Durable goods manufacturing is growing in the United States. And according to a recent Association for Manufacturing Technology study its impact on the economy is reaching $1 trillion a year. ”Machine tools and technologies other than computers and microprocessors receive inadequate credit for America’s prosperity,” said Joel Popkin of Joel Popkin & Company, a Washington D.C.-based economic consultant.
According to Popkin, recent studies have concluded that contributions of enhanced productivity in traditional manufacturing equaled – and sometimes exceeded – those of the high-tech sector, including computers and information technology.
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The study, “Producing Prosperity – Manufacturing Technology’s Unmeasured Role in Economic Expansion,” found a “remarkable” growth in durable goods producing industries. The study found a rate of increase in real output between 1992 and 1997 about twice the rate of the overall economy, is not the full measure of the benefits associated with advanced manufacturing technologies.
In fact the study found that between 1959 and 1996, manufacturing productivity grew about 40 percent faster than productivity in the overall non-farm economy. Between 1992 and 1996, durable good manufacturing, such as autos, appliances, and aircraft achieved multifactor productivity gains averaging 4.2 percent a year. (Multifactor productivity is the calculated difference between the rate of growth of output and the weighted change in capital.
Leonard Lardaro,University of Rhode Island economics professor, said the study results could mean good things for Rhode Island’s manufacturing sector, but could also have an adverse effect. Two-thirds of the industry’s productivity in the state is in durable goods.
”Durable goods is a very major element in Rhode Island,” he said. “But the industry tends to have a bad cyclical cycle, so it tends to be vulnerable in slower economic times.”
According to the study, increased output in industry is the direct result of changes in the manufacturing process – including the introduction of technology.
The study found that today’s manufacturers must constantly look for a new way to meet the “faster, cheaper, mantra of today’s economy” and to do that they have focused on every aspect of the manufacturing process looking for new ideas, new designs and new ways of doing things. As a result, the study found eight key industries saved a combined total of $24.3 billion in payroll costs in 1997 alone, and $80 billion between 1992 and 1999 – because of productivity increase.
”This study proves that much of the gain in productivity reflects a revolution in manufacturing technology,” said Don F. Carlson, president of the Association for Manufacturing Technology. “Those who can’t compete on the faster, cheaper mantra don’t survive.”
Terry Charles, director of marketing for the Rhode Island Manufacturing Extension Services (RIMES), agreed. RIMES, a partnership between the local businesses and the state and federal government started four years ago to assist local manufacturers compete in the global marketplace, has been advocating lean manufacturing, a flexible process that manufactures products at lower cost to all of its clients. And though the study suggests advancement in manufacturing technology could reduce the peaks and valleys of the U.S. business cycles, perhaps avoiding recession, Lardardo doesn’t agree when it comes to Rhode Island.
”These types of industries are reflective of the overall economy,” he said. “If the economy slides, you can expect manufacturing to [slide]. We’ve had a very strong economy and in Rhode Island the rate of increase was not what we had hoped.”
As a result, Lardaro said, if companies don’t learn how to compete now, when the economy slows, they will be lost.
