Most analyses equate manufacturing with job growth and outsourcing with job loss. A recent
analysis by McKinsey & Co., however, finds that only 20 percent of the manufacturing jobs lost in the United States since 2000 can be tied to outsourcing. The rest, the consultant says, are due to productivity gains:
We find that manufacturing job losses in advanced economies have been concentrated in labor-intensive and highly tradable industries such as apparel and electronics assembly. However, overall in the United States, trade and outsourcing explain only about 20 percent of the 5.8 million manufacturing jobs lost during the 2000-10 period; more than two-thirds of job losses can be attributed to continued productivity growth, which has been outpacing growth for the past decade.
Even nations with a strong export balance have shed jobs, the report says. Both Germany and South Korea saw manufacturing employment decline during the study period. Productivity will continue to rise and overall employment in developed economies will remain under pressure if current trends persist. Manufacturing employment in advanced economies could fall from 45 million jobs today to less than 40 million by 2030, McKinsey says.
McKinsey also notes a developing scarcity of talent in the manufacturing sector. There's a gap in the technical talent needed to run manufacturing tools and systems, the report says, and the use of greater intelligence in product design and manufacturing to boost resource efficiency and track activity in supply chains.
An executive summary and the full report can be downloaded here.
Hindsight is always 20/20. I would expect reports and data such as this to improve the longer the trend is tracked. The compnaies polled by McK no doubt have their own spin on things. Increaed productivity is always better than a decreased workforce, particulalrly if you are a publically traded business.
It is indeed very hard to believe the assertion that manufacturing job losses are largely due to productivity improvement. Another post calls McKinsey 'criminal', they may be in respects, as key senior personnel have been convicted of insider trading etc types of issues, but I dont think that 'criminal' act ties to this report.
I can believe if the jobs loss for non-manufacturing/ service was due to productivity, but even there much more than 20% must have been offshored.
There is usually a hidden motive behind many of these reports, one is hard pressed to look beyond support for the positions of larger manufacturing companies like GE. There even GE (Welch) and Intel (Grove) both seem to be having late-life remorse, and categorizing offshoring as a 'major mistake'.
Hi Lily: There's a part of the report that deals with the difference between manufacturing and service jobs which is also interesting. I think's that where the aging population can play a big role.
A recent analysis by McKinsey & Co., however, finds that only 20 percent of the manufacturing jobs lost in the United States since 2000 can be tied to outsourcing.
@Barbara, thanks for the post. I am surprised to know that the only 20% of the manufacturing jobs in US are lost because of outsourcing. Looking at the opposition to the outsourcing in US, I thought the figure was much higher. Although its good to know that productivity will continue to rise but steps should be taken to limit the impact of this productivity on job loss.
It does not surprise me at all that McKinsey is now trying to downplay the impact of loss of manufacturing jobs to the US economy. They are very much one of the criminal enterprises that profited by advocating unregulated outsourcing of manufacturing as well as siphoning of US knowhow and infrastructure to China. at the very least they deserve to be hauled to senate hearings for causing grave harm to the US economy and undermining future US competitiveness.
None of their claims hold water. Job loss in Germany or So. Korea has been insignificant compared t the US. Manufacturing jobs are engines of growth and create 2 to 3 service jobs. This is what expains the 1:5 ratio between Mfg. jobs lost vs overall unemployment. Every $ of trade deficit wirh China ( mostly due to outsourced Mfg. ) actually costs the US economy $ 3 ( unemployment benefits, loss of service jobs, loss of tax revenue, higher price of food, fuel and raw materials because now the Chinese can buy more, higher defense budget to keep the Chinese from attacking small countries, profit from outsourcing funneled to buy politicians and corrupt democracy in the US ).
10 % lower price at Wal Mart and manipulated bubbles in stock price are hardly a compensation for the disruption that the likes of McKinsey have causd.
With the improvement of productivity, the labor-intensive industries will become increasingly less, which undoubtedly has an impact on the employment. But the situation of aging population is also intensifies, which can make up the job decrease situation caused by the enhance of productivity to some extent.
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Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
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