U.S. Manufacturing in
International Perspective
Marc Levinson
Section Research Manager
February 11, 201320, 2014
Congressional Research Service
7-5700
www.crs.gov
R42135
CRS Report for Congress
Prepared for Members and Committees of Congress
U.S. Manufacturing in International Perspective
Summary
The health of the U.S. manufacturing sector has long been of great concern to Congress. The
decline in manufacturing employment since the start of the 21st century has stimulated particular
congressional interest. The Obama Administration has undertaken a variety of related initiatives,
and Members have introduced hundreds of bills intended to support domestic
manufacturing manufacturing
activity in various ways. The proponents of such measures frequently contend that
the United
States is by various measures falling behind other countries in manufacturing, and they
argue that
this relative decline can be mitigated or reversed by government policy.
This report is designed to inform the debate over the health of U.S. manufacturing through a
series of charts and tables that depict the position of the United States relative to other countries
according to various metrics. Understanding which trends in manufacturing reflect factors that
may be unique to the United States and which are related to broader changes in technology or
consumer preferences may be helpful in formulating policies intended to aid firms or workers
engaged in manufacturing activity. This report does not describe or discuss specific policy
options.
The main findings are:
•
The the following:
•
China displaced the United States remainedas the largest manufacturing country in 2010, although
its
as the United States’ share of global manufacturing activity has declined in recent yearsdeclined from 30% in
2002 to 17.4% in 2012.
•
Manufacturing output has grown more rapidly in the United States over the past
decade than in most European countries and Japan, although it has lagged China,
Korea, and other countries in Asia.
•
Employment in manufacturing has fallen in most major manufacturing countries
over the past two decades. The United States saw a disproportionately large drop
between 2000 and 2010, but its decline in manufacturing employment since 1990
is in line with the changes in several European countries and Japan.
•
U.S. manufacturers spend far more on research and development (R&D) than
those in any other country, but manufacturers’ R&D spending is rising more
rapidly in China, Korea, Mexico, and Taiwan.
•
A large share of manufacturing R&D in the United States takes place in hightechnology sectors, particularly pharmaceutical and electronic instrument
manufacturing, whereas in other countries a far greater proportion of
manufacturers’ R&D outlays occur in medium-technology sectors such as motor
vehicle and machinery manufacturing.
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U.S. Manufacturing in International Perspective
Contents
Introduction...................................................................................................................................... 1
How the U.S. Manufacturing Sector Ranks ..................................................................................... 2
The Role of Services in Manufacturing ........................................................................................... 79
Manufacturing Work ...................................................................................................................... 10
Technology and Research in Manufacturing ................................................................................. 1415
Figures
Figure 1. Leading Countries, Value Added in Manufacturing ......................................................................................... 3
Figure 2. Selected Countries’ Shares of Manufacturing Value Added ............................................. 34
Figure 3. Share of Manufacturing in National Economies .............................................................. 45
Figure 4. Change in Value Added in Manufacturing, 2000-20102005-2012 .................................................... 56
Figure 5. Domestic Value in Exports of Transport Equipment ........................................................ 67
Figure 6. Domestic Value in Exports of Electrical and Optical Equipment..................................... 67
Figure 7. Investment in Manufacturing Fixed Capital as Share of GDP, 2009................................ 78
Figure 8. Service-Sector Inputs into Manufacturing Exports ........................................................................ 8
Figure 9. Services-Related Occupations in Manufacturing Industries ........ 10
Figure 9. Manufacturing Employment.................................... 9
Figure 10. Manufacturing Employment ......................................................................................... 10 11
Figure 1110. Manufacturing Employment ......................................................................................... 1011
Figure 1211. Real Output per Labor Hour in Manufacturing ............................................................ 11
Figure 13. Importance of High-Tech Industries ............................................................................. 15
Figure 1412
Figure 12. R&D in Manufacturing, 2008 2011....................................................................................... 16
Figure 1513. Growth in Manufacturing R&D ................................................................................... 16
Figure 16. Manufacturers’ Research Intensity in Selected Countries ....14. Manufacturing R&D as Share of Manufacturing Value Added ........................................ 17
Tables
Table 1. Hourly Compensation Costs in Manufacturing................................................................ 1314
Table 2. Hourly Compensation Costs in Selected Manufacturing Industries ................................ 1415
Table 3. Comparative Research and Development Spending by Industry ..................................... 18
Table 4. Manufacturers’ R&D Spending by Sector ....................................................................... 18
Contacts
Author Contact Information........................................................................................................... 19
Congressional Research Service
U.S. Manufacturing in International Perspective
Introduction
The health of the U.S. manufacturing sector has long been of great concern to Congress. The
large decline in manufacturing employment since the start of the twenty-first21st century has
stimulated stimulated
particular congressional interest. Members have introduced hundreds of bills intended
to support
domestic manufacturing activity in various ways. The proponents of such measures
frequently frequently
contend that the United States is in some way falling behind other countries in
manufacturing,
and argue that this relative decline can be mitigated by government policy.
Examining U.S. manufacturing in isolation sheds little light on the causes of changes in the
manufacturing sector. While some of those changes may be a result of factors specific to the
United States, others may be attributable to technological advances, shifting consumer
preferences, or macroeconomic forces such as exchange-rate movements. This report is designed
to inform the debate over manufacturing policy by examining changes in the manufacturing
sector in comparative perspective. It does not describe or discuss specific policy options.
The charts and tables on the pages that follow depict the position of the United States relative to
other major manufacturing countries according to various metrics. Not all countries compile
information on each subject, so it is not possible to show data for the same set of countries on
each chartin each
instance. This report draws on data from a number of sources, and has certain unavoidable
statistical problems of which the reader should be aware.
Despite meaningful progress in standardization, countries define “manufacturing” in different
ways. Some associate manufacturing with factory production, while others may label a selfemployed artisan as a manufacturing worker. Some countries have sophisticated sampling
systems to collect data about production and employment from firms and households, whereas
others rely heavily on estimates drawn from macroeconomic models or collect data only from a
non-random subset of enterprises, such as those located in major cities. International comparisons
of compensation data are especially difficult because of national differences in taxation and
employee benefits. Complicating matters further, the organizations that compile statistics
obtained from national governments may adjust the raw data in different ways to improve
compatibility, such that certain figures used to prepare this report may not be identical to those
published by national statistical services.
Additionally, analysis of trends in manufacturing is complicated by often arbitrary distinctions
between manufacturing and non-manufacturing activity. If, for example, a manufacturing firm
owns the trucks that deliver its goods to customers, statisticians will count the truck drivers as
manufacturing-sector workers, and their wages will be included in the manufacturing sector’s
value added. If, however, the manufacturer instead contracts with a separate trucking company to
deliver its goods, statisticians will consider the truck drivers to be transport-sector workers and
their wages will be included in transport-sector value added, making the manufacturing sector
appear smaller—even though there has been no change in the total amount of labor or the tasks
performed.
All of these factors argue for caution in the use of these data, and warn against unwarranted
assumptions of precision.
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U.S. Manufacturing in International Perspective
How the U.S. Manufacturing Sector Ranks
The standard measure of the size of a nation’s manufacturing sector is not manufacturers’ sales,
but rather their value added. Value added attempts to capture the economic contribution of
manufacturers in designing, processing, and marketing the products they sell.
At the level of an individual firm, value added can be calculated as total sales less the total value
of cost of
purchased inputs, such as raw materials and electricity. The intuition behind this calculation is
that a firm that purchases raw materials and processes them only slightly may have substantial
sales, but its manufacturing efforts will not have transformed the materials in ways that
significantly increase their value. Alternatively, a firm’s value added can be measured as the sum
of its employee compensation, business taxes (less subsidies), and profits.
