Manufacturing sector’s economic contributions celebrated while reports caution uneven regional and racial benefits

As Manufacturing Day continues to be recognized throughout the month of October, the Census Bureau issued a press release highlighting the key economic contributions of the manufacturing sector. The release highlighted the increases in the value of shipments and employment in the manufacturing sector from 2017 to 2018, as well as the sector’s nearly 60 percent share of U.S. exports. But a recent report from Policy Matters Ohio and The Century Foundation set a more cautionary note. Analyzing data over a much longer period and focused on four states in the Great Lakes region, the report finds that manufacturing jobs had not yet recovered to pre-Great Recession levels even before the COVID-19 pandemic began, and that the wage advantage of manufacturing has continued to erode compared to other sectors in the region.

The Census Bureau press release focused on the national trends in manufacturing for 2018, the latest year of available data, and found that nationally the value of shipments increased by 9.1 percent to $6 trillion and employment increased by 1.7 percent to a total of 11.7 million jobs. This increase in total employment places the manufacturing sector behind health care and social assistance (20.5 million jobs), retail trade (15.7 million jobs), accommodation & food services (14.4 million jobs), and administrative support and waste management services (12.3 million jobs). The data also shows that the average annual payroll per employee in manufacturing was approximately $60,000, higher than the approximately $54,000 average across all other sectors. Also pointing out that manufacturing accounted for 61 percent ($902.1 billion) of all U.S. export dollars, the Census Bureau highlights several promising national trends in the sector.

However, the Policy Matters Ohio and Century Foundation report strikes a cautionary tone, highlighting the sector’s vulnerabilities in Michigan, Ohio, Pennsylvania, and Wisconsin. The report examines annual employment and payroll data going back to 2000, finding that while increasing over the last decade, the number of manufacturing jobs in the four Great Lakes states and the nation had not yet rebounded to pre-Great Recession levels, even before the pandemic. This slow growth is attributed to the continued offshoring of unskilled labor, with reshoring policies falling short and near-shoring failing to deliver jobs.

While manufacturing employees in the Great Lakes states continue to enjoy wages that are higher than the sector’s national average, that comparative advantage has reportedly dropped for non-supervisory workers with no more than a high school diploma from an hourly wage premium (calculated as the difference between the median hourly wages for those holding no more than a high school diploma in manufacturing and those with no more than a high school diploma in all other sectors) of $3.72 in 2000 to $2.73 in 2019. Research by the Urban Manufacturing Alliance also shows that Black workers — facing greater barriers in accessing education, skills and job training, and other resources — are at greater risk of losing these wage advantages than white workers and may struggle more to stay competitive for the manufacturing jobs of the future that increasingly demand greater technical skills and education. If the manufacturing sector fails to adopt effective, system-wide diversity, equity and inclusion efforts, it will fail to stay competitive in the highly-skilled labor market of the future, the report cautions. Read more about these efforts here.

Past SSTI analyses that focused on the county-level industry contribution to and 10-year changes in GDP point to the importance of manufacturing in a multitude of local economies. While the Census Bureau’s press release shows strengths that exist in the U.S. manufacturing sector, the Policy Matters Ohio and Century Foundation report emphasizes the importance of evaluating the regional and local variations in the sector if it is to become more inclusive and adapt to the workforce pressures.