Share of Global Manufacturing Valued-Added

The manufacturing is still a major contributor to the economies of developed countries despite politicians  and others lamenting the loss of manufacturing jobs according to an article in the OECD Observer. Manufacturing in the OECD member nations accounted for some 60% of the global manufacturing value-added in 2010.

Global share of manufacturing value-added in 2010:

Click to enlarge

Some of the key points from the article include:

  • Manufacturing jobs declined in most but not all OECD countries  in recent years.
  • Even in Germany it fell 5% from 2000 to 2008 but this is very low compared to UK and US where they fell over 25% and 20% respectively.
  • Manufacturing employment jumped by 30 million China in in the same period.
  • Its hard to see major job growth occur in manufacturing in OECD countries.

Source:  How manufacturing can create value and jobs, OECD Observer

From A Reality Check on American Manufacturing in Bloomberg BusinessWeek:

Manufacturing matters, especially this year, when industrial Midwestern states are where a big part of the electoral battle is being fought. But globalization, productivity gains, and advances in automation make it unlikely the sector will ever return to its place of prominence in the U.S. economy. Rather than promising to restore manufacturing to unachievable heights, Obama and Romney should focus on policies that can keep the U.S. competitive without wasting resources, awarding special treatment, and undermining sound regulation. (emphasis added)

So despite politicians’ talk of a manufacturing revival in the U.S. it is unlikely to happen anytime soon. The cost savings companies can achieve by locating their production facilities in low-cost labor countries is too high to ignore especially when they are under pressure to generate higher earnings with declining or stagnant sales. The article further noted:

The sector’s overall slide has been under way for decades. Over the past 12 years, U.S. manufacturers have cut 31 percent of their workforce, or nearly 6 million workers. Their contribution to gross domestic product fell to 12.2 percent in 2011 from 22.7 percent in 1970.

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