• Save the date for SSTI's 2024 Annual Conference

    Join us December 10-12 in Arizona to connect with and learn from your peers working around the country to strengthen their regional innovation economies. Visit ssticonference.org for more information and sign up to receive updates.

  • Become an SSTI Member

    As the most comprehensive resource available for those involved in technology-based economic development, SSTI offers the services that are needed to help build tech-based economies.  Learn more about membership...

  • Subscribe to the SSTI Weekly Digest

    Each week, the SSTI Weekly Digest delivers the latest breaking news and expert analysis of critical issues affecting the tech-based economic development community. Subscribe today!

US manufacturing sector poised for revitalization but without the jobs, McKinsey says

July 06, 2017

In Making it in America, McKinsey Global Institute researchers contend that for the U.S. to see a revitalization of its manufacturing sector (as measured by global market share), the public and private sectors should treat it as a national priority. However, they warn that the revitalization will not produce a return to 1960s-style manufacturing employment. In the 1960s, the manufacturing sector employed approximately 30 percent of all American workers – it is down to approximately 9 percent today (a 70 percent reduction). The authors contend that due to the changing shape of manufacturing, technology, global competition, and other market demands that manufacturing job growth would only be modest. Most of the job growth potential will be found in other sectors that would benefit from increased economic activity.

Instead, to regain the lost global market share, the country’s manufacturing renaissance will be driven by advanced manufacturing that leverages a skilled STEM workforce and technological advances such as digital manufacturing, the Internet of Things, analytics, advanced robotics, and 3-D printing. To achieve the potential revitalization of the U.S. manufacturing sector, the McKinsey Global Institute proposes several solutions in four priority areas (reinvesting, retraining, removing barriers, and re-imagining work) including:

  • Targeted investment from public, private, and foreign sources for communities in distress; Systems of lifelong learning for mid-career workers to adapt and more funding for displaced workers to transition into new roles;
  • The removal of some barriers that keep workers from seeking out better opportunities and affordable housing  in booming job markets; and,
  • The re-imagination of work with more flexible models, a more sustainable version of the gig economy, and more creative options for older workers.

These solutions are intended to serve a two-fold purpose. First, they are intended to help prepare communities and workers to absorb and address the needs of reshored and new advanced manufacturing facilities in the United States. Second, due to decreased need for manufacturing workers, the U.S. economy needs to support workers that will be displaced by automation as well as prepare them for jobs in other industries with growth potential – especially the industries that comprise the manufacturing supply chain.

The report also highlights that since 1983, the top quintile of the total U.S. workforce has almost doubled its wages and benefits in real terms while everyone else remains at roughly the levels of the 1990s. The researchers contend that there have been multiple economic, technological, and societal forces that have simultaneously contributed to pressures on incomes and wages including:

  • The declining share of national income going to labor;
  • The weakening of the relationship between productivity and wages;
  • A weak and highly uneven recovery from the Great Recession;
  • An extraordinary escalation of competitive pressures; and,
  • Profits shifting to asset-light sectors and a small number of superstar firms.