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Synergy

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I recently returned from a conference on the future of manufacturing held at the famous Ditchley House in the United Kingdom, Winston Churchill's abode during WWII, where about 50 manufacturing experts from universities and corporations around the world discussed an expansive range of manufacturing issues. With respect to developed countries, and especially the United States, the participants reached consensus on several important matters.

Predictably, there was universal agreement among the participants that manufacturing is extraordinarily important to economic growth because of its contributions to technology, productivity and export competitiveness. There was a consensus also that the U.S. is experiencing a major manufacturing renaissance driven by reduction of costs -- especially in energy and labor, the two key determinants of productivity in manufacturing.

There was much discussion on the reduction of labor costs in the U.S. that is enhancing U.S. competitiveness with other nations, such as China, that are seeing their labor costs escalate. I pointed out that though the cost of labor in U.S. manufacturing is declining, manufacturing jobs still pay much better than typical U.S. jobs in services industries.

Predictably, much of the conference was devoted to rapidly advancing technologies -- from robots to 3D printing -- that are transforming the world of manufacturing. The participants recognized that manufacturing is the seedbed of most innovation, but most were surprised to learn that manufacturing accounts for two thirds of R&D and 90 percent of patents in the U.S.

The one continuing theme through all of the sessions that caught and kept my interest was the synergy between manufacturing and services that is blurring the traditional distinction between the two. As manufactured products and processes become more complex and productive, they give rise to a host of skilled paraprofessional and professionals positions in non-manufacturing 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 and on.

Consequently, according to a recent study by the McKinsey Global Institute, 34 percent of manufacturing jobs are service-type functions. Roughly 4.7 million U.S. service jobs could be classified as manufacturing. If we add those to the 12 million manufacturing jobs reported by Bureau of Labor Statistics we have 17.7 million manufacturing jobs.

And there are millions more in service industries that tend to spring up around manufacturing facilities. This is a critical distinction because much of the popular debate about the importance of manufacturing hinges on the number of people employed in industry. We really need to see the whole picture.

You can access the paper I presented at Ditchley here.

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.