Job Creation in the Manufacturing Revival
Marc Levinson
Section Research Manager
June 20, 201219, 2013
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. Numerous bills
aimed at promoting manufacturing have 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 twofour 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 disruptions to transoceanic supply chains, evidence suggests that such a resurgence
would lead to relatively small job gains within the manufacturing sector. For more on supplychain 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 ........................................................................... 54
The Disappearance of the Large Factory ......................................................................................... 98
Start-Ups and Shutdowns............................................................................................................... 1110
Selected Policy Issues for Congress .............................................................................................. 1312
Figures
Figure 1. Manufacturing Output and Employment .......................................................................... 2
Figure 2. Growth in Manufacturing sinceSince Cyclical Trough ............................................................. 3 2
Figure 3. Manufacturing Employment by Occupation Within Manufacturing, 2000-2011 ............................................................. 6....... 5
Figure 4. Manufacturing Employment by Worker Education.......................................................... 87
Figure 5. Manufacturing Employment by Gender ........................................................................... 98
Figure 6. Jobs Created by Establishment Openings....................................................................... 1211
Figure 7. Jobs Lost Due to Establishment Closings ...................................................................... 1211
Tables
Table 1. Manufacturing Employment by Industry, 2001-2012 ........................................................ 54
Table 2. The Size Distribution of Factories ..................................................................................... 9
Table 3. Factories with More Than 1,000 Workers by Industry ...................................................... 9
Table 4. 10
Table 3. Manufacturing Employment by Establishment Size ........................................................ 1110
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 2008-2009.1 At the same time, however, there are indications that other
forces may be contributing to the revival of U.S. manufacturing. Higher labor costs in the
emerging economies of Asia, higher international freight transportation costs, 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. Members
In the 113th
Congress, Members have introduced bills intended to improve vocational training in
manufacturing skills (H.R. 803); 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
that federally assisted infrastructure projects be
constructed with steel, iron, and manufactured goods produced in the United States (H.R. 949);
require the President to develop a comprehensive national manufacturing strategy (H.R. 1127);
provide financial support for domestic production of clean energy technology (H.R. 400, H.R.
1524); repeal the excise tax on medical devices (H.R. 523); provide grants for state and local
governments to install U.S.-made solar energy systems (H.R. 1107); offer tax credits for
manufacturers to hire unemployed workers (H.R. 1522); 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 21st 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,
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
Employment
Figure 2. Growth in Manufacturing Since
Cyclical Trough
Employment in million; output indexed, 2007=100
Index, June 2009=100
125
18
105
17
100
16
95
15
90
14
85
13
80
12
75
105
11
70
100
10
65
9
60
Manufacturing Employment (left)
Manufacturing Output (right)
120
115
110
95
Industrial Production in Manufacturing
Manufacturing Employment10
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
Industrial Production Index.
Source: Bureau of Labor Statistics, Current
Employment Survey, and Federal Reserve Board,
Industrial Production Index.
Note: Data are seasonally adjusted.
Note: Data are seasonally adjusted.
The output of U.S. manufacturers hit a cyclical bottom in June 2009. Since that time, a 1920%
increase in manufacturing output has been accompanied by only a small2% increase in
manufacturing manufacturing
employment (see Figure 2). The low point in manufacturing employment was
reached in January
2010, but since that time the manufacturing job count has risen only 4.4%.1 The employment
recovery in manufacturing lags far behind the cyclical norm following past recessions.
%.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.
Congressional Research Service
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Job Creation in the Manufacturing Revival
Figure 2. Growth in Manufacturing since Cyclical Trough
Index, June 2009=100
120
115
110
105
100
95
9
1
0
0
0
9
2
1
1
9
1
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D
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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 greaterhad minimal impact on
hiring of factory workers in the United States.32 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 to 150,000. Shoe manufacturing
has seen an even steeper employment decline. Over the same period, U.S. output
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, May
2012, http://economics.mit.edu/files/6613. On U.S.-China trade more generally, see CRS Report RL33536, China-U.S.
Trade Issues, by Wayne M. Morrison, and CRS Report RL33577, U.S. International Trade: Trends and Forecasts, by
Brock R. Williams and J. Michael Donnelly.