The aggregate value addedsize of a country’s manufacturing sector cannot be determined simply by
adding up the value
added of its manufacturers. If a domestic manufacturer uses inputs from its
plants abroad, those
inputs contain value added by the firm, but not within the United States.
domestically. Calculating total value added in
manufacturing thus requires adjustments for imported parts and
components incorporated into the
output of domestic factories, and also for domestic products
that were exported and used in a
foreign plant to make products that were subsequently imported
into the United States.1
According to World BankUnited Nations estimates, China displaced the United States retained its position as the largest
manufacturing nation in 2010, with value added of $1.8 trillion, closely followed by China. Japan
. In 2012, according to the UN figures, China’s value added in
manufacturing reached of $2.6 trillion, compared to $2.0 trillion for the United States. These
estimates are calculated in U.S. dollars, and China’s rise relative to the United States is partially
due to the fact that its currency, the yuan, strengthened 24% against the dollar between 2003 and
2012.2 Japan ranked third in manufacturing value added at $1.1 trillion (see Figure 1). Germany
is the only
other country whose manufacturing sector is more than one-fifthsixth the size of those in the United
States and China.2that in the
United States.3 Data from the U.S. Bureau of Economic AnalysisU.S. government agencies indicate that manufacturing
value added
rose approximately 6% in 2011in nominal dollars, but less than 3% rose 1.8% in 2012 after adjustment for inflation.
1
For more on the changing nature of value added in manufacturing, see CRS Report R41712, “Hollowing Out” in U.S.
Manufacturing: Analysis and Issues for Congress, by Marc Levinson.
2
See http://data.worldbank.org/indicator/NV.IND.MANF.CD (accessed February 6, 2013Currency appreciation calculated from Federal Reserve Board, G.5 release, annual average data.
3
United Nations National Accounts Main Aggregates Database, value added by economic activity at current prices—
U.S. dollars, http://unstats.un.org/unsd/snaama/resQuery.asp (accessed January 6, 2014). The data used here are
standardized and hence may differ from those reported by national statistical services. For example, the World BankUnited Nations
estimates U.S. manufacturing value added of $1.771994 trillion in 20102014, whereas the U.S. Bureau of Economic Analysis
estimates $1.631867 trillion (as of November 13, 2012). The U.S. Census Bureau, which uses a different method of
calculation, gives 2010 manufacturing value added as $2.16 trillion; see 2011 Annual Survey of Manufactures,
http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ASM_2011_31GS101&prodType=
tableJanuary 6, 2014).
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U.S. Manufacturing in International Perspective
Figure 1. Leading Countries, Value Added in Manufacturing
Billions of U.S. Dollars, 2010
2,000
1,800
$1,771
$1,757
1,600
1,400
1,200
$1,066
1,000
800
600
$610
400
$306
$298
$276
$254
$230
$228
200
0
Source: World Bank, http://data.worldbank.org/indicator/NV.IND.MANF.CD.
Note: * Data for France are for 2009Billion dollars, 2012
3,000
$2,556
2,500
2,000
$1,994
1,500
$1,108
1,000
$687
500
$315
$280
$262
$254
$240
$233
$220
$210
$205
0
Source: United Nations National Accounts Main Aggregates Database, value added by economic activity, at
current prices—U.S. dollars.
The U.S. share of global manufacturing value added has declined over time, from nearly onethird30% in the
early 1980s to just short of one-fifth17%-18% today (see Figure 2). Similarly, Japan’s share of
global manufacturing
value added has contracted from 2221% in 1993 to around 10% now, and
Germany’s has fallen from 10% to 6%. These smaller shares are a consequence of the very rapid
from 10% (in 1990, just after reunification) to 6%. It is important to note that global shares are
measured in U.S. dollars, so each country’s share in a given year is greatly affected by the
strength of its currency against the dollar. The declining shares of the wealthy economies are a
consequence of the very rapid increase in manufacturing activity in emerging economies, notably
China, and do not indicate
necessarily indicate absolute declines in manufacturing value added in those countries. .
Manufacturing value added in
the United States, as measured by the Bureau of Economic
Analysis in inflation-adjusted 2005
dollars, rose 7583% from 1990 to 20102012 and 1621% from 2000 to 2010
2012, although it was lower in 2010
2012 than at the onset of the most recent recession in 2007.
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U.S. Manufacturing in International Perspective
Figure 2. Selected Countries’ Shares of Manufacturing Value Added
Calculated in Current U.S. Dollars
Source: World Bank, http://data.worldbank.org/indicator/NV.IND.MANF.CD.
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U.S. Manufacturing in International Perspectivecurrent U.S. dollars
35%
30%
25%
20%
15%
10%
5%
0%
United States
China
Japan
Germany
Source: United Nations National Accounts Main Aggregates Database, value added by economic activity, at
current prices—U.S. dollars.
Manufacturing value added amounted to 12.43% of total U.S. gross domestic product (GDP) in
20102012, according to World Bank estimatesUnited Nations calculations. Manufacturing is more significant in the United
States,
relative to the size of the economy, than in the United Kingdom, France, and Canada, but
and France, but much less
important than in Japan, Germany, Indonesia, Korea, and China (see Figure 3). Chinese
Chinese manufacturing value added accounted for 2930.6% of its economy’s total output in 2010, according
to the World Bank2012,
according to the UN.
In this respect, it is important to note that a high ratio of manufacturing value added to GDP is not
necessarily a sign of economic vibrancy. To the contrary, a high ratio may indicate that various
policies or practices, such as labor regulations, credit subsidies, or protection from imports, are
standing in the way of a reallocation of capital and labor from manufacturing to other sectors in
which they might contribute more to economic growth.
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U.S. Manufacturing in International Perspective
Figure 3. Share of Manufacturing in National Economies
(Manufacturing value added as percent of gross domestic product, 2010)
Source: World Bank, computed from data available at http://data.worldbank.org/
indicator/NY.GDP.MKTP.CN and http://data.worldbank.org/indicator/
NV.IND.MANF.CN.
Note: Figures are rounded to nearest percentage pointpercentage of Gross Domestic Product, 2012
35%
31%
30%
28%
24%
25%
20%
17%
15%
10%
9%
9%
10%
11%
12%
12%
13%
13%
19%
20%
14%
5%
0%
Source: United Nations National Accounts Main Aggregates Database, value added by economic activity and
Gross Domestic Product, at current prices—national currency.
Despite its relatively low rank in manufacturing as a share of GDP, the United States appears to
have outperformed most other wealthy countries in the growth of manufacturing value added over
the past decadein
recent years. U.S. value added in manufacturing, adjusted for inflation, rose 11 percent
between 2000 and 2010, according to estimates by the U.S. Bureau of Labor Statistics (BLS).
Japan and Germany had lower5% between 2005
and 2012, according to UN data. Japan had similar growth in manufacturing value added during
that period, after
adjusting for inflation, while France, the United Kingdom, Italy, and Canada saw declines in
value added.3 Separate data from the World Bank show that value added.
China and TaiwanKorea had much faster
growth in manufacturing value added than the United States
over the same period, after adjusting for inflation (see Figure 4). These data are expressed in
terms of each country’s currency, adjusted for its domestic inflation, so exchange-rate changes
play no role.4
4
United Nations National Accounts Main Aggregates Database, Value Added by Economic Activity at constant 2005
prices, national currency, http://unstats.un.org/unsd/snaama/selbasicFast.asp.
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5, after adjusting for inflation (see Figure 4).4
3
U.S. Bureau of Labor Statistics, “International Comparisons of Manufacturing Productivity and Unit Labor Cost
Trends: Underlying Data Tables,” October 13, 2011. The BLS estimates of change in real value added cited in this
paragraph differ from the figures presented by the Bureau of Economic Analysis, cited above, as BLS has made
adjustments for international compatibility.
4
http://data.worldbank.org/indicator/NV.IND.MANF.KN.
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U.S. Manufacturing in International Perspective
Figure 4. Change in Value Added in Manufacturing, 2000-2010
(2005-2012
Adjusted for inflation in each respective country)
200%
181%
175%
150%
125%
100%
100%
84%
75%
50%
30%
25%
11%
9%
3%
4%
-1%
-10%
-15%
-16%
C
an
ad
a
Ita
ly
Fr
an
ce
Ki
ng
do
m
te
d
U
ni
an
y
o
er
m
G
ex
ic
M
Ja
pa
n
Br
az
U
ni
il
te
d
St
at
es
Ko
re
a
-25%
Ta
iw
an
C
hi
na
0%
Sources: Derived from U.S. Bureau of Labor Statistics, “International Comparisons of
Manufacturing Productivity and Unit Labor Cost Trends: Underlying Data Tables,”
October 13, 2011. Figures for China, Mexico, and Taiwan derived from World Bank,
http://data.worldbank.org/indicator/NV.IND.MANF.KN.
Note: Data for France include mining.
