is now very similar to that of
males in manufacturing. Some 27% of women workers in manufacturing hold college degrees,
four-year college
degrees or higher degrees, whereas 12% have failed to complete high school.
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Job Creation in the Manufacturing Revival
Figure 5. Manufacturing Employment by Gender
PercentPercentage of manufacturing workforce that is female
34%
33%
32%
31%
30%
29%
28%
27%
26%
19
70
19
73
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
20
06
20
0912
20
09
20
06
20
03
20
00
20
97
19
94
19
91
19
88
19
85
19
82
19
79
19
76
19
73
19
19
70
25%
Source: Bureau of Labor Statistics, Current Employment Statistics.
NotesNote: Data are for January of each year and are not seasonally adjusted.
The Disappearance of the Large Factory
The stereotypic manufacturing plant has thousands of employees filling a cavernous factory hall.
This stereotype, however, is outdated. The United States now has very few large factories: of
more than 330,000 manufacturing establishments12establishments13 counted in the 2007 Economic Census, 192
employed more than 2,500 workers, and 1,014 employed more than 1,000 (see Table 2). As the
number of large factories has plummeted, the number of small factories, those with fewer than
100 workers, has declined only modestly. Most of the plants in the latter category are extremely
small, with average employment of 15 workers.13
1214
13
The Economic Census collects data by establishment, which is defined as “a single physical location where business
is conducted or where services or industrial operations are performed.” In the manufacturing sector, an establishment is
analogous to a factory, and the terms are used interchangeably in this section.
1314
U.S. Economic Census 2007, “Sector 31: Manufacturing: Summary Series: General Summary: Industry Statistics for
Subsectors and Industries by Employment Size: 2007.”
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Job Creation in the Manufacturing Revival
Table 2. The Size Distribution of Factories
Number of establishments by number of employees
99 or less
100-249
250-499
500-999
1,000-2,499
Over 2,500
1997
327,907
22,286
7,854
3,279
1,187
316
2002
319,643
20,346
6,853
2,720
1,025
241
2007
303,624
19,334
6,154
2,410
822
192
-7.41%
-13.25%
-21.65%
-26.50%
-30.75%
-39.24%
Change, 1997-2007
Source: U.S. Economic Censuses, 1997, 2002, and 2007, “Industry Statistics for Subsectors and Industries by
Employment Size.”
Most of the decline in the number of factories with 2,500 or more workers has occurred in two
industries, transportation equipment manufacturing and computer and electronics manufacturing.
The relevant data are collected every five years in the Census Bureau’s Economic Census.1415 It is
important to note that the employment data pertain to March of each Economic Census year, so
that the data for 2007 reflect conditions before the economy entered recession in December 2007.
For this reason, the loss of large manufacturing establishments over the 1997-2007 period likely
has less to do with the cyclical downturn than with secular causes.
The recent economic literature on the causes of changes in factory size is scant, but evidence
suggests two principal causes. One is automation: as firms substitute capital for labor, fewer
workers are required to produce a given quantity of output. The other is the increase in what
economists refer to as “vertical specialization,” with individual plants making a narrow range of
the components required for a finished product, and those partially finished goods, known as
“intermediate products,” being shipped from one location to another along a sometimes lengthy
supply chain before the final good is manufactured.1516 Much of the growth in international trade in
recent years has involved intermediate products in international supply chains, and one logical –—
although undocumented – —corollary of that growth would be that large factories reduce the scope
of their activities and shed workers who formerly made inputs that are now obtained elsewhere.
Among the large factories that remain in business, average employment size has not changed
significantly. In aggregate, however, large factories account for a diminishing share of
manufacturing employment (see Table 3). In 2007, one1 in 14 manufacturing workers was
14 employed
15
Recent research conducted by the Census Bureau points to problems with plant-level data from the Economic Census
due to the methods used to impute response values for establishments that have not responded to all questions. This
shortcoming is said to bias estimates of productivity change within small subsectors (those classified at the level of sixdigit codes) within manufacturing. However, it is not clear that these problems affect data estimates for the
manufacturing sector as a whole or for large industrial sectors within manufacturing. See T. Kirk White, Jerome P.
Reiter, and Amil Petril, “Plant-level Productivity and the Imputation of Missing Data in the Census of Manufactures,”
U.S. Census Bureau, January 10, 2011, http://www.census.gov/ces/researchprograms/seminars.php?down_key=322.
