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OM in the News: How to Recoup American Manufacturing Jobs

April 18, 2012

Businessweek (April 15-22, 2012) reports that Gene Sperling, director of the National Economic Council, recently spoke before the Conference on the Renaissance of American Manufacturing,  making the case for manufacturing in the US.  Sperling  argued that manufacturing deserves special attention because it produces “positive spillovers” for the economy. (New research shows that when a factory locates in a county, the productivity of other plants in the county rises.)

Manufacturers also account for most innovation. And innovation tends to wither when it’s separated from production. “For example,” Sperling said, “when we lost consumer-electronics manufacturing, we gave up a claim on future innovation. We lost in follow-on products like advanced batteries, flat-panel display technology, and LED lighting. When we lost consumer-electronics manufacturing, we also lost the capability to make and design the batteries, including lithium-ion batteries, used in computers, cell phones, and other consumer devices.”

The U.S. lost 34 percent of its manufacturing jobs from 2000 through 2009, and employment in manufacturing has risen only about 4 percent since. Some experts claim  manufacturing employment is in an unstoppable downtrend because fewer workers can produce more. Sperling argued that higher productivity, far from being a job killer, can lower prices, thus increasing demand for the products and saving jobs. The problem, he said, is that output is down. The physical quantity of goods made in the U.S. declined 5 percent from 2000 to 2010.

To Sperling, the solution is to boost output—which will require faster productivity growth, not slower. His plan includes denying companies a deduction for moving costs when they shift jobs abroad; making the research and development tax credit permanent; funding manufacturing training programs in community colleges; and building regional hubs for manufacturing innovation that bring together industry, government, and academia.

Discussion questions:

1. Why are some industry leaders opposed to Sperling’s plans?

2. Why are manufacturing jobs important to the US economy?

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