The Productivity Gap



America has lost about a third of its manufacturing jobs in the last decade. During the same period, around 42,200 factories shut their doors
[i]. However, the total output of America’s factories, stated in constant dollars, has continued to increase![ii] The increase is due to dramatic improvements in labor productivity. American manufacturing productivity leads the world.




Government reports indicate there is a substantial productivity gap between large manufacturers and smaller manufacturers. In 2007 (the latest data available), smaller (>500 employees) manufacturers account for nearly 99% of all American manufacturers, about 72% of manufacturing employment and about 60% of the total value-added for all U.S manufacturers[iii]. However, it is the few large manufacturers that enjoy the productivity advantage, not the many smaller manufacturers, who are struggling to compete.









Source: U.S. Census Bureau
[iv]



 
The existence of the gap makes sense, since productivity improvements result from innovation and from the implementation of new technologies, including business and manufacturing practices as well as equipment. Larger manufacturers are more likely to have access to the human, technical and financial resources necessary to innovate and to implement new technologies than are smaller firms.

American’s manufacturing productivity edge is concentrated in a relatively few large manufacturers, while the great majority of American manufacturers are significantly less productive. Further, many smaller manufacturers are suppliers to larger firms. The large manufacturers rely on smaller firms to meet stringent quality, delivery and cost requirements.




The smaller firms need to close the Productivity Gap. To continue to lag obviously isn’t sustainable. This is no mean task. The purpose of the
www.JeraSustainableDevelopment.com website is to provide access to free and low cost resources that that can help the smaller manufacturer formulate a plan for competing sustainably within the realities of the 21st century.




This blog posting is abstracted from a Jera Sustainable Development Commentary titled The Boots on the Ground. Copies of the complete Commentary are available at no charge. Request through the Contact Jera tab on the website.




Thoughtful comments are always welcome. It may be necessary to click on the title of this posting to open the comments section.



…  Chuck


 








[i] Factory closing figure from The American Prospect, quoted in Business Insider, www.businessinsider.com/deindustrialization-factory-closing-2010-9


 



[ii] There is some dispute over whether the increase in total manufacturing output is real or not. The official Bureau of Labor Statistics figures are used here. The Information Technology and Innovation Foundation (ITIF), an organization that I respect highly, offers an alternative view in The Case for a National Manufacturing Strategy, page 18(f), 26 April 2011. That document is available at www.itif.org/p-reports


 



[iii] These figures are from the U.S. Census Bureau, 2007 Economic Census: Manufacturing (November 2010), as cited in the Delivering Measurable Results to Manufacturing Clients (March 2011), the 2009 full year report of the Manufacturing Extension Partnership, a service of the National Institute for Science and Technology, part of the U.S. Government Department of Commerce. Download at www.nist.gov/mep/upload/MEP-Measuring-Results-Mar11-FINAL.pdf


 



[iv] Productivity Gap chart data from the U.S. Census Bureau, 2007 Economic Census: Manufacturing (November 2010 ), as cited in the Delivering Measurable Results to Manufacturing Clients (March 2011), the 2009 full year report of the Manufacturing Extension Partnership, a service of the National Institute for Science and Technology, part of the U.S. Government Department of Commerce. Download at www.nist.gov/mep/upload/MEP-Measuring-Results-Mar11-FINAL.pdf