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Joe Klocko: What’s still made in America

Entrepreneur’s corner

Posted: April 20, 2011 1:55 a.m.
Updated: April 20, 2011 1:55 a.m.
 

Mark Twain is credited with saying, “The rumors of my death have been greatly exaggerated.”  I’ll take the position that the same great exaggeration applies to the state of the manufacturing industry in the United States — the rumors of its demise have been greatly exaggerated.

It seems that there is no shortage of sentiment that the size of the manufacturing industry in America is in a rapid state of decline. Sure, the recession has taken a big bite out of all types of economic activity, manufacturing included. However, simply stated, the manufacturing sector is not as imperiled as many would have you believe.

Let’s look at some facts:

According to Federal Reserve data, during the best of times during the past decade, manufacturing capacity utilization hovered around 77 to 78 percent. After bottoming-out in mid-2009, capacity utilization is up about 10 percentage points, and stands at 72 percent in January 2011. The rebound is in process.

The Boston Globe reports that 58 percent of Americans believe that off-shoring by American companies looking for lower labor costs is responsible for the decline in U.S. manufacturing jobs. Clearly off-shoring has had a negative impact on the amount of goods manufactured in America, but its significance has been overemphasized.

Economic data provided by the United Nations indicates that America’s manufacturing output in 2009 was $2.15 trillion and exceeded China’s output by more than 45 percent. Also, the U.S. accounted for 20 percent of the world’s manufacturing output in 2009, marginally down from its 1990 share of 21 percent.

So what drives the dichotomy between perception and reality?  In a word: productivity. Higher productivity sometimes results in fewer jobs.
With one of the world’s highest standards of living, and its related higher labor costs when compared with developing economies, American companies have had to be leaders in adopting new practices and methodologies to drive productivity.

To survive and prosper in a globally competitive marketplace demands that U.S. manufacturers offset higher wages and benefits with high productivity. That’s the way the American manufacturing sector assures that manufacturing jobs remain in the U.S.

According to Bureau of Labor Statistics data, manufacturing output per hour has increased by 75 percent over the 1988 to 2008 timeframe. Said differently, manufacturing production grew by 65 percent with 25 percent fewer employees over the same period. It is those individuals who comprise the 25 percent fewer employees metric that imparts a painful experience on those people and on the American psyche.

Despite all that, I take the position that we have no choice but to embrace the continuous drive for ever-greater productivity. To stop doing so will surely accelerate the flight of jobs to lower-cost producers regardless of whether those lower-cost producers are advantaged by lower wages or higher productivity.

Clearly, the strategy needs to be for American companies to invest in modern factories and equipment and invest, yes invest, in training the most efficient, engaged workforce in the world. To not do so would certainly have a long-lasting deleterious impact on employment in all industries and the U.S. economy as a whole.

Los Angeles County boasts close to 390,000 manufacturing jobs and, clearly, there are individuals and companies right in our area who “get it,” as evidenced by the fact that their companies have announced major new contracts from customers around the globe.

 If you run a local company, and you are not already doing so, it’s time to start investing not only in facilities and equipment but in your employees, as well. If you’re an individual, never stop the lifelong learning process. Re-tool your skill sets to assure they are relevant today and tomorrow.

Whether you choose to avail yourself of the many programs offered by College of the Canyons, or by other public or private learning organizations in the area, what is important is that you begin and continue your personal or organizational lifelong learning process.

Joe Klocko is the director of Center for Applied Competitive Technologies (CACT), hosted by College of the Canyons. Mr. Klocko’s column reflects his own views and not necessarily those of The Signal. For more information about how College of the Canyons Economic Development Division can help your business call (661) 362-3112, email cact@canyons.edu or visit www.canyonsecondev.org.

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