1516
For a survey of the evidence on vertical specialization, see Gary Herrigel, Manufacturing Possibilities: Creative
Action and Industrial Recomposition in the United States, Germany, and Japan (New York: Oxford University Press,
2010), ch. 4-6. The literature on the implications of vertical specialization for international trade flows, which stems
from the observation that trade in manufactured goods has grown far more rapidly than global output of manufactured
goods, is now quite large, but economists have paid much less attention to the implications of vertical specialization for
the structure of the manufacturing sector. On “outsourcing” of work in manufacturing and other sectors, see CRS
Report RL32292, Offshoring (or Offshore Outsourcing) and Job Loss Among U.S. Workers, by Linda Levine.
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Job Creation in the Manufacturing Revival
employed in a plant with more than 2,500 workers, and one1 in six6 worked in a plant with more
than 1,000
workers.
Table 3. Manufacturing Employment by Establishment Size
PercentPercentage of manufacturing employment in employment size category in given year
99 or less
100-249
250-499
500-999
10001,000-2499
Over 2,500
1997
30.90%
20.44%
16.17%
13.25%
10.23%
9.02%
2002
32.29%
21.32%
16.04%
12.49%
10.17%
7.70%
2007
34.17%
22.15%
15.73%
12.19%
8.91%
6.86%
Source: U.S. Economic Census, 1997, 2002, and 2007, “Industry Statistics for Subsectors and Industries by
Employment Size.”
Start-ups and shutdownsUps and Shutdowns
The employment dynamics of the factory sector differ importantly from those in the rest of the
economy. In other economic sectors, notably services, business start-ups and shutdowns account
for a large proportion of job creation and job destruction. In manufacturing, by contrast,
employment change appears to be driven largely by the expansion and contraction of existing
firms, and entrepreneurship and failure play lesser roles. This may be due to obvious financial
factors: the large amounts of capital needed for manufacturing equipment may serve as a
deterrent to opening a factory, and the highly specialized nature of manufacturing capital may
make it difficult for owners to recover their investment if an establishment shuts down entirely
rather than reducing the scope of its production activities.
The dynamics of employment change in manufacturing can be seen in two different government
databases. The Bureau of Labor Statistics Business Employment Dynamics database, which is
based on firms’ unemployment insurance filings, offers a quarterly estimate of gross employment
gains attributable to the opening of new establishments and to the expansion of existing ones, and
of the gross job losses attributable to the contraction or closure of establishments. 1617 In
manufacturing, BLS finds, less than 10% of gross job creation since 2005 is attributable to new
establishments, and more than 90% to the expansion of existing establishments. This is quite a
different picture than that offered by the service sector, in which openings routinely account for
more than 20% of all new jobs (see Figure 6).
Similarly, while plant closings are frequently in the headlines, closings are responsible for less
than 12% of the manufacturing jobs lost since 2005, according to BLS data. The vast bulk of
manufacturing job losses occur at establishments that remain in operation. Closure is far less
likely to be the cause of job loss in the manufacturing sector than in the service sector. 17
16, where 19%
of job losses are due to establishments closing (see Figure 7).18
17
“Gross” job gains and losses refer to the number of positions created and eliminated, respectively; the net change in
employment can be calculated by subtracting gross job losses from gross job gains. For technical details on this
database, see http://www.bls.gov/news.release/cewbd.tn.htm.
17
Data derived from 18
Bureau of Labor Statistics Business Employment Dynamics database, http://www.bls.gov/bdm/.
Congressional Research Service
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Job Creation in the Manufacturing Revival
Figure 6. Jobs Created by Establishment
Openings
Figure 7. Jobs Lost Due to Establishment
Closings
Percent of New Jobs
Percent of Jobs Lost
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
Services
Source: Bureau of Labor Statistics.
Q
Q
Q
Q
Manufacturing
1.
20
0
4. 0
20
Q 00
3.
2
Q 0 01
2.
2
Q 0 02
1.
20
Q 03
4.
20
Q 03
3.
20
Q2 04
.2
Q 0 05
1.
2
Q 0 06
4.
20
Q 06
3.
20
Q 07
2.
20
Q 08
1.
2
Q 0 09
4.
2
Q 0 09
3.
20
10
25%
1.
20
0
4. 0
20
Q 00
3.
20
Q 01
2.
20
Q 02
1.
2
Q 0 03
4.
2
Q 0 03
3.
2
Q 0 04
2.
20
Q 05
1.
2
Q 0 06
4.
20
Q 06
3.
2
Q 0 07
2.
2
Q 0 08
1.
