Role of Technology in Manufacturing Competitiveness

Abstract

A manufacturing revolution has emerged in the past 50 years that is as significant as the industrial revolution of the 19th century. From 1950 to 2000, the average productivity growth in manufacturing in the United States was 2.8% per year, and this figure has been accelerating for the past two decades as manufacturing productivity growth has exceeded the average of other sectors by more than one percent per year (please see table below). Stated more simply, a US manufacturing worker can produce four times as much per hour today as compared with fifty years ago. This gain has resulted from competitive pressures, the advent of new technologies, and a series of product and process innovations. It has also resulted in a much higher standard of living for Americans, as products become more useful and more affordable. In order to utilize this new manufacturing capacity, U.S. firms (and others) have expanded their marketing abroad, creating rapid increase in global trade. The perception of a crisis in American manufacturing is the result of one of the most difficult realities of large gains in productivity: additional capacity almost always exceeds increased consumption. This results in an inevitable shift of labor. Industries become more productive as they mature, and competitive pressures increase. These two factors require companies to decrease their workforce and often result in movement of commodity industries overseas. The end result is a loss of jobs in the United States. Displaced workers must shift to new occupations, requiring new skills and abilities. History has shown that this shift can be either detrimental or beneficial to workers; the most important determinant of benefit is the presence of innovative new industries, which, create high value for their markets. The sustainability of growth in the U.S. manufacturing sector is based on the ability of America to continue to innovate. Innovation is the key to a vibrant U.S. manufacturing base and continued generation of new jobs.