New data from the Organisation for Economic Co-operation and Development (OECD) show that
domestic value added accounts
150%
125%
121%
100%
75%
50%
48%
25%
15%
13%
8%
6%
5%
0%
-4%
-6%
-10%
-12%
-25%
Sources: http://unstats.un.org/unsd/snaama/selbasicFast.asp.
Data from the Organisation for Economic Co-operation and Development (OECD), a group of 34
nations, most with relatively high per-capita incomes, show that domestic value added accounts
for a comparatively high proportion of the value of U.S.
manufactured exports. For example, nearly 80% of the value of U.S. exports of transport
manufactured exports. In other words,
U.S. manufacturers use a low proportion of imported inputs and a high proportion of domestically
produced inputs, compared to manufacturers in other countries. For example, nearly 80% of the
value of U.S. exports of transport equipment in 2009 was added in the United States; while such exports from Japan and Brazil had
higher proportions of domestic value added, most , while most
other countries’ exports of such equipment contained far less
domestic value added (see Figure
5). With respect to exports of electrical and optical equipment,
the share of value added
domestically is far greater for the United States (89%) than for Japan
(82%), Germany (75%),
China (58%), or Korea (53%), according to the OECD.5
5
Calculated from OECD-WTO Trade in Value Added database, Value Added embodied in Gross Exports by Source,
http://stats.oecd.org/Index.aspx?DataSetCode=TIVA_OECD_WTO# (accessed February 8, 20136, 2014).
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U.S. Manufacturing in International Perspective
Figure 5. Domestic Value in Exports of
Transport Equipment
Figure 6. Domestic Value in Exports of
Electrical and Optical Equipment
2009
2009
90%
90%
85%
85%
80%
80%
75%
75%
70%
70%
65%
65%
60%
60%
55%
55%
50%
50%
Source: OECD-WTO Trade in Value Added, Value
Added in Gross Exports by Source.
Source: OECD-WTO Trade in Value Added, Value
Added in Gross Exports by Source.
The United States has also performed well in manufacturing, compared to other high-income
economies, when viewed over a longer time period. From 1990 through 20102012, the only highincome countries with faster growth in manufacturing value added were Finlanda handful of smaller
economies including Finland, Israel, and Sweden.
Additionally, data on inflows of foreign investment suggest that the United States has been an
attractive manufacturing location relative to other high-income countries in recent years.6 Over the
2007-2009
the 2007-2012 period, 34.640% of foreign direct investment coming into the United States went into the
manufacturing sector, compared to 21.1% in Italy, 18% in the United Kingdom, 11.4% in France
and Japan, and less than 10% in Germany and Korea.6
the manufacturing sector, a far higher percentage than in any other large, wealthy economy.7
Comparative data are not available
regarding the extent to which foreign direct investment finances that foreign investment financed
construction of new
manufacturing facilities as opposed to acquisition of existing facilities.
Data on capital investment in manufacturing are compiled by the Organisation for Economic Cooperation and Development (OECD), a group of 34 nations, most with relatively high per-capita
incomes. Investment data are available permitting international comparisons of capital investment in manufacturing are available
for only a few countries. These indicate that gross
investment in fixed manufacturing capital, such
as factories and equipment, accounts for a lower
share of GDP in the United States than in the other wealthy countries for which data are available
(see Figure 7). Gross fixed capital formation across the entire economy is lower relative to GDP
in the United States than in most of these countries,7comparatively low share of GDP in the United States
(see Figure 7). Gross fixed capital formation in general is comparatively low in the United
States,8 but the United States also devotes a smaller
share of gross proportion of fixed capital formation to manufacturing than theinvestment to the
manufacturing sector than other countries, with the
exception of France.8
6
9
6
For analysis of the role of international differences in corporate taxation in location decisions, see CRS Report
R42927, An Analysis of Where American Companies Report Profits: Indications of Profit Shifting, by Mark P.
Keightley, and CRS Report R41743, International Corporate Tax Rate Comparisons and Policy Implications, by Jane
G. Gravelle.
7
OECD International Direct Investment Statistics, “Foreign direct investment: flows by industry,” http://doi:10.1787/
data-00334-en.
7www.oecdilibrary.org/finance-and-investment/data/oecd-international-direct-investment-statistics_idi-data-en.
8
http://stats.oecd.org, “National Accounts at a Glance: 6. Capital,” indicator K1S: Consumption of fixed capital,
percentage of GDP.
89
Some 9.110% of U.S. fixed-capital formation in 2009 occurred in the manufacturing sector, compared to 8.7% in
France.
The highest proportion among the countries for which data are available was 25.54% in Korea. See OECD,
National
Accounts Statistics, “Detailed National Accounts: Capital formation by activity,” OECD National Accounts Statistics (database), http://doi:
10.1787/data-00009-en (accessed February 6, 2013http://www.oecd-ilibrary.org/
economics/data/detailed-national-accounts/capital-formation-by-activity_data-00008-en?isPartOf=/content/
datacollection/na-dna-data-en (accessed February 6, 2014).
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U.S. Manufacturing in International Perspective
Figure 7. Investment in Manufacturing Fixed Capital as Share of GDP, 2009
8%
7.4%
7%
6%
5%
3.7%
4%
3%
2.1%
2%
1.4%
2.1%
1.7%
2%
1.4%
1%
0%
Belgium
Finland
2.1%
Belgium
Finland
2.4%
1.7%
1%
0%
United
States
France
Germany
Italy
Korea
United
States
Source: OECD, National AccountAccounts Statistics, “Detailed National Accounts: Capital
formation by activity” and “Gross Domestic Product.”
Interpreting the comparativethese data on investment in manufacturing is problematic. A high ratio of
gross fixed
capital formation to output is not necessarily positive from an economic point of
view; if such
investment is generating a low return, then high capital investment could indicate
inefficient use
of capital. The relatively low level of gross investment in the United States might
therefore therefore
indicate that U.S. manufacturers pay greater attention to return on capital than their
counterparts counterparts
in other countries. Another explanation might be that U.S. manufacturers face
comparatively few
obstacles to contracting fabrication or assembly work to manufacturers
abroad, whereas other
nations may have policies in place to promote domestic fabrication and
assembly or to discourage
foreign sourcing. Also, it is important to note that the definition of
gross fixed capital used by the
OECD appears to exclude software, which may represent a greater
share of investment by U.S. manufacturers than by those in other countries.9
The Role of Services in Manufacturing
Measuring manufacturing activity is not without problems, largely because of the imperfect line
between manufacturing and services. U.S. statistical agencies, for example, consider activities
occurring at establishments whose principal business is manufacturing to be manufacturing,
regardless of the specific tasks involved. Similarly, activities occurring at establishments whose
principal business is services are considered service activities.
9
manufacturers than by those in other countries.10
10
OECD uses the definition established by the United Nations Statistics Division, which reads: “Gross fixed capital
formation is measured by the total value of a producer’s acquisitions, less disposals, of fixed assets during the
accounting period plus certain additions to the value of non-produced assets (such as subsoil assets or major
improvements in the quantity, quality or productivity of land) realised by the productive activity of institutional units.”
http://unstats.un.org/unsd/snaama/glossresults.asp?gID=34.
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U.S. Manufacturing in International Perspective
The 8
U.S. Manufacturing in International Perspective
The Role of Services in Manufacturing
Measuring manufacturing activity is not without problems, largely because of the imperfect line
between manufacturing and services. U.S. statistical agencies, for example, consider work
performed at establishments whose principal business is manufacturing to be manufacturing,
regardless of the specific tasks involved. Similarly, all activities occurring at establishments
whose principal business is services are considered service activities.
The following three examples will illustrate the statistical confusion that can result. If a
manufacturing facility designs and then fabricates a product, the design activities generally count
as value added in manufacturing and the workers engaged will be tabulated as manufacturing
employees. If the design is created within the manufacturing firm but at a location where no
physical production occurs, it could conceivably count as either a manufactured product or a
service-sector product. If the manufacturer purchases the design from a specialist design firm, the
value added in the design process will be credited to the service sector, and the workers involved
will be considered service-sector employees. In all three cases, total employment and total value
added are identical; all that differs is the economic sector to which the employment and value
added are attributed.