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Job Creation in the Manufacturing Revival
1
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.
2
On the impact of China on manufacturing employment, see Justin R. Pierce and Peter K. Schott, The Surprisingly
Swift Decline of U.S. Manufacturing Employment, working paper 18655, National Bureau of Economic Research,
December 2012, and David H. Autor, David Dorn, and Gordon H. Hanson, “The China Syndrome: Local Labor Market
Effects of Import Competition in the United States,” American Economic Review, forthcoming. On U.S.-China trade
more generally, see CRS Report RL33536, China-U.S. Trade Issues, by Wayne M. Morrison, and CRS Report
RL33577, U.S. International Trade: Trends and Forecasts, by Brock R. Williams and J. Michael Donnelly.
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Job Creation in the Manufacturing Revival
employment in apparel manufacturing has fallen to 143,000. Leather
manufacturing has seen an even steeper employment decline. Over the same
period, U.S. output of apparel fell by 83%, and output of leather products fell by
73%.
•
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 9794,000 people working in the industry at year-end produced
9.5in 2012 produced
14% more steel in 2011 than nearly 400,000 workers did in 1980.43
•
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
2230% from its peak in 1999, contributing to a 3638% drop in industry employment
over the same period. As cigarette consumption has waned, output in tobacco
products manufacturing is down by 3951% since 2001, the most recent peak in 1996,
while employment has
fallen by halfnearly two-thirds. 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 1one in 11 manufacturing jobs, now accounts for 1one 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—
eight. Fabricated metal
products, machinery, and chemicals manufacturing have become more important parts of
manufacturing—although these sectors have not been immune from the decline in employment. On the other hand,
apparel
Apparel, textiles, furniture, and computers and electronic products now account for substantially smaller
smaller shares of manufacturing employment than was formerly the case (see Table 1).
43
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), pgspp. 8, 21. U.S. steel shipments in 20112012 were 9195.9 million
tons,
according to the Institute; see http://www.steel.org/sitecore/content/Global/Document%20Types/News/2012/~/
media/Files/AISI/Press%20Releases/2012/SHIP%201112.ashx2013/December
Steel Shipments Up 1 Point 2 Percent From November.aspx. BLS gives average steel-industry employment in 2011
as 2012 as
93,600.
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Job Creation in the Manufacturing Revival
Table 1. Manufacturing Employment by Industry, 2001-2012
Shares of total manufacturing employment and thousands of workers
Industry
Food
2001 Share
2001
Employment
2012 Share
2012
Employment
9.08%
1,554
12.20%
14471,447
Transportation Equipment
11.64%
1,992
12.01%
14241,424
Fabricated Metal Products
10.28%
1,759
11.61%
13771,377
Computers and Electronic
Electronic Products
10.93%
1,871
9.34%
11081,108
Machinery
8.49%
1,453
9.17%
10881,088
Chemicals
5.71%
977
6.72%
797
Plastics and Rubber
5.45%
932
5.40%
640
Miscellaneous Manufacturing
4.25%
728
4.87%
577
Printing
4.66%
798
3.89%
461
Primary Metals
3.55%
608
3.40%
403
Paper
3.50%
599
3.31%
393
Electrical Equipment
3.41%
583
3.13%
371
Nonmetallic Mineral Products
3.25%
556
3.12%
370
Furniture
3.96%
677
2.95%
350
Apparel
2.67%
457
1.26%
158
Source: Current Employment Statistics survey, Bureau of LaborBureau of Labor Statistics, Current Employment 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.54
Goods production is no longer the principal occupation of workers in the manufacturing sector.
Fewer than 4039% of manufacturing employees are directly involved in making things. That
proportion fell by nearly four4.5 percentage points between 2000 and 20102012 (see Figure 3), and rose
only slightly in 2011 despite the overall employment growth in manufacturingcontinues to
decline. Some 31% of all
manufacturing workers now occupyhold management and professional jobs.6
55
4
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.
65
Bureau of Labor Statistics, Current Population Surveys for 2011Survey for 2012 and previous years, Table 17.
