U.S. manufacturing employment currently totals 12.8 million today. This number is an impressive drop from the high point of close to 20 million workers in 1979. That’s the case today, but the share of workers actually employed in the manufacturing sector has shrunk dramatically from 22% to just 8% today. Even with this steep drop, the sector is rebounding. The sector has added 1.2 million jobs since 2010. Experts caution that a meaningful increase in manufacturing jobs will likely take years and come at a high cost.
That historical context is key to understanding today’s manufacturing landscape. After World War II, the U.S. manufacturing sector became a vital engine for lifting American workers into the middle class. As the decades have rolled on, an unfortunate and unfair landscape has taken root. For context, the employment level is currently at 12.8 million, 6.7 million jobs below the peak established in 1979. Yet, this rapid decline has caused a huge amount of heartburn for policymakers, as well as troubling heartburn for workers.
The most important reason for this trend is the increasing cost of labor in the U.S. U.S. labor costs present a significant hurdle for manufacturing firms trying to compete in a global market where lower labor costs prevail. Consequently, many manufacturers have adopted high capital intensity models to stay competitive. This transformation usually requires pouring money into tech and automation, which can create a barrier to job growth.
Fourth, the U.S. manufacturing sector’s anemic labor productivity growth has contributed to these recent employment trends. While employment is up again, the number behind this metric tells a different story in terms of overall sector health. Combined with increased capital-intensity and soaring inflation, the manufacturing investment both in the U.S. and abroad is higher than ever. Experts agree that we need a minimum of $2.9 trillion in net new capital investment just to get us back to historic peak employment levels.
There’s no question that the Biden administration has gone big on trade policy. These changes come as an attempt to bring back manufacturing jobs to the United States. Raising tariffs on imported goods to increase domestic production and create jobs in the U.S. They charge foreign products a tax, making them more expensive thereby incentivizing consumers and businesses to buy American-made products. Experts stay skeptical about tariffs’ ability to accomplish these aims.
Realistically, it will take years for new manufacturing capacity to come on line in the U.S. Strengthening our manufacturing workforce will require significant and long-term political capital and investment. The challenge of restoring a strong manufacturing base should not be underestimated. Yet manufacturers are fighting against things such as increasing labor costs and fierce global competition. That is what makes the need for serious, long-term, capital investment so essential.