Efforts to measure the value of manufacturing-related services more accurately are still in their
infancy. Such data as are available indicate that service-sector inputs incorporated into
manufactured products account for a larger share of manufacturing value added in the United
States than in any other major economy (see Figure 8). Further, the service-sector share of the
total value added of manufactured goods increased faster in the United States than in any of the
37 other countries studied between 1995 and 2005.
Figure 8. Service-Sector Inputs into Manufacturing
(Service-sector value added in manufactured goods as percentage of
total value added of manufactured goods, 2005)
35%
30%
30%
29%
28%
25%
24% 24%
23% 23%
21%
19%
20%
18%
17%
16% 16% 16%
15%
13%
10%
5%
an
Ko
re
a
In
do
ne
si
a
Ta
iw
C
hi
na
zi
l
Sp
ai
n
M
ex
ic
o
C
an
ad
a
Br
a
Ita
ly
Ki
ng
do
m
an
y
U
ni
te
d
In
di
a
er
m
G
U
ni
te
d
St
a
te
s
Fr
an
ce
Ja
pa
n
0%
Source: Organisation for Economic Co-operation and Development (OECD), STAN
Input-Output Database, May 2011, http://dx.doi.org/10.1787/888932487628.
The figures illustrated in Figure 8 show only the importance of services purchased by
manufacturers from outside firms. One possible interpretation of these data is that U.S.
manufacturers are less vertically integrated than those in other countries, such that they more
frequently contract with outside providers for services rather than producing them in-house.
However, data on the occupations of manufacturing workers argue against this interpretation. In
2008, more than half of all Americans employed within the manufacturing sector worked in
service occupations, such as management, technical support, and sales (see Figure 9). This is a
far greater proportion than in other OECD economies. The relatively high service-intensity of
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U.S. Manufacturing in International Perspective
U.S. manufacturing is thus evident within manufacturing firms as well as in their purchases of
inputs from outside firms.
Figure 9. Services-Related Occupations in Manufacturing Industries
(Percentage of all employees in manufacturing, 2008)
60%
53%
50%
50%
45%
44%
40%
40%
36%
32%
30%
30%
28%
20%
10%
0%
United
States
United
Kingdom
France Germany Sweden
Italy
Japan
Spain
Canada
Source: OECD Science, Technology and Industry Scorecard, 2011.
Notes: Swedish data are for 2007. Services-related occupations include (1) legislators,
senior officials, and managers; (2) professionals; (3) technicians and associate
professionals; (4) clerks; and (5) service workers and shop and market sales workers as
defined in the International Standard Classification of Occupations, 1988.
In combination, the data in Figure 8 and Figure 9 could suggest that U.S. manufacturers may be
relatively advanced, in comparison to those in other countries, when it comes to automating
routine production work, and therefore employ a smaller proportion of their workers in
production operations. A related interpretation of these data would be that U.S. manufacturers’
output contains a higher proportion of non-physical value, such as intellectual property, than the
output of other countries, possibly implying that U.S. manufacturers produce more advanced
products. Another possibility is that U.S. manufacturers make greater use of certain services, such
as legal, tax, and accounting services, than manufacturers in other countries.10
10
OECD data do not allow firm conclusions about the relative importance of services embodied in manufactured
goods. Available data indicate that services account for a larger share of domestic value added in U.S. exports of
machinery equipment than is the case for other major exporters (save Italy), but a comparatively small share of
domestic value added in U.S. exports of chemicals. However, these data track only services value purchased by
exporters of manufactured goods from service-sector firms. Hence, the differences revealed in the data may simply
reflect differing degrees of vertical integration among exporters in various countries. Data on this point can be
calculated from two OECD datasets, Trade in Value Added and Service Industry Value Added embodied in Gross
Exports by Source, both available at http://stats.oecd.org/Index.aspx?DataSetCode=TIVA_OECD_WTO#.
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U.S. Manufacturing in International Perspective
Manufacturing Work
International comparisons of manufacturing employment trends are hampered by inadequate data,
particularly for emerging economies. Among the top-ranking manufacturing countries, China,
Brazil, and India do not report complete information on manufacturing employment at the
national level. Mexico has a nationwide statistical sampling program, but due to definitional and
methodological changes a consistent time series is available only since 2009.11
Manufacturing employment in the United States, as measured by surveys of workers (rather than
surveys of establishments), fell by 22% from 2001 through 2011. Among the major
manufacturing countries for which data are available, Canada, France, and Japan saw similar
declines in manufacturing employment over that period, and the decline in the United Kingdom
was substantially larger (see Figure 10). Over the 21-year period since 1990, manufacturing
employment fell by approximately the same percentage in the United States as in France and
Japan, and much less than in the United Kingdom (see Figure 11). These figures indicate that the
diminished importance of manufacturing as a source of jobs is not limited to the United States.12
Figure 10. Manufacturing Employment
Figure 11. Manufacturing Employment
Percentage change, 2001-2011
Percentage change, 1990-2011
0%
0%
-5%
-10%
-10%
-20%
-15%
-30%
-20%
-40%
-25%
-50%
-60%
-30%
Canada
France
Germany
Italy
Japan
Korea
United
Kingdom
United
States
Source: Bureau of Labor Statistics, “International
Comparisons of Annual Labor Force Statistics,” June
7, 2012, http://www.bls.gov/ilc/flscomparelf.htm,
Table 2-4.
Canada
France
Germany
Italy
Japan
Korea
United
Kingdom
United
States
Source: Bureau of Labor Statistics, “International
Comparisons of Annual Labor Force Statistics,” June
7, 2012, http://www.bls.gov/ilc/flscomparelf.htm,
Table 2-4.
11
On manufacturing employment in China, see Judith Banister and George Cook, “China’s employment and
compensation costs in manufacturing through 2008,” Monthly Labor Review, March 2011, p. 39, http://www.bls.gov/
opub/mlr/2011/03/art4full.pdf. On manufacturing employment in India, see Jessica R. Sincavage, Carl Haub, and O.P.
Sharma, “Labor costs in India’s organized manufacturing sector,” Monthly Labor Review, May 2010, p. 3,
http://www.bls.gov/opub/mlr/2010/05/art1full.pdf. Recent Mexican data from the Instituto Nacional de Estadística y
Geografía are available at http://dgcnesyp.inegi.org.mx/cgi-win/bdiecoy.exe/445?s=est&c=25534.
12
These data are compiled by the U.S. Bureau of Labor Statistics (BLS) and adjusted for consistency. For most
countries, the manufacturing sector is as defined by the International Standard Industrial Classification system, but data
for Canada and the United States are in accordance with the North American Industry Classification System. The data
for France include some mining activity. For details, see the BLS detailed technical notes available at
http://www.bls.gov/fls/intl_prod_tn.pdf.
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U.S. Manufacturing in International Perspective
The international comparison of manufacturing employment is somewhat different if viewed in
terms of hours worked rather than by the number of workers. By this metric, France, Japan, and
Germany all experienced similar declines in manufacturing activity since 1990 to that of the
United States, and the decline in the United Kingdom was larger. The timing differed among
countries, with manufacturing work hours falling faster in other countries during the 1990s and
the United States experiencing a comparatively steep drop from 2001 to 2011.13
Whether the measure is the number of workers employed in the sector or the number of work
hours, the United States is not unique in experiencing a decline in the need for labor in the
manufacturing sector. Even in Korea and Taiwan, where manufacturing output has expanded far
more rapidly than in the United States, factories require fewer total hours of labor than was
formerly the case.
The reduced demand for labor is directly related to improved labor productivity in manufacturing.
Manufacturing labor productivity increased much more rapidly in the United States between 2000
and 2010 than in Canada, European countries, or Japan, as measured by real output per hour of
manufacturing labor (see Figure 12). Taiwan and Korea both had greater improvement in
manufacturing labor productivity than the United States.
Figure 12. Real Output per Labor Hour in Manufacturing
Percentage change, 2001-2011
110%
103%
99%
90%
72%
70%
50%
44%
44%
30%
30%
21%
13%
10%
7%
Canada
France Germany
-10%
Italy
Japan
Korea
Taiwan
United
Kingdom
United
States
Source: Bureau of Labor Statistics, “International Comparisons of Manufacturing
Productivity and Unit Labor Cost Trends, 2011 Data Tables,” December 6, 2012, Table
1.
