FAQ: How is globalization impacting U.S. manufacturing?

Talking Points:

The integration of traditional manufacturing, new technologies, national markets and improved supply chain management—all spawned by globalization—is transforming American manufacturing. In the process, resources have shifted to sectors with competitive advantages. As a result, productivity has climbed to new highs, and due to the American ability to change and improve, innovation is flourishing. For instance, the use of muscle on the factory floor is a thing of the past. Today, self-directed workers operate in teams and apply more sophisticated skills to create and run new processes. Concurrently, competitive forces unleashed by globalization are forcing U.S. manufacturers to compete less on price and focus more on product design, branding strategies, productivity, flexibility, quality and responsiveness to customer needs. And companies must continue to push the envelope in terms of greater specialization.

Thomas Friedman writes in The Lexus and the Olive Tree that “The relative decline of the United States in the 1980s was part of America’s preparing itself for and adjusting to the new globalization system.” This process will continue. With the fast-paced changes brought on by the dynamic global economy, tremendous pressure is put on companies to adapt. Lester Thurow, author and Massachusetts Institute of Technology professor, states that “businesses must be willing to destroy the old while it is still successful if they wish to build the new that will become successful.” He points out that makers of vacuum tubes never successfully made transistors after transistors replaced vacuum tubes.

Of the 500 companies that originally comprised the S&P 500 in 1957, only 339 exist today, and this includes descendants of mergers and acquisitions and spin-offs, according to Wharton professor and author Jeremy Siegel. Why? Arie de Geus, author of The Living Company, says “The average life expectancy of a multinational corporation—Fortune 500 or its equivalent—is between 40 and 50 years.” Long-lived companies, he contends, are sensitive to their environment, cohesive with a strong sense of identity, tolerant and conservative in their financing. But today, it is essential that companies become truly global in order to succeed well into the future.

FAQ: What change does globalization create in the workforce?

Talking Points:

Globalization is forcing ongoing changes similar to those introduced by the industrial revolution. Shifting from an agrarian society to an industrial economy compelled workers to leave farms in search of factory jobs. Industrialization created anxiety and fear and demanded that workers learn new skills. With the advent of globalization, the U.S. is increasingly specializing in more complex, value-added goods and services. Consequently, new skills again are demanded. Gradually, globalization has created, transformed and streamlined jobs in the United States. This has forced workers to continually improve their job skills and add greater value.

But adapting to change is never easy. To help workers adjust to the changing environment, on August 6, 2002, Congress re-authorized the Trade Adjustment Assistance (TAA) program through fiscal year 2007 and added provisions. Overall, the TAA’s goal is to help trade-affected workers return to suitable employment as quickly as possible.

Today, the ability to seize the best job opportunities is often dependent on the level of education one has obtained. The occupational groups projected to decline or be among the slowest growing are more likely to be dominated by workers who do not obtain education beyond high school. Conversely, occupations with the highest rates of growth are more likely to employ workers with higher educational attainment.

According to the U.S. Department of Labor’s report Futurework, “We are living in a new economy—powered by technology, fueled by information, and driven by opportunity on our side.” By 2050, the report indicates, the U.S. population is expected to increase by 50 percent. As the knowledge economy emerges, it is essential that our young people develop the skills needed for tomorrow. According to the National Association of Manufacturers, intense competition from the globalization of the manufacturing marketplace, changing demographics and the relentless advancement of technology has challenged U.S manufacturing. “The result has been a dramatic increase in the sector’s need for highly skilled, technically savvy employees who can fully exploit the productive potential of advanced technologies and support increased quality and product complexity.”

It is very clear: as globalization creates opportunity, it generates more opportunities for those workers who are better educated. Because the uneducated could be left behind, lifelong learning policies are essential in today’s economy and even more so in tomorrow’s. It is also very important for companies to nurture a proactive global corporate culture that supports these goals.

FAQ: Why are manufacturing jobs declining?

Talking Points:

The number of U.S. manufacturing jobs declined from a high of 21 million in 1979 to 14.3 million in June 2005. During this period, the percentage of manufacturing jobs relative to total U.S. employment fell from 21 percent to about 10 percent. The primary reason: a combination of technology and high productivity. Productivity gains generated by new technologies in manufacturing have consistently outpaced productivity gains in other sectors of the economy. As a result, new technologies and processes have permitted manufacturing firms to produce ever-increasing output with fewer higher paid workers.

According to Federal Reserve Governor Ben Bernanke, “In real terms, manufacturing production in the United States has risen rapidly over the last fifty years... If manufacturing output has not declined, then what explains the sharp reductions in U.S. manufacturing employment that have occurred not only in the past few years but over preceding decades as well? The answer is a stellar record of productivity growth. Over the years, new technologies, processes and products have permitted manufacturing firms to produce ever-increasing output with ever fewer workers. The long-run trend in manufacturing is similar to what occurred earlier in agriculture.” Bernanke also notes, “Strong productivity growth provides major benefits to the U.S. economy in the long term, including higher real incomes and more efficient and competitive industries.”

FAQ: Is the U.S. economy able to produce new jobs to compensate for those lost in manufacturing?

Talking Points:

Yes. The U.S. economy generated 60 million net new jobs from 1970-2000, and is predicted to create another 21.3 million net jobs from 2002 through 2012, according to the U.S. Department of Labor, Bureau of Labor Statistics. Daniel Hecker, an economist in the Office of Occupational Statistics and Employment Projections, Bureau of Labor Statistics, says, “The economy will continue generating jobs for workers at all levels of education and training, although growth rates are projected to be faster, on average, for occupations generally requiring a postsecondary award (a vocational certificate or other award or an associate or higher degree) than for occupations requiring less education or training. Most new jobs, however, will arise in occupations that require only work-related training (on-the-job training or work experience in a related occupation), even though these occupations are projected to grow more slowly, on average.”

Job losses, often erroneously assumed to be the result of international trade and globalization, are frequently reported in the media. Unfortunately, job gains are rarely covered in newspapers or on television, and therefore, not recognized by the general public. The bad news, which has had a cumulative negative effect on public opinion, is clearly revealed in public surveys.

This section appeared in Part III: Frequently Asked Questions and Talking Points of the book Grasping Globalization: Its Impact and Your Corporate Response, 2005.

John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.

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