2
Q 0 09
4.
2
Q 0 09
3.
20
10
25%web/cewbd/table1_5.txt
and http://www.bls.gov/web/cewbd/table1_6.txt.
Congressional Research Service
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Job Creation in the Manufacturing Revival
Manufacturing
Services
Source: Bureau of Labor Statistics.
00
4
1.
2
1.
2
1.
2
Q
Q
Q
0%
1.
2
0%
Q
5%
1.
2
10%
5%
Q
15%
10%
1.
2
15%
Q
20%
00
0
25%
20%
Q
1.
2
Q 000
4.
2
Q 000
3.
2
Q 001
2.
20
Q 02
1.
2
Q 003
4.
20
Q 03
3.
2
Q 004
2.
2
Q 005
1.
20
Q 06
4.
2
Q 006
3.
2
Q 007
2.
20
Q 08
1.
2
Q 009
4.
2
Q 009
3.
20
Q 10
2.
20
11
25%
00
5
Q
1.
20
06
Q
1.
20
07
Q
1.
20
08
Q
1.
20
09
Q
1.
20
10
Q
1.
20
11
Percentage of Jobs Lost
00
3
Percentage of New Jobs
00
2
Figure 7. Jobs Lost Due to
Establishment Closings
00
1
Figure 6. Jobs Created by
Establishment Openings
Manufacturing
Services
Source: Bureau of Labor Statistics.
The other source of data on the connection between new factories and manufacturing job creation
is the longitudinal business database maintained by the Census Bureau’s Center for Economic
Studies. This database, which contains data since 1976, covers some establishments (notably
certain public sector employers) not included in the BLS database and links individual firms’
records from year to year in an attempt to filter out spurious firm openings and closings.1819 The
Census database has different figures than the BLS database, but identifies similar trends, in
particular that establishments are born and die at far lower rates in the manufacturing sector than
in other sectors of the economy.
The Census Bureau data make clear that the rate at which new business establishments of all sorts
were created fell significantly during the recession. 1920 Yet they also show that, within the
manufacturing sector, the decline in the rate at which new factories are opened has persisted for at
least three decades.
The new manufacturing establishments that have been created in recent years have accounted for
relatively few jobs, the Census data suggest. On average, 28% of theIn 2010, 24% of newly created manufacturing jobs created
in recent years have occurred
were located at newly opened factories, whereas 3735% of all jobs created across
the economy have been were
in new establishments. The average new manufacturing establishment
provides 1713 jobs during its
first year in operation.2021 The Census data also indicate that
approximately 29 from 2008 to 2010, the most recent
year for which data are available, 24% of the job loss in manufacturing, on average, is was related to the closure
of a
plant, slightly less than the 33 plant, well below the 30% of job loss that is relatedwas due to establishment closure across the
entire entire
economy.
These two data sources on business dynamics thus support similar conclusions about the role of
plant openings and closings in manufacturing employment. Only a small share of the jobs that are
18created in the manufacturing sector come from new factories, and a minority of the jobs lost come
19
For information about this database, see http://www.ces.census.gov/index.php/ces/researchdata?detail_key=10.
19
John Haltiwanger, Ron Jarmin, and Javier Miranda, “Historically Large Decline in Job Creation from Startup and
Existing Firms in the 2008-09 Recession,” March 2011, http://www.ces.census.gov/docs/bds/pluginBDS%20March%202011%20single_0322_FINAL.pdf.
2021
Census Bureau, Longitudinal Business Database, http://www.ces.census.gov/index.php/bds/bds_database_list.census.gov/ces/dataproducts/bds/data_firm.html.
20
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Job Creation in the Manufacturing Revival
created in the manufacturing sector come from new factories, and a minority of the jobs lost come
from the closure of existing factories. These facts indicate that marginal employment change in
manufacturing depends more heavily on staffing decisions at existing factories than on the
creation of new ones.
Selected Policy Issues for Congress
The 112th Congress is consideringIn recent years, Congress has considered a large amount of legislation intended to revive the
manufacturing sector. The pending billsBills introduced in the 112th Congress take extremely diverse approaches,
ranging from
establishing tax-exempt manufacturing reinvestment accounts (H.R. 110, Manufacturing
Manufacturing Reinvestment Account Act of 2011) to encouraging “repatriation” of
manufacturing (H.R. 516,
Bring Jobs Back to America Act) to creating an Innovation Technology
Loan Guarantee Program
(S. 239, Innovate America Act) to increasing domestic content
requirements for federally
supported transportation projects (H.R. 613, Airports, Highways, High-SpeedHighSpeed Rails and Transit:
Make it in America Act) to creating a federal registry of skill credentials
for manufacturing
occupations (H.R. 1325, The America Works Act).