13
U.S. Bureau of Labor Statistics, “International Comparisons of Manufacturing Productivity and Unit Labor Cost
Trends: Underlying Data Tables,” December 6, 2012, Table 4.
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The strong improvement in U.S. labor productivity in manufacturing has several causes. One is
manufacturers’ large investments in automation, which have eliminated many routine assembly
jobs; less than 40% of the workers in U.S. manufacturing establishments are now directly
engaged in production. A related factor is the rapid increase in education levels among U.S.
manufacturing workers, some 28% of whom possess college degrees.14 A third cause of
improvement in average manufacturing productivity is the rapid growth of certain sectors in
which labor productivity is extremely high. These include instrument manufacturing, in which
output grew 65% from 2002 to 2012, and aerospace manufacturing, which expanded output 40%
over the same period, during which total U.S. manufacturing output rose 10%.15
Moreover, determining the location at which value is added to a service that is used in a
manufactured product can be all but impossible. Manufacturers frequently procure components
from many suppliers in lengthy international supply chains, and each of those suppliers is likely
to purchase service inputs to at least a limited extent. The service providers themselves may be
international firms, and their involvement in a given production process may involve workers on
several continents.
Efforts to measure the value of manufacturing-related services more accurately are still in their
infancy. According to 2009 data, U.S. exports of manufactured products include a lesser
proportion of services content than exports of most other advanced economies (see Figure 8).
However, U.S. manufacturers made very little use of imported services content in exports
compared to exporters in other countries. For example, 12.2% of the value of Chinese
manufactured exports and 13.4% of the value of Korean manufactured exports in 2009 comprised
imported services, compared with 4.4% of the value of U.S. manufactured exports.
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U.S. Manufacturing in International Perspective
Figure 8. Service-Sector Inputs into Manufacturing Exports
Service-sector value added as percentage of total value added in of manufactured exports, 2009
45%
40%
38%
37%
37%
35%
36%
31%
30%
31%
30%
30%
29%
28%
26%
25%
25%
20%
25%
18%
15%
10%
5%
0%
Source: Organisation for Economic Co-operation and Development (OECD), STAN
Input-Output Database, May 2011, http://dx.doi.org/10.1787/888932487628.
The figures illustrated in Figure 8 show only the importance of services purchased by
manufacturers from outside firms. One possible interpretation of these data is that U.S.
manufacturers are more vertically integrated than those in other countries. A partial explanation is
that a comparatively efficient transportation system requires U.S. exporters to spend less on
purchasing transportation than their competitors in other countries: the cost of transportation and
communications services came to only 3.5% of the value of U.S. manufactured exports in 2009,
compared with 5.4% in Germany and 6.9% in Japan.11
Manufacturing Work
International comparisons of manufacturing employment trends are hampered by inadequate data,
particularly for emerging economies. Among the top-ranking manufacturing countries, China,
Brazil, and India do not report complete information on manufacturing employment at the
11
OECD, services content of manufactured exports by type of service, 2009, http://www.oecd-ilibrary.org/sites/
sti_scoreboard-2013-en/07/02/index.html?contentType=&itemId=/content/chapter/sti_scoreboard-2013-61-en&
containerItemId=/content/serial/20725345&accessItemIds=/content/book/sti_scoreboard-2013-en&mimeType=text/
html (accessed February 7, 2014).
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U.S. Manufacturing in International Perspective
national level. Mexico has a nationwide statistical sampling program, but due to definitional and
methodological changes a consistent time series is available only since 2005.
All of the advanced economies for which data are available have experienced long-term declines
in manufacturing employment. Manufacturing employment in the United States, as measured by
surveys of workers (rather than surveys of establishments), fell by 15% from 2002 through 2012.
Canada, France, and the United Kingdom saw much greater declines over that period, while the
employment declines in Italy and Japan were similar to that in the United States (see Figure 9).
Over the 22-year period since 1990, manufacturing employment fell by a much lower percentage
in the United States than in in France, Japan, and the United Kingdom (see Figure 10). These
figures indicate that the diminished importance of manufacturing as a source of jobs is not limited
to the United States.12
Figure 9. Manufacturing Employment
Figure 10. Manufacturing Employment
Percentage change, 2002-2012
Percentage change, 1990-2012
0%
0%
-5%
-10%
-10%
-20%
-15%
-30%
-20%
-40%
-25%
-50%
-30%
Canada
France
Germany
Italy
Japan
Korea
United
Kingdom
United
States
Source: Bureau of Labor Statistics, “International
Labor Comparisons,” June 7, 2013,
http://www.bls.gov/ilc/dashboards.htm, Table 2-4.
-60%
Canada
France
Germany
Italy
Japan
Korea
United
Kingdom
United
States
Source: Bureau of Labor Statistics, “International
Labor Comparisons,” June 7, 2013,
http://www.bls.gov/ilc/dashboards.htm, Table 2-4.
The international comparison of manufacturing employment is somewhat different if viewed in
terms of hours worked rather than by the number of workers. By this metric, Germany
experienced a similar decline in manufacturing work to that of the United States since 1990,
while the declines in France, Japan, and the United Kingdom were larger. The timing differed
among countries, with manufacturing work hours falling faster in other countries during the
1990s and the United States experiencing a comparatively steep drop from 2002 to 2012.13
The United States is not unique in experiencing a decline in the need for labor in the
manufacturing sector. Even in Korea and Taiwan, where manufacturing output has expanded far
more rapidly than in the United States, factories require fewer total hours of labor than was
formerly the case. The reduced demand for labor is directly related to improved labor
productivity. Manufacturing labor productivity increased much more rapidly in the United States
between 2002 and 2012 than in Canada, European countries, or Japan (see Figure 11). Taiwan
12
These data were compiled by the U.S. Bureau of Labor Statistics (BLS) and adjusted for consistency.
The Conference Board, International Labor Comparisons program, December 2013, Table 4, http://www.conferenceboard.org/ilcprogram/.
13
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U.S. Manufacturing in International Perspective
and Korea both had greater improvement in manufacturing labor productivity than the United
States, probably due to declining employment in labor-intensive industries, such as apparel.
Figure 11. Real Output per Labor Hour in Manufacturing
Percentage change, 2002-2012
100%
91%
90%
82%
80%
70%
60%
53%
50%
40%
36%
33%
30%
30%
25%
20%
11%
8%
10%
0%
Canada
France
Germany
Italy
Japan
Korea
Taiwan
United
Kingdom
United
States
Source: The Conference Board, International Labor Comparisons program, “International Comparisons of
Manufacturing Productivity and Unit Labor Cost Trends, 2012,” Table 1, http://www.conference-board.org/
ilcprogram/.
The strong improvement in U.S. labor productivity in manufacturing has several causes. One is
manufacturers’ large investments in automation, which have eliminated many routine assembly
jobs; fewer than 39% of the workers in U.S. manufacturing establishments are now directly
engaged in production. A related factor is the rapid increase in education levels among U.S.
manufacturing workers, some 29% of whom possess college degrees.14 A third cause of
improvement in average manufacturing productivity is the rapid growth of certain sectors in
which labor productivity is extremely high. These include instrument manufacturing, in which
output grew 56% from 2002 to 2012, and aerospace manufacturing, which expanded output 39%
over the same period, during which total U.S. manufacturing output rose 9%.15
14
On occupations and education within the manufacturing sector, see CRS Report R41898, Job Creation in the
Manufacturing Revival, by Marc Levinson.
15
Output changes are calculated from annual figures published in the Federal Reserve Board G.17 release, “Industrial
Production and Capacity Utilization.”
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U.S. Manufacturing in International Perspective
In part, however, the measured improvement in labor productivity in manufacturing also reflects
the rapid shrinkage of low-productivity manufacturing activities since 2000. During this period,
many manufacturers moved routine assembly work abroad, either to their own factories or to
those of contract suppliers. For example, the reduction of U.S. import barriers encouraged apparel
imports and led to a reduction of domestic capacity in the low-productivity apparel industry. As
U.S. plants with below-average productivity closed, average productivity of the remaining
manufacturing plants necessarily increased even in the absence of productivity improvements.16
Similarly, the very rapid increases in manufacturing labor productivity in Korea and Taiwan
likely reflect the closure of low-productivity manufacturing as well as the expansion of capitalintensive manufacturing. For example, Korea’s exports of apparel, the product of a comparatively
low-productivity industry, declined from $4.3 billion in 2001 to $1.8 billion in 2011, and
Taiwan’s fell from $2.5 billion to $1 billion over the same period.17 As the jobs involved in
producing such goods were eliminated, the average productivity of those countries’
manufacturing workers would have risen even without growth in high-productivity sectors.
