Manufacturing Needs Direction

Chad Gillis, Journalist | 3/30/2012 | 19 comments

Chad Gillis
Successful manufacturing CIOs and IT managers lead the nation in research and development, pay workers well, and help reduce the nation's trade deficit while contributing to environmental sustainability. It seems that the only things holding these high-road companies back from even more success are lesser-performing competitors (which reap the benefits of R&D without contributing to research) and a regulatory climate that makes it risky and sometimes difficult to compete against those very companies in the short term.

According to a recent Brookings Institution report, government leaders and policymakers should reward truly innovative companies if they want to increase the number of high-paying jobs in manufacturing and its contribution to the nation's overall economy.

Focusing on manufacturing's importance to America's economy, Brookings researchers compared the United States to other higher-wage countries in terms of job retention, wages, and employee development in various industries. In a dozen European nations and Australia, the average manufacturing worker earns more per hour (60 percent more in Norway) than an American counterpart. For the most part, these countries also do a much better job at retaining skilled IT workers. They produce a trade surplus in goods and are experiencing growth in patent applications and renewable energy sources.

China has become a solar and wind energy powerhouse, largely because American companies offshored battery production and solar technology to East Asia. Japan, China, and South Korea are now well ahead of the United States in terms of innovation in these areas. In this case, America lost not only jobs, but also the technological advantage. Those three nations have a distinct competitive edge in the development of battery-powered vehicles -- something that wasn't heavily considered when the offshoring first occurred. It's probably not a coincidence that China now spends more money on the production of solar photovoltaic cells and lithium-ion batteries than any other nation. And with that spending comes innovation and patents -- a wonderful measure of a nation's creativity and output.

The report says:

Offshoring reveals that the loss of industrial production capability often leads to later loss of R&D capability. The reason is that making products exposes engineers to both the problems and the capabilities of existing technology, generating ideas both for improved processes and for applications of a given technology to new markets. Losing this exposure makes it harder to come up with innovative ideas.

Finally, America should look to Germany as a role model for government funding of R&D. The German government funds scientific research at a rate 20 times higher than America's. Manufacturing workers there also receive continuous vocational training through their working life, and they have more input in decision-making processes.

The Brookings report closes with a suggestion that public policy require companies, workers, unions, and governments to share the responsibility for developing and maintaining high-paying, environmentally sustainable, and export-intensive jobs.

We know manufacturing is important. We know technology jobs are high-paying. What we don't know is whether our government leaders and policymakers are willing to make changes like those suggested in this report. Where do you see our regulatory climate five years from now?

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mejiac   Manufacturing Needs Direction   3/31/2012 1:30:39 PM
Re: But Still ....
The US is definitly in the forefront of many market trends, with new opportunities emerging everyday. And I agree, there will be many changes to come, and hopefully they are for the best.

The US market is  definitly a driver in the world economy, and several secondary markets benefit from this. 

One trend I've seen is the service industry gaining more and more momentum, although this those entail more capable people to be part of the work force than maintains it.
mejiac   Manufacturing Needs Direction   3/31/2012 1:24:30 PM
US Economy Modelma
"government leaders and policymakers should reward truly innovative companies if they want to increase the number of high-paying jobs in manufacturing and its contribution to the nation's overall economy." 

I think this is hitting the nail on the head. I've worked in offshore manufacturing facilities, and the main driver is the overhead cost, which is significantly lower than on this side of the river.

But we can't entirely blame companies, since the environment has to provide the conditions for a business to grow. If you want to grow a plant, the soil needs to be proper nutrients and conditions, water and maintenance is only part of work. So in my book it has to be a win win situation (maybe this is why Europe and Asia have the advantage).

Sadly we tend to react when things start going down hill. Let's hope we don't get that far.
Umair Ahmed   Manufacturing Needs Direction   3/31/2012 10:47:12 AM
Re: Evaluating Innovation
As to how the U.S. could reward true innovators, measuring the amount of quality R&D over a given time is a place to start

That's a good idea, but this would only work for existing companies. Instead of funding the companies on the basis of their past R&D work, wouldn't it be better that the government invite all the companies for innovative manufacturing-business plans, and give the favor to the approved plans in terms of help in building infrastructure, reduced tax and power rates. German model of funding R&D seems more appealing, since it wouldn't restrict the research and so benefits to specific number of companies, and producing more innovators through universities.
Chad Gillis   Manufacturing Needs Direction   3/31/2012 10:18:46 AM
Re: Evaluating Innovation
@ Umair, that will be the tricky part if changes are made. Brookings researchers note in the report that one remote technology campus related to an R&D university in Germany helped sprout 14 companies in that town alone. Tech related companies as well -- those high-road jobs we need here. In the German model, government funds R&D through universities and those universities grow the technology by creating an attractive environment. It's an indirect situation. As to how the U.S. could reward true innovators, measuring the amount of quality R&D over a given time is a place to start. Don't fund companies that contribute very little to science and basically survive by rehashing what the true leaders have developed.  
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Chad Gillis   Manufacturing Needs Direction   3/31/2012 10:12:40 AM
Re: turn the negaticve to positive reinforcement
at ZAIUS, nice points. Wages in China are rising, as is the value of the Yuan. With rising gas prices, the report notes that some manufacturing sectors will benefit from all of those factors for their domestic sales and shipping.  
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Umair Ahmed   Manufacturing Needs Direction   3/31/2012 9:53:09 AM
Evaluating Innovation
government leaders and policymakers should reward truly innovative companies if they want to increase the number of high-paying jobs in manufacturing and its contribution to the nation's overall economy.

@ Chad: I agree with you, government's support is essential for the success of any industry. But, what should be the form of this reward?  And what will be the criteria to determine which companies are innovative (especially for the newly formed or planned companies)?
nimanthad   Manufacturing Needs Direction   3/31/2012 5:18:16 AM
Re: But Still ....
Exactly and that is why we are facing this economic crisis. We do not have any direction or guidence (proper) right now and things are going astray.
Zaius   Manufacturing Needs Direction   3/30/2012 4:26:15 PM
turn the negaticve to positive reinforcement
The regulatory system needs to move from negative action, that is prohibiting this and that to positive action by rewarding good corporate and planetry citixens. Your ideas to keep the jobs here are good. Now with the rising cost of employees in China, the cost of offshoring is even higher. The manufacturing costs more and we lose that technological edge too, which is a value to both the company and the nation.Maybe there should even be some national awards up for grabs in manufacturing. THat is really great PR.
Nemos   Manufacturing Needs Direction   3/30/2012 4:17:54 PM
But Still ....
You are correct that manufacturing needs a direction to be follow, but with my European eyes still I see USA as the County that gives a lot of opportunities. I cannot predict how it will be the manufacturing sector in five years, but we will see a lot of changes for sure.
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