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Job Creation in the Manufacturing Revival
Figure 3. Manufacturing Employment by Occupation Within Manufacturing, 2000-2011
Percentage of total manufacturing employment
Percentage of manufacturing workforce
50%
40%
30%
20%
10%
2000
2005
Transportation
and material
and
material moving
Production
Construction,
extraction,
maintenance
Sales and
office
occupations
Service
occupations office
Service
Professional
Management
0%
20112012
Source: Bureau of Labor Statistics, 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 product manufacturing sector has 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 2011, 292012, 28% were engaged in production work, for which
a high school education may be sufficient;7 21 and for which workers received mean annual pay of
$34,860. Some 22% of the industry’s workers were in architecture
and engineering occupations
paying a mean annual wage of $83,160, and another 13% were in computer and mathematical occupations, for
which
occupations with a mean annual wage of $95,310; the latter two occupational categories required
much higher education levels are requiredthan production work. Similarly, some 31% of the workers in the
pharmaceutical manufacturing subsector are involved with production. Many of the rest have
scientific skills associated with higher education levels.86
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 2011In 2012, employment in this occupation, which typically
requires little training and no academic qualifications, had fallen to 952,300was 1,006,980. Of those, 703,740
worked 742,040 worked
in manufacturing, representing 6% of manufacturing jobs. This type of job, once the core
of of
manufacturing, has become so unimportant to many manufacturers and warehouse operators
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.
8
that
one-sixth of all team assemblers work for employment agencies, which furnish workers to other
companies on an as-needed basis. Team assemblers working for employment agencies earn an
6
Data from Bureau of Labor Statistics Occupational Employment Statistics database, http://data.bls.gov/oes/.
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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.9average of $11.25 per hour, some 26% less than those employed directly by manufacturing
companies.7
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), “Manymany companies are changing to incentive systems based on group
performance that considers both the quantity and quality of the goods produced.”108 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.119
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 20112012, that share dropped by seven percentage points, even as the
proportion of manufacturing workers with college or graduate degrees rose by more than six
percentage points. Given that college-educated workers generally command significantly higher
pay in the labor market than high-school drop-outsdropouts 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 4.41 million manufacturing jobs sincebetween 2000, and 2012,
the number of
manufacturing workers with graduate degrees increased by 1319% (see Figure 4).
Demand for
workers with associate (community college or proprietary school) degrees in
academic fields,
which qualify the recipient to pursue education to the bachelor’s degree level, declined far less
than demand for
rose 7%, even as the number of manufacturing workers without degrees beyond high school fell
by one-third. Workers with academic-track
associate degrees fared much better than those with
associate degrees in occupational fields,
which prepare students for immediate vocational entry
and typically require less coursework in
English and mathematics English, mathematics, and science. 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 20112012, the
manufacturing sector added 6190,000 workers with
academic-track associate degrees, even while eliminating 27,000while the
number of manufacturing jobs held by workers with
occupational degrees.12
9 rose by 10,000.10
7
Ibid.
Bureau of Labor Statistics, “Textile, Textile Product, and Apparel Manufacturing,” Career Guide to Industries,
2010-11 201011 edition, http://www.bls.gov/oco/cg/cgs015.htm.
119
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.
1210
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),” 2011 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.
108
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Job Creation in the Manufacturing Revival
Figure 4. Manufacturing Employment by Worker Education
Percentage change, 2000-2011
20%
10%
0%
-10%
-20%
-30%
-402012
30%
19.22%
20%
10%
7.26%
0%
-6.50%
-10%
-20%
-17.94%
-23.47%
-30%
-30.42%
-30.51%
-40%
-42.38%
-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 27.32% of manufacturing workers, the smallest share since 19751971 (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 since 2000, due largely to the departure of these less
educated women from the manufacturing workforce. The number of female manufacturing
workers with no education beyond high school fell 4544% from 2000 to 20112012. 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 holdin 2012 held four-year college
college degrees or higher degrees, whereas 12% have11% had failed to complete high school.
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Job Creation in the Manufacturing Revival
Figure 5. Manufacturing Employment by Gender
Percentage of manufacturing workforce that is female
34%
33%
32%
31%
30%
29%
28%
27%
26%
12
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.