At the other extreme, Italy, which saw only an 8% drop in manufacturing employment over the
decade, experienced
At the other extreme, Italy, which has seen a comparatively small drop in manufacturing
employment, experienced by far the smallest increase in output per hour worked of any of the wealthy
wealthy countries for which data are available, along with a steep decline in manufacturing value
added.
In combination, these figures suggest that restructuring low-productivity operations has
been a
challenge for Italian manufacturers. Italy’s export data provide some evidence of this: exports of
apparel rose steeply between 2001 and 2011.18
14
On occupations and education within the manufacturing sector, see CRS Report R41898, Job Creation in the
Manufacturing Revival, by Marc Levinson.
15
Output changes are calculated from annual figures published in the Federal Reserve Board G.17 release, “Industrial
Production and Capacity Utilization.”
16
challenge for Italian manufacturers.
Average compensation per employee in U.S. manufacturing was $35.67 per hour in 2012, a 43%
increase since 2000.17 U.S. hourly manufacturing labor costs were lower than those in 13 of 34
countries studied by the Bureau of Labor Statistics (BLS). Due in part to exchange-rate changes,
average compensation per hour expressed in U.S. dollar terms has been rising more slowly in the
United States than in most other major manufacturing countries, with the notable exception of
Japan (see Table 1).
16
In general, the manufacturing industries with the lowest productivity growth are those in which it has proven most
difficult to automate production processes to increase output per worker hour. The apparel and footwear industries are
notable in this respect. From 1973 to 2001, productivity grew at an annual rate of 0.9% for all U.S. manufacturing, but
at only 0.7% for apparel and 0.3% for leather and leather products. For detailed data, see Bureau of Labor Statistics,
“Multifactor Productivity in U.S. Manufacturing and in 20 Manufacturing Industries, 1949-2001,” February 10, 2004,
http://www.bls.gov/mfp/tables.htm, and “Manufacturing Sector and NIPA-level Manufacturing Industries KLEMS
multifactorMultifactor Productivity Tables by Measure,” August 11, 2011, http://www.bls.gov/mfp/mprdload.htm.
17
Korea and Taiwan data were taken from World Trade Organization statistics database, http://stat.wto.org/
StatisticalProgram/WSDBViewData.aspx?Language=E.
18
In current U.S. dollars, Italian apparel exports rose from $14.2 billion in 2001 to $25.3 billion in 2010, a 77%
increase. See http://stat.wto.org/StatisticalProgram/WSDBViewData.aspx?Language=E. Over the same period, the euro
appreciated approximately 56% against the dollar, implying a real increase in apparel exports of 21%“Compensation” includes pay for time worked, employee benefits, and labor-related taxes net of subsidies.
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U.S. Manufacturing in International Perspective
Average compensation per employee in U.S. manufacturing was $35.53 per hour in 2011, a 41%
increase since 2001.19 U.S. hourly manufacturing labor costs were lower than those in 15 of 33
countries studied by the Bureau of Labor Statistics (BLS). Due in good part to exchange-rate
changes, average compensation per hour expressed in U.S. dollar terms has been rising more
slowly in the United States than in most other major manufacturing countries (see Table 1).
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U.S. Manufacturing in International Perspective
Table 1. Hourly Compensation Costs in Manufacturing
(U.S. dollar basis)
Direct Pay, 2011
Brazil
Total Compensation
Costs, 2011
Average Annual
Percentage Change,
1997-2011
$7.93
$11.65
3.6%
Canada
$29.07
$36.56
5.0%
France
$29.50
$42.12
3.8%
Germany
$37.14
$47.38
3.5%
Italy
$25.70
$36.17
4.4%
Japan
$20.23
$35.71
3.5%
Korea
$15.21
$18.91
5.3%
Mexico
$4.53
$6.48
4.6%
Taiwan
$8.00
$9.34
2.0%
United Kingdom
$26.03
$30.77
3.4%
United States
$23.70
$35.53
3.1%U.S. dollar basis
Total Compensation
Costs, 2012
Increase in Average
Hourly Compensation
Costs, 2000-2012
$7.53
$11.20
158%
Canada
$29.30
$36.59
100%
France
$27.89
$39.81
86%
Germany
$36.07
$45.79
80%
Italy
$24.29
$34.18
105%
Japan
$28.94
$35.34
41%
Korea
$16.27
$20.72
115%
Mexico
$4.45
$6.48
36%
Taiwan
$8.08
$9.46
30%
United Kingdom
$26.37
$31.23
51%
United States
$27.15
$35.67
43%
Direct Pay, 2012
Brazil
Source: Bureau of Labor Statistics, “International Comparisons of Hourly Compensation Costs in
Manufacturing, 2011,” December 19, 20121996-2012: Time Series Tables,” August 9, 2013, http://www.bls.gov/news.release/ichcc.nr0.htm, Tables 2 and 3ilc/ichcc.htm#chart01.
Notes: “Direct Pay” includes vacation pay, bonus payments, and employer contributions to employees’ savings
funds. “Total Compensation Costs” additionally includes pensions, disability insurance, sick leave, health
insurance, severance pay, other social insurance expenditures, and taxes on payrolls or employment. “Average
Annual Percentage Change” is calculated in terms of U.S. dollars andIncrease in
Average Hourly Compensation Costs” incorporates the effects of exchange-rate
changes.
Accurate nationwide data on manufacturing compensation costs in China and India are not
available. BLS estimates that average manufacturing compensation in China to have beenwas $1.36 per
hour in 2008,20 but it warns that this estimate is not as robust as those for other countries.21 Based
on data from the Chinese National Bureau of Statistics, the Wall Street Journal estimated that
average annual wages (as distinct from total compensation) at private manufacturers in China
approached $4,000 at the end of 2011, implying an hourly rate of $1.60 for a 50-hour
workweek.2274 per hour
in 2009, having risen 110%, in U.S. dollars, between 2005 and 2009. With respect to India, BLS
estimates average hourly compensation in formal manufacturing
establishments to have been $1.17 in 2007, but cautions that this figure overstates average
19
“Compensation” includes pay for time worked, employee benefits, and labor-related taxes net of subsidies.
See Banister and Cook, “China’s employment and compensation costs in manufacturing through 2008.”
21
BLS News Release, “International Comparisons of Hourly Compensation Costs in Manufacturing, 2011,” December
19, 2012, http://www.bls.gov/news.release/ichcc.nr0.htm.
22
Tom Orlik and Bob Davis, “Wage Rises in China May Ease Slowdown,” Wall Street Journal, July 15, 2012,
http://online.wsj.com/article/SB10001424052702303612804577528873250642842.html.
20
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U.S. Manufacturing in International Perspective
$1.46 in 2007, but cautions that this figure overstates average compensation as it pertains to only
about 20% of the country’s manufacturing workers.23 IHS
Global Insight, a research company, estimated total labor costs in India’s formal manufacturing
sector to average $2.68 in 2010, slightly more than its estimate of similar costs in China.24
18 Because data from China and India are not
comparable to those from other countries, they are not
included in Table 1.
The data on average hourly compensation costs can be misleading, as they are not adjusted for
differences in the industrial mix. In most countries, including the United States, labor costs vary
greatly among industries; the average hourly wage of U.S. production workers who make
household furniture is around $15production workers at U.S. sawmills is
around $16 per hour, whereas the average hourly wage for production
workers in aircraft
manufacturing exceeds $3436.
The most recent U.S. data on comparative compensation costs within individual industries show
U.S. costs to be lower than those in major European countries, although well above those in
emerging economies (see Table 2). The more detailed data that would be required to correct for
national differences in the products manufactured by these industries are not available.
18
http://www.bls.gov/ilc/ichcc.htm#chart01.
