Do you want to stimulate inclusive growth? Relaunch manufacturing

Long before COVID-19 dominated our lexicon and our lives, America’s growth model was showing signs of strain.

With years of uneven growth across sectors and geographies, some industries have thrived while others have weakened. Large hubs have exploded, but countless small communities have fallen through the cracks. The labor market has become increasingly polarized, with the number of people in high and low-wage jobs increasing, while the number of people in middle-wage jobs has declined.

These forces have fueled inequalities, and the pandemic has only exacerbated this trend. If we don’t act, more people will be left behind and the U.S. economy will suffer.

A revitalization of the U.S. manufacturing sector – an industry that was once the beating heart of the nation’s economy – could be fundamental to addressing these inequalities while stimulating sustainable and inclusive growth.

Today, the manufacturing sector accounts for only 10% of US GDP and jobs, but generates 20% of the country’s capital investment, 35% of productivity growth, 60% of exports and 70% of business research and development spending.

Despite its disproportionate contribution to the economy, the manufacturing sector has not experienced the same prosperity as other sectors in recent years. Although it has increased in absolute terms, its relative global share has increased from 25% to 17% over the past two decades.

As the manufacturing sector shrank, inequalities increased. Today, the United States carries the title of the most unequal economy in the G7.

Research from the McKinsey Global Institute found that restoring growth and competitiveness in 16 key manufacturing industries could increase annual GDP by more than 15%. Strengthening the sector could also solve pervasive supply chain issues wreaking havoc around the world, mitigating the short-term disruption caused by the pandemic while improving global competitiveness in the medium to long term.

The manufacturing sector is full of companies that generate significant shareholder value. Investors and capital markets should start paying attention.

Renewing the capital stock in the US manufacturing sector could help the industry realize its full potential and generate billions of dollars in investment. This would serve not only to modernize and digitize manufacturing infrastructure, but also to trigger a virtuous cycle of increased economic activity in communities across the country.

Strengthening investments in this sector could also play a major role in tackling territorial inequalities from coast to coast, especially in communities excluded from booming technological and financial industries.

Already, manufacturing is the main economic driver and the main employer in about 500 counties across the country. In these communities, the industry employs a larger portion of the overall population – and it does so in a more inclusive way. In most cases, employees don’t need a four-year degree and they enjoy higher salaries than service jobs, making manufacturing a key tool in opening up more opportunities to more people. of people. These counties give us a model of success.

The manufacturing revival could also create up to 1.5 million jobs, especially among mid-skilled workers, which would help recalibrate the U.S. labor market and strengthen the middle class.

Revitalizing manufacturing means revitalizing communities.

To reap the benefits of a vibrant manufacturing industry, emphasis will need to be placed on the modernization and development of the workforce.

The industry is undergoing seismic shifts towards a digital, automated, advanced and sustainable future, but many small players lack the tools they need to keep pace. It will take innovation and participation across the economy to provide these businesses with the people and capital they need to thrive. Private and public sector leaders can play a role in modernizing small manufacturing operations by providing targeted financial programs and business accelerators.

As digitization sets in, manufacturing needs to attract more talent into the pipeline and develop the skills of its existing workforce.

There are now a record number of jobs open in the US manufacturing sector. In October of last year, that number surpassed one million, the highest on record and greater than the entire population of San Francisco.

To attract new talent, it will be necessary to strengthen the reputation of the industry among workers. To this end, companies should engage with schools and communities through university partnerships and trade school funding. In doing so, they will attract young people to the industry’s innovations and the benefits it offers workers, perhaps more importantly, its viable jobs with career advancement opportunities.

But attracting new entrants to the labor market will not be enough on its own – upgrading the skills of existing workers, especially in the area of ​​digitization, must also be a priority. Without it, the gap between the capabilities people have today and those that many vacant jobs require will only widen. Combined with the right training of workers, digitization can make the workforce more productive, their work more enjoyable and the industry more competitive.

The stars might soon align. The public and private sectors are increasingly determined to support an industry that has long been a pillar of the economic fabric of the United States.

The manufacturing sector is ready to resume its place as the engine of the economy, but leaders must focus their collective energy on three actions:

1. Encourage investors and capital markets to look to the manufacturing sector

2. Attract new talent and train the workforce for the jobs of tomorrow

3. Updating and digitizing the American manufacturing infrastructure

If the manufacturing industry capitalizes on this opportunity by investing in innovation and workforce development, the gains will propel sustainable and inclusive growth while simultaneously fueling U.S. competitiveness on the global stage.