Note: 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 is seriously outdated. The United States now has very few large factories: of
more than 330 more
than 295,000 manufacturing establishments13establishments11 counted in the 2007 Economic Census, 192
employed more than 2,500 workers, and 1,014by the Census Bureau in March 2011, only
815 employed more than 1,000 workers (see Table 2). As the
The reported number increased slightly in
2011, marking the first time since at least 1998 that the number of large plants has shown an
uptick.12
As the number of large factories has plummeted since the late 20th century, the number of small
factories, those with fewer than
100 workers, has declined only modestlyfar more slowly. Most of the plants in
the latter category are extremely
small, with average employment of 15 workers.14
13
The Economic Census collects data by establishment, which small, with 60% of them having fewer than 10 workers. The
growing prominence of small factories has contributed to a decline in mean employment in U.S.
manufacturing establishments, from 46.3 workers in 1998 to 37.2 in 2011.
11
An establishment 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.
14
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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912
Census Bureau, 2011 County Business Patterns: Geography Area Series: County Business Patterns by Employment
Size Class, http://censtats.census.gov/cgi-bin/cbpnaic/cbpsect.pl. Due to definitional changes, data for 1998 and
subsequent years are not compatible with those for earlier years.
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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.15 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.
1998
330,956
22,499
7,968
3,322
1,504
2001
319,058
21,744
7,433
3,011
1,373
2004
309,909
19,227
6,349
2,486
1,112
2007
302,836
18,943
6,172
2,384
1,020
2010
277,148
15,428
4,764
1,847
795
2011
272,396
15,575
4,986
1,871
815
Change, 1998-2011
-17.69%
-30.77%
-37.42%
-43.68%
-45.81%
Source: Census Bureau, County Business Patterns by Employment Size Class.
The decline in the number of large factories has been widespread across the manufacturing sector,
with the exception of the food processing industry. According to the Census Bureau’s annual
County Business Patterns report, which captures data on enterprises from a variety of
administrative records, four industries—chemicals, computers and electronic products,
machinery, and transportation equipment—accounted for more than half the decline in the
number of factories with more than 1,000 workers between 1998 and 2011 (see Table 3).13
Table 3. Factories with More Than 1,000 Workers by Industry
Number of establishments
Industry
1998
2003
2008
2010
2011
Food
169
179
171
167
168
Chemicals
107
81
71
60
57
Primary Metals
71
44
42
31
33
Computers and Electronic Products
269
168
140
122
123
Electrical Equipment
66
39
28
24
22
Machinery
122
82
86
63
71
Transportation Equipment
298
260
243
163
177
Source: Census Bureau, County Business Patterns, various years.
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
13
Census Bureau, County Business Patterns, http://www.census.gov/econ/cbp/.
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supply chain before the final good is manufactured.1614 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 businessremaining factories with more than 1,000 workers, average employment size has not changed
significantlyheld
steady since 2004. In aggregate, however, large factories account for a diminishing share of
manufacturing employment (see Table 34). In 2007, 1 in 14 manufacturing workers was 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.
16
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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in a plant with more than 2,500 workers, and 1 in 6 worked in a plant with more than 1,000
workers.
Table 32011, 15% of manufacturing workers were
employed in plants with more than 1,000 workers, down from 19% in 1998.
Table 4. Manufacturing Employment by Establishment Size
Percentage of manufacturing employment in employment size category in given year
99 or less
100-249
250-499
500-999
1,000-2499
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.” and
over
1998
30.9%
20.5%
16.2%
13.3%
19.2%
2003
33.7%
21.2%
16.0%
12.1%
17.0%
2008
34.7%
21.9%
15.7%
12.1%
15.6%
2010
36.6%
21.7%
15.1%
11.4%
15.2%
2011
36.2%
21.6%
15.6%
11.4%
15.1%
Source: Census Bureau, County Business Patterns, various years.
Start-Ups 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.17 In
15 In
14
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.
15
“Gross” job gains and losses refer to the number of positions created and eliminated, respectively; the net change in
(continued...)
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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, 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.
