Explore why changing demographics mean there won’t be a manufacturing renaissance, and learn where job growth is shifting.
For decades after World War II, manufacturing was a mainstay of the American economy, providing steady employment and good wages for millions of workers chasing the American dream. Today, however, there are 37 percent fewer manufacturing jobs than there were in 1979 when the industry peaked at 19.5 million jobs. Much has changed over those 38 years, but manufacturing’s downfall is the most recent long-term transition that reshaped the economy into what’s needed to serve current and future generations, according to Raymond James Chief Economist Dr. Scott Brown.
Baby Boomer Arrival
Manufacturing’s ascent to economic dominance mirrors the arrival of the baby boom generation, the roughly 75 million Americans born between 1946 and 1964 who redefined the economy and flooded the labor force, helping to fuel manufacturing’s growth. “Those workers coming in are consumers as well,” Brown said, and as demand for goods grew, more manufacturing jobs were created for those same boomer consumers.
After peaking in 1979, manufacturing employment remained strong until shortly after the new millennium when it bowed to two big economic pressures and the shifting demographics that surrounded it.
“Factory jobs have always come and gone,” Brown said, “but manufacturing output has increased substantially over the years. The number of manufacturing jobs dropped in the last two recessions, but failed to rebound as they had in past recoveries.”
Much of this change is due to technology, which has been a Catch-22 for manufacturing. Robots and automation pushed efficiency and output to record levels, but replaced workers, leaving companies needing fewer to produce more goods. Technology’s effect on manufacturing jobs continues to be a harsh reality for workers.
“Half of the jobs losses have been due to technology, and those aren’t going to come back,” Brown said. “We expect huge technology improvements over the next 10 to 20 years are going to reduce manufacturing jobs more.”
A More Connected World
As technology grew and the dot-com era recession took hold, international trade agreements proliferated making it easier and, at times, cheaper to produce or purchase goods abroad and import them to the United States. Again, manufacturing jobs became a casualty.
Brown also credits supply-chain changes such as larger container ships and infrastructure upgrades at domestic and foreign ports for increasing trade. Globalization is making it increasingly common for goods consumed in the U.S. to be made elsewhere.
Brown believes domestic manufacturing jobs won’t completely disappear, but demographic changes continue to lift other sectors while leaving behind manufacturing.
“Typically, the population will dictate the jobs,” Brown said. “Healthcare is going to be a growing industry because the population is getting older and will need more care.”
As baby boomers age and enter retirement, they’re once again reshaping the economy. Jobs in the healthcare and social assistance sector skyrocketed, growing 107 percent since 1990, the first year the Bureau of Labor Statistics (BLS) tracked the sector, while manufacturing jobs declined 30 percent over the same timeframe. The BLS expects 3.8 million additional healthcare and social services jobs by 2024, when the oldest boomers turn 78. Manufacturing is projected to lose an additional 814,000 jobs by 2024, the largest loss of any sector.
Brown also expects employment growth in education and technology. The BLS projects increased enrollment in postsecondary education as the college-age population grows and more adults return to school to learn new skills. Technology will be a large focus for all students entering school as its role in the economy continues to grow.
“A lot of firms are looking for higher skilled workers,” Brown said. “They want people who know how to use computers and it’s hard to compete in that environment” without a college degree.
Collectively, the economic signs do not point toward a manufacturing renaissance, but they do give the next generation of workers directions to the new path to the American dream.
Sources: Bureau of Labor Statistics