These proposals, and many others, are typically advanced with the stated goal of job creation, and
often with the subsidiary goals of improving employment opportunities for less educated workers
or reversing employment decline in communities particularly affected by the loss of
manufacturing jobs. The available data suggest, however, that these goals may be difficult to
achieve. In particular:
•
Even large increases in manufacturing activity are likely to translate into only
modest gains in manufacturing employment due to firms’ preference to use U.S.
facilities for highly capital-intensive production. Examples of this heavy use of
capital can be seen in two recent announcements by automotive manufacturers:
General Motors stated in May that it would invest $2 billion in 17 U.S. facilities,
thereby creating or preserving 4,000 jobs – an investment of $500,000 per job –
and Hyundai said it would add 214 positions after spending $173 million to
expand engine production, an investment of over $800,000 per job.21manufacturers. On June 4, 2012,
Deere & Company said it would spend $47 million to expand manufacturing
capacity for hydraulic cylinders in Moline, IL, but would add no jobs as a result.
Also in June 2012, the specialty steel manufacturer SSAB said it had opened a
$220 million, 275,000-square-foot expansion of its mill in Axis, AL, which it said
would create at least 130 new jobs—an investment of $1.7 million per job.22
•
Increases in manufacturing employment are unlikely to result in significant
employment opportunities for workers who have not continued their educations
beyond high school, as the sorts of tasks performed by manufacturing workers
increasingly require higher levels of education and training. At the same time,
manufacturers report shortages of certain manufacturing skills. For example,
Pennsylvania training officials predict openings for precision machining and
skilled industrial workers over the next few years even though they expect total
employment in related industries to decline. 22 This suggests that training efforts
21
General Motors Co., “GM to Invest $2 Billion in U.S. Plants, Adding 4,000 Job,” press release, May 11, 2011,
http://media.gm.com/content/media/us/en/gm/news.detail.html/content/Pages/news/us/en/2011/May/0510_bigbang;
Office of the Governor, State of Alabama, “Hyundai Motor Manufacturing Alabama Expands Engine Plant,” press
release, May 16, 2011, http://www.governor.alabama.gov/news/news_detail.aspx?ID=5080.
2223 This suggests that training efforts
22
“Deere to Expand Manufacturing Capacity for Hydraulic Cylinders,” June 4, 2012, http://www.deere.com/wps/
dcom/en_US/corporate/our_company/news_and_media/press_releases/2012/corporate/
2012jun04_corporaterelease.page?; “SSAB starts production at Axis expansion,” June 8, 2012, http://blog.al.com/
press-register-business/2012/06/ssab_starts_production_at_axis.html.
23
Pennsylvania Center for Advanced Manufacturing Careers, “Critical Shortages of Precision Machining and Industrial
Maintenance Occupations in Pennsylvania’s Manufacturing Sector,” December 2010,
http://www.paworkforce.state.pa.us/portal/server.pt/community/pa_center_for_advanced_manufacturing_careers/1890.
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Job Creation in the Manufacturing Revival
may be helpful in preparing individuals for manufacturing work even if they do
not lead to an increase in total manufacturing employment.
•
To the extent that federal policies lead to the establishment of new manufacturing
facilities in the United States, those facilities are likely to provide only limited
employment opportunities in the locations where they are built, as plants with
more than 1,000 workers are now rare. This Well over half of all manufacturing
workers are employed in establishments with fewer than 250 workers. This
suggests that there will be relatively
few instances in which the siting of a new
plant, by itself, will suffice to
revitalize a community with a struggling economy.
•
Policies that promote construction of new facilities for manufacturing may be
less effective ways of preserving or creating jobs than policies aimed at existing
facilities, as new establishments are relatively unimportant as drivers of
employment in manufacturing.
It is important to note that increased manufacturing activity may lead to job creation in economic
sectors other than manufacturing, such as transportation and business services. To the extent that
increased domestic production of manufactured goods supplants imports, however, any increases
in ancillary employment related to domestic manufacturing may be counterbalanced by reduced
employment related to the transportation and processing of imported goods, leaving the net
employment effect uncertain.
Author Contact Information
Marc Levinson
Section Research Manager
mlevinson@crs.loc.gov, 7-7240
Congressional Research Service
14