18
Bureau of Labor Statistics Business Employment Dynamics database, http://www.bls.gov/web/cewbd/table1_5.txt
and http://www.bls.gov/web/cewbd/table1_6.txt.
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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 Openings16
Figure 6. Jobs Created by
Establishment Openings
Figure 7. Jobs Lost Due to
Establishment Closings
Percentage of New Jobs
Percentage of Jobs Lost
25%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
Manufacturing
Services
Source: Bureau of Labor Statistics.
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.1917 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 2007-09 recession.2018 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.
(...continued)
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.
16
Bureau of Labor Statistics Business Employment Dynamics database, http://www.bls.gov/web/cewbd/table1_5.txt
and http://www.bls.gov/web/cewbd/table1_6.txt.
17
For information about this database, see http://www.ces.census.gov/index.php/ces/researchdata?detail_key=10.
18
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.
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The new manufacturing establishments that have been created in recent years have accounted for
relatively few jobs, the Census data suggest. In 2010, 24% of newly created2011, less than 10% of all manufacturing jobs
were located at newly opened factories, whereas 35% of all jobs created across the economy were
in new establishments. The average new establishments in operation for five years or less. Economy-wide, by contrast,
24% of all jobs were at establishments operating for five years or less. The average new
manufacturing establishment provides 13 jobs during its
first year in operation.2119 The Census data
also indicate that from 2008 to 20102009 to 2011, the most recent
year for which data are available, 2425% of
the job loss in manufacturing was related to the closure
of a plant, well below the 30% of job loss
that was due to establishment closure across the 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
created 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.
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.
21
Census Bureau, Longitudinal Business Database, http://www.census.gov/ces/dataproducts/bds/data_firm.html.
20
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from the closure comes from new factories, largely because factories typically
expand slowly in their early years.20 Conversely, a minority of the jobs lost come from the closure
of existing factories. These facts indicate that marginal employment change in
manufacturing manufacturing
depends more heavily on staffing decisions at existing factories than on the
creation of new ones
factories.
Selected Policy Issues for Congress
In recent years, Congress has considered a large amount of legislation intended to revive the
manufacturing sector. Bills introduced in the 112th113th Congress take extremely diverse approaches,
ranging from establishing tax-exempt manufacturing reinvestment accounts (H.R. 110,1737, the
Manufacturing Reinvestment Account Act of 20112013) 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, HighSpeed 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 Actrelocation of foreign business
operations to the United States (S. 337, the Bring Jobs Home Act) to creating a revolving loan
fund to assist U.S. manufacturers with retooling or retraining (H.R. 375, the Make It In America
Manufacturing Act of 2013) to requiring that only “green technologies” that are 85%
manufactured in the United States may be acquired by the federal government (H.R. 1524, the
Make it in America: Create Clean Energy Manufacturing Jobs in America Act) to supporting
worker training related to targeted “industry clusters” (H.R. 919, the Strengthening Employment
Clusters to Organize Regional Success (SECTORS) Act of 2013).
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. After adjusting for inflation,
U.S. manufacturers’ fixed assets per full-time-equivalent employee rose 26%
from 2006 to 2011.21 Examples of theExamples of this heavy use of
capital can be seen in recent announcements by manufacturers. 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.23 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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may be helpful in preparing individuals for manufacturing work even if they do
not lead to an capital can be seen in recent
19
Census Bureau, Longitudinal Business Database, http://www.census.gov/ces/dataproducts/bds/data_firm.html.
Lucia Foster, John Haltiwanger, and Chad Syverson, The Slow Growth of New Plants: Learning About Demand?,
working paper 12-06, Census Bureau Center for Economic Studies, March, 2012,
ftp://ftp2.census.gov/ces/wp/2012/CES-WP-12-06.pdf.
21
The increase in fixed assets per employee is calculated from Bureau of Economic Analysis (BEA) fixed assets
accounts tables 3.1ES and 3.2ES and the BEA measure of full-time-equivalent employees by industry. The underlying
(continued...)
