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OM in the News: Revitalizing U.S. Manufacturing

June 20, 2016

The U.S. shed 5.7 million manufacturing jobs from 2000 to 2010—more than 1/3 of the manufacturing workforce—as companies abandoned plants and workers in favor of low-cost foreign countries. But in recent years, manufacturing employment has grown slightly as the auto industry rebounded and domestic plants became more cost-competitive with those of other countries where manufacturing expenses have escalated because of higher wages.

Welder at Work“Reviving the manufacturing sector won’t be easy—but it’s crucial,” writes The Wall Street Journal (June 8, 2016). Manufacturing is one of the best generators of wealth for an economy, requiring processes, materials and work skills that create employment and profits at each step in an assembly. Countries that don’t make anything eventually start to lose their edge in research and product development. “Manufacturing and design drive each other,” says a U. of Notre Dame prof. “If you lose one, you’ll lose the other, too.”

Here are just 3 possible strategies discussed in the article:

(1) Look at the true cost of offshoring. When companies decide to offshore production, they often simply seek the lowest initial price per unit. If they were required to take into account the hidden costs of foreign production, U.S.-made goods would become more cost-competitive. Manufacturing overseas carries dozens of uncounted expenses and consequences. Companies often don’t weigh costs for transportation, as well as expenses for dealing with reduced product reliability, undependable supply chains and the need to hold more inventory in case overseas deliveries are delayed.

(2) Turn community colleges into career factories. Despite low manufacturing payrolls in the past decade, companies continue to have difficulty finding welders, machinists and other skilled craft workers to replace retiring employees. Community colleges need to offer programs for skilled trades that are specialized to suit companies’ needs.

(3) Spend more on manufacturing R&D. Training workers isn’t enough. The government also needs to spend more on applied research to solve specific problems in manufacturing and bringing new products to market.

Classroom discussion questions:

  1. Name several other strategies proposed in the WSJ article.
  2. Can U.S. policy makers create this revival?
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