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Table 2. Hourly Compensation Costs in Selected Manufacturing Industries
(U.S. dollar basis, 2011 )
Wood Products2012
Paper
Textiles
Chemicals
Machinery
Motor Vehicles
$6.34
$7.89
$20.36
$15.19
$19.59
Canada
$33.40
$26.88
$43.47
$40.43
NA
France
$31.01
$32.63
$55.11
$44.56
$44.86
Germany
$32.51
$34.23
$58.83
$51.53
$60.33
Italy
$29.47
$31.79
$44.51
$38.78
$39.01
Korea
$14.75
$12.51
$23.13
NA
$22.79
NA
$7.35
NA
NA
$9.89
United Kingdom
$23.21
$24.65
$36.89
$32.38
$34.87
United States
$24.63
$23.60
$39.43
$37.14
$37.97
Brazil
TaiwanBrazil
$13,82
$7.60
$19.23
$14.58
$18.78
France
$37.46
$30.73
$52.03
$42.19
$45.77
Germany
$41.12
$33.82
$57.59
$49.11
$58.82
Italy
$33.08
$30.13
$42.20
$36.70
$37.26
Korea
$18.08
$13.41
$24.25
$18.24
$25.74
Mexico
$5.34
$3.87
$9.91
$6.59
$7.80
Taiwan
$7.43
$7.29
NA
NA
$9.98
United Kingdom
$31.47
$24.83
$36.38
$33.23
$38.284
United States
$36.99
$24.17
$39.48
$38.15
$45.34
Source: Bureau of Labor Statistics, http://www.bls.gov/fls/ichccindustry.htm#16 (accessed
February 8, 201310, 2014).
Technology and Research in Manufacturing
High-technology manufacturing has been a particular focus of public-policy concern for many
years. There is no standard definition of high-tech manufacturing, but commentators have long
asserted that high-technology production has especially beneficial economic spillovers.2519
Although definitions of “high-tech industry” vary, the OECD considers that manufacturing of
23
Sincavage, et al, “Labor costs in India’s organized manufacturing sector.”
IHS, “IHS Global Insight Study Finds India’s Manufacturing Labour Costs Top China in 2010,” November 1, 2010.
25
See, for example, Stephen S. Cohen and John Zysman, Manufacturing Matters: The Myth of the Post-Industrial
Economy (New York, 1987), p. 106, and Lester Thurow, Head to Head: The Coming Economic Battle Among Japan,
Europe, and America (New York, 1992), pp. 45-51.
24
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U.S. Manufacturing in International Perspective
pharmaceuticals; office, accounting, and computing machinery; radio, television, and
communications equipment; medical, precision, and optical instruments; and aircraft and
spacecraft is particularly technology-intensive, based on those industries’ research and
development (R&D) expenditures and on the amount of R&D embodied in their products.2620 It is
important to note in this context that some industries that may have a considerable technological
component, such as automobile and machinery manufacturing, are not considered hightechnology industries by the OECD.
The United States derives a greater share of manufacturing value added from high-tech industries
than is the case in most other OECD member countries (see Figure 13). Moreover, the share of
value added
represented by high-technology sectors has been rising in the United States, whereas
it has been stable or declining in many other countries.
Figure 13. Importance of High-Tech Industries
(Share of country’s manufacturing value added)
25%
23%
21%
19%
17%
15%
13%
11%
9%
7%
5%
2000
2001
France
Korea
2002
2003
2004
Germany
United Kingdom
2005
2006
Italy
United States
2007
2008
2009
Japan
Source: OECD STAN database, http://stats.oecd.org/Index.aspx?DatasetCodeSTAN08BIS&lang=en.
Manufacturers in the United States spend far more on research than those in any other major
industrial country. Adjusting for differences in purchasing power, spending on manufacturing
research and development was nearly twice as high in the United States as in Japan in 2007, and
almost four times the level of Germany (see Figure 14).27
26
These sectors correspond to United Nations International Standard Industrial Classifications 2423, 30, 32, 33, and
353. For details, see OECD, “ISIC Rev. 3 Technology Intensity Definition,” July 7, 2011, p. 1, http://www.oecd.org/
dataoecd/43/41/48350231.pdf.
27
These figures include expenditures by manufacturers, whatever the original source of the funds. For technical
background, see OECD, “The OECD Analytical BERD (ANBERD) Database,” August 5, 2011, http://www.oecd.org/
dataoecd/52/23/47840198.pdf.
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U.S. Manufacturing in International Perspective
Although far less manufacturing R&D occurs in countries that have industrialized more recently,
R&D spending in those countries has been growing at a very rapid rate (see Figure 15).
Figure 14. R&D in Manufacturing, 2008
Figure 15. Growth in Manufacturing R&D
(Billions of U.S. dollars at purchasing
power parity)
(Change in real local currency,
2000-2008)
400%
$200
$180
350%
$160
300%
$140
250%
$120
200%
$100
$80
150%
$60
100%
$40
50%
$20
St
at
es
Ki
ng
do
m
ni
te
d
U
Un
ite
d
o*
Ta
iw
an
M
ex
ic
Ko
re
a
Ita
ly
Ja
pa
n
e*
an
y
Fr
an
c
G
er
m
-50%
Ch
in
a
St
at
es
Ki
ng
do
m
ni
te
d
U
Un
ite
d
*
ic
o
Ta
iw
an
M
ex
Ko
re
a
Ita
ly
Ja
pa
n
Ch
in
a
Fr
an
ce
*
G
er
m
an
y
Ca
na
da
Ca
na
da
0%
$0
stable or declining in many other countries.21
19
For a recent statement of this view, see Gregory Tassey, “Competing in Advanced Manufacturing: The Need for
Improved Growth Models and Policies,” Journal of Economic Perspectives, vol. 28 (2014), p. 29. Similar arguments
were made in earlier decades in Stephen S. Cohen and John Zysman, Manufacturing Matters: The Myth of the PostIndustrial Economy (New York, 1987), p. 106, and Lester Thurow, Head to Head: The Coming Economic Battle
Among Japan, Europe, and America (New York, 1992), pp. 45-51.
20
These sectors correspond to United Nations International Standard Industrial Classifications 2423, 30, 32, 33, and
353. For details, see OECD, “ISIC Rev. 3 Technology Intensity Definition,” July 7, 2011, p. 1, http://www.oecd.org/
dataoecd/43/41/48350231.pdf.
21
Based on CRS analysis of OECD Structural Analysis Database.
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U.S. Manufacturing in International Perspective
Manufacturers in the United States spend far more on research than those in any other major
industrial country. Adjusting for differences in purchasing power, spending on manufacturing
research and development was nearly twice as high in the United States as in Japan in 2010, and
more than three times the level of Germany (see Figure 12).22
Although far less manufacturing R&D occurs in countries that have industrialized more recently,
R&D spending by manufacturers in those countries has been growing at a very rapid rate (see
Figure 13). In particular, manufacturers in China, Korea, and Taiwan have increased R&D
spending very rapidly since 2000.
Figure 12. R&D in Manufacturing, 2011
Figure 13. Growth in Manufacturing R&D
Billions of U.S. dollars at purchasing
power parity
Change in real local currency,
2000-2011
$200
$160
700%
600%
500%
$120
$80
400%
300%
200%
$40
100%
$0
0%
-100%
Source: OECD STAN database, “STAN R&D
expenditures in Industry," http://stats.oecd.org/
index.aspx.
Source: OECD STAN database, "STAN R&D
expenditures in Industry," http://stats.oecd.org/
index.aspx.
Note: * MexicoUnited States data are for 20072010.
Note: * MexicoUnited States data are for 2000-20072010.
Manufacturers have been responsible for approximately 70% of all R&D conducted by businesses
in the United States in recent years. This is similar to the proportion in Italy, but far lower than in
Germany, Japan, and Korea, where manufacturers account for close to 90% of all businessfinanced R&D. Conversely, the service sector is relatively more important in undertaking
research and development in the United States than in many other countries. The most notable
exception is the United Kingdom, where service companies account for three-fifths of all business
R&D spending.2823
The research intensity of U.S. manufacturing has increased significantly since 2003, as shown by
data indicating that R&D accounts for a growing share of manufacturing value added. In 2000,
U.S. manufacturers spent 8increased during the first decade of the twenty-first
century, indicating that U.S. manufacturers are devoting a growing share of their revenue to
R&D. In 2000, U.S. manufacturers spent 2.9% of sales on research and development, a figure that
rose to 3.3% by 2008. The only country in which manufacturers’ R&D spending has been
growing at a faster rate is Korea. U.S. manufacturers devote a greater proportion of their revenue
to R&D than those in any other country save Japan, including some countries renowned for their
relatively large high-technology sectors, such as Finland and Israel (see Figure 16). 29
28
rose into the
11% range starting in 2008. The only country in which manufacturers’ intensity has been growing
22
These figures include expenditures by manufacturers, whatever the original source of the funds. For technical
background, see OECD, “The OECD Analytical BERD (ANBERD) Database,” August 5, 2011, http://www.oecd.org/
dataoecd/52/23/47840198.pdf.
