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"Can Manufacturing Survive in U.S., Other Advanced Countries?"
"NEW YORK -- The decline in manufacturing jobs in the United States and other major nations shows no signs of slowing, a comprehensive new study released yesterday by The Conference Board finds.The study says that in good times and bad in the United States, at least 16 million jobs are created or destroyed each year -- 14% of all U.S. employment.Domestic manufacturing jobs were particularly hard hit in the most recent recession, dropping 7.8% -- a decline more than three times greater than the 2.2% decrease in the two years following the recession of 1990-1991. The study notes that the number of manufacturing jobs has been in decline many years.These same trends are evident in other advanced countries, ranging from Germany and France to Japan and Taiwan. All are registering declines in the relative size of their manufacturing sectors. These shifts are being spurred by productivity gains and the exodus of factories from Japan and other countries.Rapidly growing software development in India is raising similar concerns. The study shows that more and more resources in the major countries are being shifted to services, while emerging countries are moving resources from agriculture into manufacturing as well as services and both are redeploying resources within manufacturing and services.Says Robert McGuckin, author of the study and director of economic research at The Conference Board, "While job destruction and job creation are part of the regular fabric of economic activity year in and year out, manufacturing is drawing attention because job losses remain high and are not being made up by greater job creation [during] expansions."The Conference Board study points out that not all manufacturing job losses result from outsourcing, companies moving off shore and production abroad. Some involve temporary layoffs and permanent reallocations from one U.S. industry to another in response to technological improvements and shifts in consumer demand. The study emphasizes that job reallocation is a major driver of growth in productivity and improved standards of living. McGuckin says, "The key focus of the ongoing debate about job losses should concentrate on improving the reallocation of resources and finding a consensus on how to help workers who have been adversely affected by these intensifying trends."Job Losses and National SecurityIncreases in cross-border allocation of resources throughout manufacturing raise questions about the strategic importance of manufacturing in the nation's overall security system. Among the major questions being asked:Is manufacturing a crucial part of national defense efforts and does cross-border production weaken national security? Are research and development in manufacturing key drivers of new technologies and especially vital in improving productivity and living standards?How can security be maintained in a world of increasingly intertwined economic relationships?These issues are being raised throughout the industrialized world.According to McGuckin, "These issues need to be addressed directly and specifically and not simply as part of the reaction to job losses in manufacturing. The strategic importance of the manufacturing sector per se involves at least two major considerations: 1) How much and what capabilities must be maintained ready for the support of defense systems, and 2) What is the strategic role of manufacturing in the nation's research and development effort that supports security?"Neither question is easy to answer, he continues. But both should be approached in the context of an environment where intelligence and information are increasing in importance and information and communications technology is transforming operational possibilities. Similarly, the face of research and development has been changing quickly and new organizational structures and business practices need to be factored into the analysis. McGuckin notes that "The Conference Board currently has under way a major study of international R&D organization, which I hope will provide some guidance on these organizational issues."Global Job Shifts in Productivity and Standards of LivingThe Conference Board study shows that the decline in manufacturing employment growth was well under way in the 1980s. Job destruction during that decade averaged 10.3% while job creation was only 9.1% This difference of 1.2% signaled the continuing and long-run decline in manufacturing jobs.But the shift in jobs is a major factor in productivity growth as workers shift from low to high productivity business firms and business units. This process shows that new and growing companies supplant declining and uncompetitive ones. Many of the productivity gains result from entirely new enterprises."It's all part of the Schumpeterian 'creative destruction' story," McGuckin concludes. "We know that the job creation and destruction process that accompanies these reallocations is an essential ingredient of productivity growth and improved living standards. It is a process that has been going on within the United States for a long time, and while the increased cross-border nature of the reemployment raises new challenges, the process provides win-win opportunities."Source: Can Manufacturing Survive In Advanced Countries?Executive Action No. 93, The Conference BoardVisit the Conference Board at http://www.conference board.org "