20
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announcements by manufacturers. A $200 million yogurt plant that opened June
3, 2013, in Batavia, NY, is expected to employ 180 workers, an investment of
$1.1 million per worker. A “multibillion-dollar expansion” under way at a large
chemical plant in Baytown, TX, is expected to provide 350 permanent jobs,
implying a capital investment of several million dollars per worker. Such
ventures may create demand for workers in other sectors, notably construction,
but the effect on employment in the manufacturing sector is likely to be small.
•
The decline in energy costs due to the development of shale gas, strongly
encouraged by federal policy, is stimulating energy-intensive manufacturing in
the United States.22 The three sectors that jointly account for about 65% of
natural gas consumption in manufacturing—chemicals, petroleum refining, and
primary metals—are the three most capital-intensive sectors of U.S.
manufacturing and provide relatively little employment.23 To the extent that
expansion in these industries creates jobs, those are more likely to be in ancillary
sectors rather than directly in chemical and steel plants and oil refineries.24
•
Changes in methods, products, and materials may transform some manufacturing
industries over the next few years. Some of these changes have been supported
by the federal government. For example, in 2012 five federal agencies jointly
invested $30 million to help establish the National Additive Manufacturing
Innovation Institute to develop and disseminate methods of producing goods by
using printer-like equipment to deposit thin layers of liquefied material, one atop
the other, following a digital blueprint. Although still in its infancy, additive
manufacturing is expected to provide a cost-effective means of making items
with relatively short production runs, such as components for industrial
machinery or aircraft. Federal research grants have been important in the growth
of nanotechnology, which involves the creation of materials and products using
components just a few billionths of a meter in size and is now widely used in
pharmaceutical and semiconductor manufacturing. Such innovations may
increase demand for engineers and scientists, but they may further reduce the
need for production workers, as equipment will be almost entirely automated.
•
Increases in manufacturing employment are unlikely to result in significant
employment opportunities for workers who have not continued their educations
(...continued)
data are available on the BEA website, http://www.bea.gov.
22
See CRS Report R42814, Natural Gas in the U.S. Economy: Opportunities for Growth, by Robert Pirog and Michael
Ratner.
23
For example, in 2011, the chemicals sector had $390,000 of structures, equipment, and software per full-time
employee, implying that even very large investments will lead to little direct demand for additional labor; see Bureau of
Economic Analysis, Fixed Assets Accounts Table 3.1ES, Current-Cost Net Stock of Private Fixed Assets by Industry,
and Industry Economic Accounts, Full-Time Equivalent Employees by Industry, both accessible from
http://www.bea.gov.
24
“New yogurt plant hungry to grow,” Buffalo News, June 3, 2012, http://www.buffalonews.com/apps/pbcs.dll/article?
AID=/20130603/BUSINESS/130609732/1005; r_company/news_and_media/press_releases/2012/corporate/
2012jun04_corporaterelease.page?; ExxonMobil Chemical Co., “U.S. Petrochemical Production, Exports to Expand,
says ExxonMobil Chemical President,” March 5, 2013, http://news.exxonmobilchemical.com/press-release/english/uspetrochemical-production-exports-expand-says-exxonmobil-chemical-president; “Exxon doubles down in multibilliondollar Baytown plant expansion,” Houston Chronicle, March 5, 2013, http://www.chron.com/business/energy/article/
Exxon-doubles-down-in-multibillion-dollar-Baytown-4331134.php.
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Job Creation in the Manufacturing Revival
beyond high school, as the sorts of tasks performed by manufacturing workers
increasingly require higher levels of education and training. Although
manufacturers report shortages of certain manufacturing skills, the average
hourly wage in manufacturing rose only 1% in the year to March 2013, implying
weak demand for additional labor in the manufacturing sector. This suggests that
government-supported training efforts, while potentially helpful in preparing
individuals for specific manufacturing jobs, should not be expected to 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. 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
. For example, professional and business services provide about
9% of all inputs into manufacturing, and the transportation and warehousing industry furnishes
about 3%, so expansion of manufacturing is likely to stimulate employment in those sectors.25 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
25
Estimates taken from Bureau of Economic Analysis, “Use of Commodities by Industries before Redefinitions,” 2011,
http://www.bea.gov/iTable/index_industry.cfm.
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