We are witnessing one of the greatest periods of transformation in history. The convergence of powerful technological, political, economic and cultural forces are shaping the 21st century. For many manufacturers and workers, adapting to this reality is proving difficult—but necessary.

Technological advances in microelectronics, computers, telecommunications, biotechnology and other fields are changing the way we live and work. The fall of Communism, which added one-third of humanity to the capitalistic ranks, is sharply boosting global competition and creating new markets.

Globalization, made possible by the technological revolution, is empowering companies to source and sell anything anywhere. Concurrently, many traditional cultures are resisting the modernization pressures that globalization brings.

In response to these seemingly chaotic events, many faiths are retreating into religious fundamentalism in order to regain certainty in an uncertain world.

How did we get here?

Industrialization emerged in the late 1700s in Great Britain and early 1800s in the United States and Germany. The invention of the steam engine and its application to railroads enabled the speedy transport of mass produced goods across large distances. And the invention of electricity, which virtually turned night into day, established new paradigms.

The recent integration of new technologies, global markets and improved supply chain management has again altered our production and distribution models with fantastic results. Productivity has climbed to new highs while innovation has flourished. The shift from brawn power—use of muscle on the factory floor—to brainpower is nearly complete. Today, self-directed workers operate in teams and apply more sophisticated skills to create and run new processes.

What is the result?

The manufacturing contribution to GDP is declining—from 22 percent in 1979 to 12.9 percent in 2002. Yet, output continues to rise while the number of workers, as well as inflation-adjusted prices, continue to fall.

We've seen these trends before. In 1940, 9.5 million U.S. workers were employed on farms. By 2003, this number fell to 2.3 million. Yet, U.S. agricultural output skyrocketed. In the process, the U.S. did not lose 7.2 million farm jobs: they shifted to emerging industries resulting in higher standards of living and a more prosperous economy.

Since 1970, the number of working Americans has grown by 85 percent to 131.5 million. According to the Labor Department, the U.S. will generate another 21.3 million net jobs from 2002 through 2012. However, manufacturing jobs have fallen from a high of 21 million in 1979 to 14.4 million in August 2004. Many blame this on rising imports and offshoring. But analysis reveals that new technologies, high levels of productivity and improved manufacturing processes are the primary causes.

Consider this. U.S. job churn results in the average loss of 31 million jobs annually. But new ones are created even faster. In turn, resources are shifting from low-technology production to higher value, higher technology processes that create new industries and higher skilled, higher paying jobs.

This pattern is not new. Automobile workers replaced buggy makers, and ATMs and voice mail eliminated many bank teller and receptionist jobs.

Looking forward, manufacturers must compete less on price and more on product design, branding strategies, productivity, flexibility, quality and responsiveness to customer needs. This puts a high premium on skills.

Consequently, it's no surprise that unemployment is lower among workers with higher levels of education. For example, in August 2004, the U.S. unemployment rate for workers age 25 years and older without a high school diploma was 7.5 percent. It declined to 4.7 percent for high school graduates, 4.1 percent for those with some college education, and 3 percent for college graduates.

In an attempt to adapt, companies are increasingly specializing in more complex, value-added goods and services. In turn, workers are seeking greater expertise. This pattern, however, is not without consequences. The previous shift from an agrarian society to an industrial economy compelled workers to leave farms in search of factory jobs. Workers were required to learn new skills. But the skills demanded today are far more sophisticated, and are probably creating even more fear and anxiety than before.

As the U.S. manufacturing sector evolves, less competitive industries will increasingly demand protection via creative subsidies, quotas and regulations from policymakers. Higher tariffs will be more difficult to obtain. In the past, different tactics were used. For example, in the early 19th century, the English Luddites destroyed textile machines because they replaced weavers.

Since protectionism will result in the further erosion of manufacturing jobs, it will be necessary to establish long-term, pro-trade advocacy efforts. But, policies that support life-long learning and global integration will help prepare our workers and companies for the challenges ahead. And companies that nurture proactive global corporate cultures and learn faster than their competitors likely will be successful in the next decade.

This article appeared in World Trade Magazine, November 2004.

John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the ManzellaReport.com, is a world-recognized speaker, author and nationally syndicated columnist on global business, trade policy, labor, and economic trends. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.

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