There has been a great deal of press about advanced manufacturing since the establishment of advanced manufacturing hubs by the Obama administration. However, most people don't know what this really means.
The Brookings Institution recently released a new report that provides the answer: "America's Advanced Industries: What They Are, Where They Are, and Why They Matter." The report "provides a wide-angle overview of the advanced industry sector that reviews its role in American prosperity, assesses key trends, and maps its metropolitan and global competitive standing before outlining high-level strategies to enhance that."
New technologies such as advanced robotics, 3-D printing and the “digitization of everything” are part of these advanced industries, but "the sector encompasses 50 industries ranging from manufacturing industries such as automaking and aerospace to energy industries such as oil and gas extraction to high-tech services such as computer software and computer system design, including for health applications."
An industry had to meet both of the following criteria to be identified as an advanced industry:
- "An industry's R&D spending per worker must fall in the 80th percentile of industries or higher, exceeding $450 per worker.
- The share of workers in an industry whose occupations require a high degree of STEM knowledge must also be above the national average, or 21 percent of all workers."
Key findings of the overview of this sector are:
1. "Advanced industries represent a sizable economic anchor for the U.S. economy and have led the post-recession employment recovery."
- Sector grew at a rate of 5.4%, 30% faster than economy
- Average earnings increased almost five times as fast as overall economy
- Employs 12.3 million U.S. workers or about 9% of total U.S. employment
- Employs 80% of the nation’s engineers
- Performs 90% of private-sector R&D
- Generates approximately 85% of all U.S. patents
- Accounts for 60% of U.S. exports
2. "The advanced industries sector is highly metropolitan and varies considerably in its composition and depth across regions…in nearly every U.S. region…"
- 100 largest metro areas contain 70% of all U.S. advanced industries jobs.
- San Jose is the nation’s leading advanced industry hub with 30.0% of its workforce employed in the sector; Seattle follows with 16.0% of its local jobs in advanced industries; Wichita (15.5%); Detroit (14.8%), and San Francisco (14.0 %).
- Advanced industries account for more than one in 10 jobs in nearly one-quarter of the country’s major metro areas.
Clustering occurs in a variety of configurations.
- Grand Rapids, MI ─ automotive
- Portland, OR ─ semiconductor
- Wichita ─ aerospace manufacturing
- Bakersfield and Oklahoma City ─ strong energy specializations.
- Boston, San Francisco, and Washington ─ services such as computer systems design, software, and research and development
- San Jose, Detroit, and Seattle ─ depth and balance across multiple advanced industry categories.
Number of extremely dense concentrations of advanced industry has declined
- In 1980, 59 of the country’s 100 largest metropolitan areas had at least 10% of their workforce in advanced industries.
- By 2013, only 23 major metro areas contained such sizable concentrations.
What makes this report especially worthwhile is that you can put in the name of one of these metropolitan hubs and get the basic statistics for its advanced industries sector. When I put in San Diego, I was surprised that San Diego only ranked 14th out of the 100 metropolitan hubs. In 2013, the advanced industries sector represented 21.2% of the Gross Regional Product and 176,280 jobs, for a 12.3% share of all jobs. This may be because San Diego has only a handful of Fortune 500 companies and very few corporations of over 500 employees. It is more of a branch or subsidiary metropolis rather than a headquarters town. However, San Diego's advanced industries sector is very balanced compared to 25 years ago when aerospace and defense dominated the region. The report listed San Diego as having the following industries:
- Scientific Research and Development Services
- Architectural, Engineering, and Related Services
- Management, Scientific and Technical Consulting Services
- Computer Systems Design and Related Services
- Navigational, Measuring, Electromedical, and Control Instruments Manufacturing
U.S. Advanced Industries Losing Ground in Global Competition
3. "The United States is losing ground to other countries on advanced industry competitiveness…most productive advanced industries in the world, behind only energy-intensive Norway. However, this competitiveness appears to be eroding."
- The sector’s employment and output as a share of the total U.S. economy has shrunk since 2000.
- U. S. employment in advanced industries is low by international standards and falling rapidly.
- Since 1999. U.S. has had a trade deficit of $500 - $600 billion.
- U.S. share of global R&D and patenting is falling much faster than its share of global GDP and population.
- Among the nation’s most patent-intensive regions, just two—San Diego and the San Jose-San Francisco combined area—rank in the global top 20 and just two more (Boston and Rochester) score in the top 50.
- The sector faces a labor supply challenge as only 15 of the large metropolitan areas are home to more STEM graduates than Finland, the global leader and 33 metropolitan areas rank below Spain at #24 globally.
In the concluding section of the report, “Implications: Strategies for Promoting U.S. Advanced Industries,” the authors write that their "assessment of the advanced industry sector points to significant opportunity—but also challenges…On the positive side, the combination of intensive technology investment and highly skilled STEM workers in the advanced industry sector represents a potent source of U.S. prosperity—including for workers without a bachelor’s degree. Advanced industries power the national economy and their success is a prerequisite for building an opportunity economy in the United States…. America’s advanced industries are not national. They are local, and in regions like Austin, Boston, San Diego, Seattle, and Silicon Valley they are world-class hubs of prosperity."
They warn: "The deterioration of the nation’s balance of trade in advanced technology products over the last decade raises especially sobering questions, not just about trade policy, but about the long-term vitality of the sector. Likewise, too few regional advanced industry ecosystems now retain the technology inputs, labor pools and supplier density to generate the synergies that drive global competitiveness. Making matters worse is the gridlock in Washington that continues to preclude national action to strengthen advanced industries through sensible corporate tax reform or strategic trade liberalization and enforcement."
The authors recommend that the nation’s private- and public-sectors should:
Commit to innovation ─ "both the private and public sectors need to radically rethink their technology development strategies…need to ramp up the scale of their innovation efforts and reconsider the formats through which they conduct them. More R&D conducted within new, more open or networked innovation models will be necessary in the coming years."
Recharge the skills pipeline ─ "both private- and public-sector actors—often in partnership—need to bear down on improving the availability of skilled workers by developing smart, industry-led, sector-specific, regional skills initiatives. Overall, firms need to get much more involved in developing the skills pipeline and the public sector must become much more responsive to their needs."
Embrace the ecosystem ─ "firms, governments, and other relevant actors must work to strengthen the nation’s local advanced industry ecosystems—the regional industrial communities within which firms operate…. in too many places America’s advanced industry clusters are thin or eroded, after decades of offshoring and disinvestment. It is critical, therefore, that private- and public-sector leaders work together to renew the vitality of the nation’s regional advanced industries ecosystems—the most durable foundations of U.S. competitiveness in the sector…"
I completely agree with the authors' concluding statement: "America’s advanced industries are a critical anchor of national prosperity. Business leaders, government, and the civic sector need to work together in new ways to augment their vitality."