It should surprise nobody to learn that the number of U.S. workers employed in manufacturing has been on the decline over the past decade, with annual employment dropping from 17 million in 1997 to just over 14 million in 2006. Those are the hard, fast numbers that the U.S. Department of Labor's Bureau of Labor Statistics (BLS) compiles, and for some industry observers, those are the only numbers that are relevant to a discussion of the future of manufacturing in the United States. But what exactly is manufacturing? Are the people who make products for U.S. companies being paid more, or less, than they used to be? Are they better educated, or less so? What about their productivity -- is there any evidence that today's manufacturing workforce is doing a better job at making stuff than previous generations of workers? And what happened to those 3 million jobs, anyway? Let's find out.

First of all, "manufacturing" as defined by the BLS refers to "establishments engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products." That includes all the industries typically thought of as manufacturers based on the North American Industry Classification System (NAICS) codes, including food, beverage and tobacco; textiles; apparel; leather and wood products; paper and printing; petroleum and coal; chemicals; plastics and rubber products; metals and fabricated metal products; nonmetallic mineral products; machinery; computers and electronic products; electrical equipment and components; transportation equipment; and furniture.

Manufacturing Jobs Are Down Employees (in millions)

Source: U.S. Dept. of Labor, Bureau of Labor Statistics

The dramatic decline in manufacturing jobs is a relatively recent development. Over a 20-year period from 1982-2001, according to BLS statistics, the number of people employed in manufacturing in the U.S. fluctuated modestly between 16 million and 18 million. It wasn't until the recession at the beginning of this century that employment dipped into the 15 millions and then into the 14 millions. Thanks to a steady dip throughout this decade, it's quite likely that manufacturing employment could drop into the high 13 millions by the end of 2007; preliminary numbers for March 2007 put the total at 14.03 million, the lowest employment level since 1950, more than a half-century ago.

Total employment figures only tell part of the story, though. The percentage of U.S. workers employed in manufacturing has dropped from 16.5% in 1987 to 10.8% today. Even so, as the National Association of Manufacturers (NAM) points out, when you consider that manufacturing accounts for $1.5 trillion in gross domestic product (GDP), if U.S. manufacturing was a country, it would be the eighth largest economy in the world. In fact, three manufacturing sectors -- food and beverage, computers and high-tech, and transportation/motor vehicles -- account for roughly 30% of the total manufacturing GDP.

Productivity Is Up Percent change from previous year

Source: U.S. Dept. of Labor, Bureau of Labor Statistics

The most significant counterbalance to the drop in total employment has been the dramatic rise in productivity. Indeed, during the recession years, productivity (as measured by output per hour) rose by 7.0% in 2002 and 6.2% in 2003. According to NAM, over the past two decades, manufacturing productivity has grown by 94%, considerably faster than the rest of the U.S. business sector, where productivity grew by 38% over the same period.

Although the total number of people employed in the manufacturing industry continues to shrink, their compensation has been on a steady rise, evidence that productivity pays off in terms of higher salaries. As of 2005, the average full-time manufacturing employee earned $50,180, according to the U.S. Department of Commerce's Bureau of Economic Analysis (BEA). That represents an 11.8% gain since 2002. The typical manufacturing manager earns $106,588, according to the IndustryWeek 2007 Salary Survey.

Production workers tend to be much better educated than their counterparts of years past. The NAM cites statistics that indicate the number of high school graduates working at manufacturing facilities has steadily risen by 10% over the past three decades. Today, nearly 50% of production workers finished high school, and roughly 25% have attended college, though less than 10% have degrees.

Salaries Are On The Rise Average hourly earnings of production workers

Source: U.S. Dept. of Labor, Bureau of Labor Statistics

However, as production becomes more specialized and more reliant on precision machining, there is concern of a widening skills gap between what young people are learning in school and the specific needs of manufacturers. According to a NAM/Deloitte Consulting study, 80% of manufacturers anticipate a shortage of skilled production workers over the next couple years, while 35% believe there will also be shortage of scientists and engineers.

View article on one page