Strengthening American Manufacturing: A New Federal Approach

Susan Helper and Howard Wial


Manufacturing is essential to America’s economic well-being. It accounts for the bulk of United States exports, is key for innovation, and provides many highwage jobs, especially for less educated workers. It is the economic lifeblood of much of the Great Lakes region. Yet the United States has lost manufacturing jobs for the last three decades, and manufacturing output has grown much more slowly than GDP.

During this time, federal policy has done little to stem the loss of manufacturing jobs or improve the economic performance of U.S. manufacturing plants. Manufacturing’s decline has contributed to the nation’s huge trade deficit and worsening earnings distribution, and puts America’s innovation potential at risk. To address these problems, the federal government should adopt policies to improve the performance of manufacturing firms in the United States. It should support the development and diffusion of improved manufacturing technologies, ways of organizing work, and relationships between final goods producers (typically, assemblers) and their suppliers; help groups of manufacturers within an industry work together to improve performance; and promote understanding of the importance of the economic and geographic ties that among U.S. manufacturers that contribute to U.S. manufacturing performance. These policies would not favor any particular industries, but would help solve problems that exist in both newer manufacturing industries (such as solar panels) and older ones (such as auto assembly).

America’s Challenge
Improving manufacturing’s performance is a crucial part of the solution to America’s trade, innovation, and income distribution problems and is especially important to the well-being of metropolitan areas throughout the Great Lakes region.

Manufacturing employment has fallen and output has grown slowly. U.S. manufacturing employment has trended downward since 1980, and job losses have been especially severe in the past decade. Between 2000 and 2009, the nation lost 31.2 percent of its manufacturing jobs, and manufacturing fell from 13.1 percent of total employment to 9.1 percent.3 The nation’s manufacturing output grew by only 11.0 percent during this period, while GDP grew by 15.7 percent. As a result, manufacturing’s share of GDP fell from 14.2 percent to 11.0 percent.

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