The New Manufacturing Services Employment Hybrid
by Jerry Jasinowski
Apple CEO Tim Cook recently announced that Apple will invest $1 billion in “advanced manufacturing,” in an apparent effort to respond to President Trump’s stated intention to bring manufacturing employment back to America. At the same time, Apple offered up a new page on its website boasting of all the millions of jobs it has created, most of which were in the service sector. Why is Cook doing this?
The rationale for Apple’s $1 billion investment in advanced manufacturing is the realization by Tim Cook that the new advanced manufacturing will be a manufacturing service hybrid. Apple is simply going where the jobs are and realizes that most manufacturing companies have become service companies too. You can see that in everything from the technology to the employment in the modern manufacturing firm.
The main challenge to manufacturing today is an acute shortage of workers who have the skills to work in modern manufacturing. In reality, manufacturing has become a hybrid that combines manufacturing and services in a way that is blurring the traditional distinction between the two. As manufactured products and processes become more complex and high tech, they give rise to a host of skilled positions in nonmanufacturing such as logistics and transportation, customer service, technical support, regulatory and safety specialists, distribution employees trained in use of information driven tools for receiving, storing and picking, the list goes on.
According to a recent study by the McKinsey Global Institute, 34 percent of manufacturing jobs are service-type functions. And there are millions more in service industries that tend to spring up around manufacturing facilities. Thus, we are seeing growing evidence that manufacturing supports far more jobs in other sectors than previously thought. For example, Intel Corporation has a plant in Washington County, Oregon, employing 16,250 people in the design, manufacture and marketing of microprocessors. A study by ECONorthwest concluded that every 10 jobs there supported another 31 jobs in other sectors at above average wages -- a three to one job creation ratio.
In other words, advanced manufacturing is so intensely dynamic that it supports many jobs in service and other sectors. A recent study by the Manufacturing Institute found that a typical manufacturing facility that employs 100 people actually supports 158 jobs, 100 directly, and another 58 through employment in suppliers. A new study by MAPI also demonstrates that every new manufacturing job supports 3.6 jobs in other sectors. That would be 32 percent of all employment. In the more advanced manufacturing sectors, such as electronic computer manufacturing, the multiplier can be as high as 16 to one, meaning every manufacturing job supports 15 other jobs.
Tim Cook’s recently announced $1 billion investment in advanced manufacturing is revealing because it underlies that the new manufacturing is a combination of manufacturing, technology, and service employment.
Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements. May 2017