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Case Analysis: Manufacturing In the United States

Introduction

Manufacturing plays a key role in the economy of the United States since the 20th century. It has significantly contributed to making the United States economy the largest in the world. Innovation has played a key role in the growth of the manufacturing industry in with federal support programs introduced purposely to fund innovation in various sectors. Similarly, the education system of the United States has supported innovation and also formed the backbone of the manufacturing industry in the country. Other factors that have boosted the industry include the availability of skilled labour forces, good infrastructure. The United States is a major trading partner with Mexico and other countries in Europe and Asia where most of her products are from the manufacturing industry. The industry also creates job opportunities for the Mexico nationals who have acquired work permits to work in the United States. Although this is subject to change due to political and economic policies, the manufacturing in the United States has created huge employment opportunities for the Mexican especially in the southern states like Texas.  This paper, therefore, analysis and summarizes the manufacturing in the U.S.A case and provides the recommendations on the case. The paper also provides an estimation for the period of the next 10 years on the situation of manufacturing in the United States.

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Case Overview and summary

The output from the United States manufacturing industry has risen steadily between the 1960’s to the 1990’s.  The United States is the largest trading partner in North America comprising of Mexico and Canada. The country country’s output accounts for over 80% of the total production output in the region. However, the manufacturing sector has not maintained its projected growth when compared to the 1960’s to the 1990’s and especially experienced a decline in the 2008 economic crisis. The data also shows that employment rate slightly recovering from the year 1984 after the mild recession experienced in the United States began to recede. However, the case continued with the down ward trend after the period which symbolises that demonstrates the effects of other factors like relocations of the manufacturing sector within the country. The manufacturing industries migrated from the United States to oversee countries as industries began searching for ways to reduce production cost through cheap labour, lower cost of raw materials. It is convenient for the industries to relocate to countries where they would access raw material in a cheaper price when compared to shipping them to the United States. Similarly, the manufacturing relocated from the traditional manufacturing states like Ohio and Michigan to the southern states like Carolina and Texas.

Several factors are attributed to the rising production with decreasing employment rate.  Few workers with more production output implies that the total production per worker has increased. This demonstrates the role played by advancing technology in increasing production. Technology has improved significantly within the period especially in the United States and continued to play major in production. In addition to the technology, the production processes have also improved. This includes the adoption of the production lines in manufacturing which has improved bulk production. The impact of technology in increased production was not felt in the manufacturing sector alone but also other sectors like   the agriculture.

The United States has made several agreements with other countries like Mexico and Canada. These agreements have risen several debates on the plight of United States jobs and employment opportunities. One such agreement is the United States agreement with Mexico which still remains the subject of debate in the politicians and economists. These agreements have both a negative and positive effects as they increase productive efficiency.

How the data supports the case analysis

The economic recession is to be blamed for reduced production in the United States manufacturing sector. The figure 13.2 supports this by showing that output in the manufacturing sector in the United States was the highest from 1960 to 1990’s and declined during the 2008 recession.  The graph demonstrates the rising trend during this period and that is however interrupted by the recession.  The scale on the left demonstrates the effect manufacturing sector on employment. The employment rate was highest during 1979 when employment topped at 19,426,000. However, the employment rete experienced a decline from the year 1980 after which it began experiencing a long run decline. This is due to the mild recession that was experienced in the United States during this period. It is important to note that employment is significantly affected by the recession. The same case can be noticed by the 2008 recession where the rate of unemployment in the United States reached its peak. 

The data therefore shows although employment has declined with the total number of jobs reducing, manufacturing has risen steadily.  Consequently, the relocation of the manufacturing companies from the traditional manufacturing states has brought the perception that manufacturing sector in the United States has declined steadily and not as vibrant as before. However, the United States has remained a major producer of the manufactured goods in the North American region.

The decline of employment in manufacturing is not limited to the United States alone but event to other high income economies. Several explanations for this trend include the unfavourable growth in productivity and elasticity in prices and income. This is an also an indication that the growth in economy is bigger when compared to the labour productivity. The production in the manufacturing sector is also not balanced. The United States has overseen a growth in the computer and electronic sector when compared to the traditional sectors of manufacturing like motor industry (Baily & Bosworth, 2014). The manufacturing industry experienced a sluggish decline during the 1990 recession and the recent 2008 but recovered due to an increased demand from consumption and technology advancement.

Prediction of numbers in the next 10 years.

Several factors have to be considered before projecting the employment rates and manufacturing productions in the United States for the next decade. Data from labour and statistics bureau projects that the total jobs in the United States are projected to rise by 15.3 million by the year 2018 (Lacey & Wright, 2009).. However, the significant rise in, employment is likely to be contributed by other sectors like healthcare when compared to the manufacturing sector. The case analysed demonstrates that economic recession like for the case of 2008 has a significant impact on the rising case of employment. Therefore with the signs of the economy recovering from the 2008 recession employment rates are more likely to increase up to 2018 going by the current economic projections. Data from the labor and statistic bureau projects that employment rate to rise by 16.8 %( Lacey & Wright, 2009).  Manufacturing production is also expected to rise significantly as a result of advanced technology and favorable government policies. Statistics for bureau also predicts that production to rise by 29% within this period (Lacey & Wright, 2009). This is due to the reduced cost of production for the United States signs more trade agreements with several countries where cheap raw materials is accessible. The free movement of labor agreement between the United States and Mexico has also created an influx of cheap labour from Mexico especially to the southern states where manufacturing industries have relocated. If the policies remain unchanged, these policies encourage production through reducing the cost of production.

Conclusions

The manufacturing industry has played a critical role in the growth of the United States economy.   The sector has a recorded a growth in the since the 1960’s due to the technology and innovation. However, the sector has recorded a decrease during the recession experienced in the United States in 1990 and 2008. The data also shows a decrease in the unemployment rate as production in the manufacturing sector increases. This is attributed to the increased output per worker due to technology and improved production process. The United States has also signed several labour and trade agreements with Mexico which allows the free movement of labour between the two countries. This has led to an influx of cheap labour especially in the southern states where traditional manufacturing companies have relocated.

References

Baily, M. N., & Bosworth, B. P. (2014). US Manufacturing: Understanding Its Past and Its Potential Future. The Journal of Economic Perspectives28(1), 3-25.

Lacey, T. A., & Wright, B. (2009). Employment outlook: 2008-18-occupational employment projections to 2018. Monthly Lab. Rev.132, 82.

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