Manufacturing is not farming

In manufacturing, fewer Americans are producing more. The output keeps growing, the employment numbers keep shrinking, and this spurs people to think about corn and soybeans. The same thing that happened to farming--which employs so few but produces so much--is happening to manufacturing.

But I’m not so sure that’s true. You’d think that if fewer people produced more, productivity would go up, right?  It turns out that in manufacturing, productivity gains and employment numbers don’t seem to be inversely related. Consider Dow Chemical CEO Andrew Liveris’ argument made in his book, Make It In America, published earlier this year.



“Between 1989 and 2000, manufacturing employment in this country was relatively stable. And during that period of time, U.S. manufacturing showed an increase in productivity of 3.8 percent each year. Now, between 2000 and 2007--a time period that completely excludes any potential losses from the Great Recession--the United States had almost the exact same productivity gains year over year--3.7 percent. Yet 3.5 million jobs disappeared in those years. How could it be that over the first time period I mentioned, productivity gains didn’t cause major job losses, but over the second period, where productivity was essentially unchanged, huge job losses occurred? The reason is that those job losses have very little to do with productivity. They have to do with aggressive international competition.”

One FORTUNE columnist recently complained that President Obama’s focus on manufacturing is ill-guided. Judging by the polls (and chats with our readers), many aren’t happy with the president, and I can certainly understand why. But at least he sees (or says he sees) some shred of value in the sector.

Large companies need technicians who can program and run automated equipment. Small companies need technicians to program and set up equally intelligent equipment, though designed to run small lot sizes, to deliver just what those large plants need, when they need it. You can’t pull someone off the street and tell him to program a half-million-dollar laser cutting center with lights-out cutting capability.

Large plants may employ plenty, but their number pales in comparison to the millions of people working at contract fabricators and other job shops supplying parts to these larger manufacturers. Continuous improvement methodologies preach the virtues of small batch sizes and quick changeovers. A small shop’s most profitable customers can be those who request a few of this and a little of that. Margins often shrink when a customer takes a greater share of a job shop’s business--those large orders. Many tell me the trick is to have a balance of both large and small customers to sustain a steady, profitable, diverse manufacturing company. And to manage all this complexity, these manufacturers need people.

So much of the action--and need for workers--is going on several tiers down the supply chain. These workers deal with complex subassemblies and lot sizes of thousands down to one. They manage part flows that can change from one day to the next, with lead-times of days or even hours. That doesn’t sound like farming to me.

All this ran through my mind last week, when I spent time in Switzerland attending Bystronic’s 25^th anniversary event. We toured several Swiss job shops and product line manufacturers, and one common thread struck me--just how valuable Swiss consider manufacturing is.

There is actually a skilled-labor problem in Switzerland, but it’s not because they can’t find enough Swiss people with the right skills. There just aren’t enough Swiss people, many of whom grew up with the country’s admired apprenticeship system. By the time many high school students graduate, they may well have spent time operating a variety of machine tools at local manufacturers. The population knows the value of exposing students early on, because they know these complicated machines don’t run themselves.

Back in the U.S., manufacturing can help narrow the trade deficit, and in doing so it can employ millions more, like it has in the past. When people say America has “moved beyond” manufacturing, I like to ask them, “Where exactly have we moved to--or where should we move to? Continue pushing for a service-based economy? Really? How’s that working out for you?”