Job Creation in the Manufacturing Revival, Marc Levinson, Section Research Manager. May 5, 2017. [via FAS]

“The health of the U.S. manufacturing sector is of ongoing interest to Congress. Numerous bills aimed at promoting manufacturing are introduced in each Congress, often with the stated goal of creating jobs. Implicit in many of these bills is the assumption that the manufacturing sector is uniquely able to provide well-paid employment for workers who have not pursued education beyond high school. U.S. manufacturing output has risen approximately 22% since the most recent low point in 2009, but almost all of that expansion occurred prior to the end of 2014. The upswing in manufacturing activity has resulted in only relatively modest growth of employment in the manufacturing sector. Although a variety of forces seem likely to support further growth in domestic manufacturing output over the next few years, including higher labor costs in the emerging economies of Asia and increased concern about disruptions to transoceanic supply chains,evidence suggests that such a resurgence would lead to relatively small job gains within the manufacturing sector. Manufacturing wages are below those in many other industries and continue to decline in relative terms. Data taking insurance, pensions, and other employee benefits into account indicate that production workers have experienced a decline in average total compensation relative to comparable full-time workers in other occupations over the past decade. The past few years have seen important changes in the nature of manufacturing work. A steadily smaller proportion of manufacturing workers is involved in physical production processes, while larger shares are engaged in managerial and professional work. These changes are reflected in increasing skill requirements for manufacturing workers and severely diminished opportunities for workers without education beyond high school. Even if increased manufacturing output leads to additional employment in the manufacturing sector, it is likely to generate little of the routine production work historically performed by workers with lower education levels. As manufacturing processes have changed, factories with large numbers of workers have become much less common than they once were. This suggests that promotion of manufacturing as a tool to stimulate local economies is likely to meet with limited success; even if newly established factories prosper, few are likely to require large amounts of labor. The development of large supplies of oil and natural gas from shale formations in several states has led to considerable speculation about prospects for expanded chemical manufacturing. The number of chemical plants in the United States has risen by nearly 9% since 2012, and numerous companies have announced expansions of existing plants. However, total capacity in the industry has declined over the same period as very large plants have closed or have eliminated certain production operations. In any event, chemical plants are extremely capital-intensive, and even large amounts of new investment are likely to result in the creation of relatively few jobs.”