“The COVID-19 pandemic has underscored manufacturing’s role in providing products that are critical to health, safety, national security, and the continuity of multiple industries,” said McKinsey in a recent discussion paper, Building a More Competitive US Manufacturing Sector. “It has also revealed the extent to which global supply chains are exposed to shocks and disruptions. All of this has occurred at a moment when new technologies, process innovations, and demand growth are reshaping the sector worldwide. The United States can seize on these developments to make its own manufacturing sector more competitive.”
Manufacturing jobs helped build the US middle class after WWII. In the 1950s, it accounted for roughly 30% of employment and close to 30% of GDP. But manufacturing has significantly declined in the intervening decades, now comprising only 8% of the workforce and 11% of GDP. Manufacturing growth has particularly slowed down over the past 30 years, from 4.9% in the 1990s to 1.4% in each of the past two decades.
Despite its dramatic decline, manufacturing continues to have a disproportionate impact on the US economy, accounting for 35% of productivity growth, 55% of patents, 70% of R&D spending, and 60% of exports. According to McKinsey, these outsize economic contributions uniquely position manufacturing to strengthen the US recovery over the long term.