Reinventing Manufacturing

Reinventing Manufacturing
3
Strengthening California’s
Environment for Manufacturing
Long-standing notions about manufacturing in the US
are being upended as a result of technological advance
and changing cost factors globally. New technologies,
such as 3D printing and other digital tools, 14 are playing
growing roles in manufacturing and are pushing down
labor’s share of total production costs. As cost factors
shift, manufacturers are beginning to move operations
closer to end markets, 15 while others are moving back to
the US due to intellectual property, quality, and time-tomarket
issues that are better controlled domestically.
Given stagnating household incomes nationally and
producers’ concerns about skills shortages, manufacturing
has become the focus of resurgent interest both
because it is a source of middle-income jobs with career
paths and because it has the potential to drive a new
wave of innovation. Manufacturing is key to the strength
of the US economy for multiple reasons, including its
12.1 percent share of gross domestic product in 2015, 16
and its workforce of over 12.3 million. 17 In addition to
its role in direct job creation, manufacturing has the
following economic impacts:
Manufacturing generates high levels of output and
employment throughout the economy. Studies have
found that each manufacturing job creates more than
two additional jobs, compared to multipliers of 1.5
for jobs in business services and below 1.0 for retail
trade. 18 Every dollar in final sales of manufactured
products supports $1.37 in additional economic activity—more
than double the multiplier effects for the
retail and wholesale trade sectors. 19
Manufacturers are responsible for approximately 70
percent of all research and development (R&D) conducted
by private businesses in the US. R&D spending
in manufacturing grew from 8 percent of sales
in 2000 to 11 percent in 2008, and has remained
relatively flat since. 20 Over the period from 2000
to 2008, 22 percent of manufacturing companies
reported product or process innovations compared
to only 8 percent of non-manufacturing companies. 21
This concentration of R&D spending in manufacturing
is the backbone of the domestic innovation infrastructure,
much of it occurring in high-technology sectors
such as pharmaceuticals (23 percent of total private
US R&D spending), aerospace (19 percent), and electronic
instruments (12 percent). 22
Manufacturing is the largest contributor to US exports,
with nearly $1.2 trillion exported in 2014.
Manufactured goods account for 74 percent of all US
goods exports and 51 percent of total exports. 23
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