23
OECD, Science, Technology and R&D Statistics, “Business enterprise R-D expenditure by industry,”
http://stats.oecd.org/BrandedView.aspx?oecd_bv_id=strd-data-en&doi=data-00183-en (accessed February 8, 2013).
29
The data discussed in this paragraph measure research and development expenditures by manufacturers as a
percentage of their sales. OECD also compiles statistics on the ratio of R&D spending to value added. However, these
statistics can be problematic for single-year, cross-country comparisons, as a decline in an industry’s profitability can
reduce its value added, increasing the ratio of R&D outlays to value added even if no additional research is undertaken.
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U.S. Manufacturing in International Perspective
Figure 16. Manufacturers’ Research Intensity in Selected Countries
(R&D spending by manufacturers as percentage of sales)
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
2000
2001
Canada
Israel
Mexico
2002
2003
2004
Finland
Italy
United Kingdom
2005
2006
France
Japan
United States
2007
2008
2009
Germany
Korea
Source: OECD, STAN indicators: R&D intensity of manufacturing sectors,
http://www.oecd-ilibrary.org/industry-and-services/data/stan-oecd-structural-analysisstatistics/stan-indicators-2009_data-00031-en10, 2014).
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at a faster rate is Korea. U.S. manufacturers spend more on R&D, relative to value added, than
manufacturers in the other large manufacturing countries, save Japan (see Figure 14).
Figure 14. Manufacturing R&D as Share of Manufacturing Value Added
Local currency basis
14%
12%
10%
8%
6%
4%
2%
0%
2000 2001 2002 2003 2004 2005 2005 2007 2008 2009 2010 2011
United States
China
Korea
Japan
Germany
Source: CRS, from OECD STAN R&D expenditures in industry,
http://stats.oecd.org/Index.aspx?DataSetCode=ANBERD_REV4, and value-added data in United Nations National
Accounts Main Aggregates Database, http://unstats.un.org/unsd/snaama/resQuery.asp.
One possible reason for national differences in R&D intensity in manufacturing is differences in
the composition of the manufacturing sector. Industries such as aircraft, spacecraft, and electronic
instrument manufacturing are among the most research-intensive in every country, and, all other
things equal, countries in which these sectors are relatively large may be expected to have greater
R&D intensity in manufacturing than countries in which they are less important.
Table 3 provides an alternative cross-country comparison of R&D spending by manufacturers by
breaking out R&D intensity by industry for 2006. It illustrates that U.S. manufacturers are more
research-intensive than those in other countries only in selected industries, such as electronic
instruments. In other industries, foreign manufacturers spend comparatively more on R&D than
those in the United States. For example, Japanese manufacturers of office, accounting, and
computing machinery devote a greater share of sales to R&D than those in any other country, and
Italy, whose manufacturers generally are much less R&D-intensive than those in other countries,
appears to have particularly extensive industry research related to aerospace manufacturing.
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U.S. Manufacturing in International Perspective
Table 3. Comparative Research and Development Spending by Industry
(R&D outlays by manufacturers as a percentage of sales, 2006)
Germany
1.4%
2.5%
2.4%
0.6%
3.7%
1.9%
2.4%
3.3%
Pharmaceuticals
11.9%
8.7%
10.4%
1.5%
15.0%
2.5%
24.9%
22.5%
Office, accounting,
computing machinery
10.9%
7.9%
4.1%
1.1%
28.7%
3.9%
0.4%
11.0%
Electrical machinery
1.3%
3.5%
1.3%
0.5%
8.8%
1.4%
3.3%
2.0%
NA
7.1%
6.6%
2.4%
14.4%
2.2%
3.6%
18.0%
Motor vehicles
0.5%
4.7%
4.4%
1.8%
4.3%
2.8%
1.9%
3.4%
Aircraft and spacecraft
6.3%
5.2%
10.4%
12.5%
4.2%
9.0%
10.7%
11.3%
Instruments
Japan
Korea
United
States
France
All manufacturing
Italy
United
Kingdom
Canada
Source: OECD, STAN indicators: R&D intensity of manufacturing sectors, http://www.oecd-ilibrary.org/
industry-and-services/data/stan-oecd-structural-analysis-statistics/stan-indicators-2009_data-00031-en.
Table 4 confirms that manufacturers’ R&D spending is targeted quite differently in different
countries. In the United States, a much larger proportion of manufacturing R&D occurs in the
pharmaceutical sector than is the case elsewhere, with the exception of the United Kingdom. The
. The instruments sector, including medical
equipment and process-control equipment as well as
navigational, testing, and measuring
equipment, is also disproportionately important in the United
States. By contrast, the motor
vehicle sector accounts for a significantly smaller share of
manufacturers’ research and
development activity in the United States than in other countries.
Table 4. Manufacturers’ R&D Spending by Sector
(Percentage of total research and development spending by manufacturers)
Country
Country
Year
Pharma
Telecoms
Instruments
Motor
Vehicles
Other Trans.
Equ.
Year
Pharma
Telecoms
Instruments
Other
France
2007
6.9%
14.8%
9.7%
11.0%
19.6%
38.1%
Germany
2008
8.3%
8.0%
8.0%
36.9%
5.7%
33.1%
Italy
2010
8.1%
10.2%
7.4%
15.1%
15.6%
43.5%
Japan
2010
12.2%
17.5%
5.6%
19.7%
0.9%
44.2%
Korea
2010
2.6%
54.5%
2.8%
13.9%
2.0%
24.3%
United
Kingdom
2009
38.4%
5.6%
4.3%
9.9%
14.4%
27.4%
United States
2006
22.8%
18.1%
13.1%
9.7%
11.7%
24.7%
Source: OECD, Science, Technology and R&D Statistics, “Business enterprise R-D expenditure by industry,”
http://www.oecd-ilibrary.org/content/data/data-00183-en (accessed February 8, 20132010
5.9%
5.1%
9.7%
12.8%
21.8%
44.8%
Germany
2010
9.3%
2.2%
5.9%
36.8%
6.2%
39.5%
Italy
2010
7.4%
4.5%
5.0%
14.2%
15.0%
54.0%
Japan
2010
12.2%
9.3%
1.7%
24.7%
0.5%
51.6%
Korea
2010
2.6%
11.1%
1.7%
13.9%
2.0%
68.6%
United Kingdom
2010
7.7%
1.0%
7.7%
17.7%
19.4%
46.6%
United States
2009
22.9%
17.1%
11.5%
5.8%
18.9%
23.8%
Source: OECD (2013), Research and Development Statistics: Business enterprise R-D expenditure by industryISIC Rev. 4,” OECD Science, Technology and R&D Statistics database (accessed February 11, 2014).
The United States ranks third among OECD member countries, following only Ireland and
Finland, in the proportion of manufacturing R&D that occurs in high-technology sectors. In the
United States, OECD reports, 69% of manufacturers’ total R&D spending in 2007 occurred in
high-technology sectors and 22% in medium-technology sectors. In Germany, by contrast, 60%
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U.S. Manufacturing in International Perspective
of manufacturers’ R&D spending occurred in medium-technology sectors, such as motor vehicle
and machinery manufacturing, and the corresponding figure for Japan was 45%.3024
Author Contact Information
Marc Levinson
Section Research Manager
mlevinson@crs.loc.gov, 7-7240
3024
OECD Science, Technology and Industry Scoreboard 2011, “Business R&D in the manufacturing sector by
technological intensity,” Figure 6.8.2, http://www.oecd-ilibrary.org/sites/sti_scoreboard-2011-en/06/08/index.html?
contentType=/ns/Chapter,/ns/StatisticalPublication&itemId=/content/chapter/sti_scoreboard-2011-62-en&
containerItemId=/content/serial/20725345&accessItemIds=&mimeType=text/html.
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