Reinventing American Manufacturing: The Role of Innovation

The American public has become alarmed about the decline of U.S. manufacturing, 1 although most are reluctant to send their sons and daughters to work in factories.Manufacturing work still brings to the public mind such words as "dumb, " "dirty, " and "dangerous." Some visualize newsreel clips of Ford's famous River Rouge plants in the 1930s, belching dark smoke while predawn crowds of grim, cloth-hatted workers pour through tall factory gates armed with lunch pails.But these are old pictures.The repetitive assembly line has disappeared in modern manufacturing plants, replaced by sophisticated equipment controlled by highly skilled technical workers.A typical advanced plant looks and feels much like the interior of a modern office building, except that it is far quieter, less crowded, and cleaner. HOLLOWING OUT?And yet, the U.S. manufacturing sector is in decline. EmploymentOver the past 50 years, manufacturing's share of GDP has shrunk from 27 percent to below 12 percent.For most of this period (1965-2000), the number of manufacturing employees generally remained constant at 17 million, but over the past decade it fell precipitously to just below 12 million, or 31.4 percent. 2 All manufacturing sectors experienced job losses between 2000 and 2010, but the lower value sectors readily subject to globalization, such as textiles and furniture, were most adversely affected, losing almost 70 percent and 50 percent of their jobs, respectively.3 Investment Manufacturing fixed capital investment (plant, equipment, and IT) grew in the 2000s at its lowest rate as a percentage of GDP (below 1.5 percent annually) since