A new econometric forecast model shows there is ample potential for U.S. manufacturing to resurge and, by 2025 add a significant number of good-paying manufacturing jobs, add to GDP growth, and help create the first surplus in the nation's goods and services balance of trade since 1975.
Report sponsors were the Aspen Institute's program on Manufacturing and Society in the 21st Century and the Manufacturers Alliance for Productivity and Innovation (MAPI). The economic model and expert advice used for the projections were provided by the University of Maryland's Interindustry Forecasting Project (Inforum).
"The robust results presented in the study are achievable with only modest acceleration of current trends, and none of the policy recommendations mark a radical departure from current policy trajectories," said report author Thomas J. Duesterberg, executive director of Aspen Institute's Manufacturing and Society program. "But they require a willingness to change in a disciplined way."
Stephen Gold, MAPI President and CEO, agreed, and said, "With no changes in public policy the manufacturing base will continue to shrink as a share of GDP as it has for the past decade. With just a few policy shifts, however, manufacturing in America can experience a resurgence that will ensure new innovation, increased productivity, more jobs, and a rise in living standards on our shores."
Inforum was commissioned to make projections based on a target of moving manufacturing's share of GDP back to the level last seen in 1998 (approximately 15%), before the "dot-com" recession and the "Great Recession." Results were projected to 2025. Various scenarios were tested to determine what economic trends could power a change. The "manufacturing resurgence" scenario was then contrasted with a baseline forecast where the manufacturing value-added share would remain at today's level, approximately 11.5%.
The study found that by focusing on key drivers--exports and imports; capital investments; energy supplies; regulatory and tax policy; and the skills gap for manufacturing workers and researchers--the growth path for manufacturing and the U.S. economy could improve dramatically.
Possible improvements, according to the report:
* The manufacturing share of value-added in the resurgence scenario would grow to 15.8% of GDP in 2025, a proportion not seen since 1998, compared to 11.1% in 2025 under the baseline forecast.
* Manufacturing employment in the resurgence scenario would grow by 307,000 per year, or an increase of 3.7 million jobs by 2025, compared with essentially flat growth, or 23,000 workers per year, in the baseline scenario.
* Under such a scenario, by 2025, the nation's GDP would be $1.5 trillion larger than under "business as usual," with most of the increase coming from the manufacturing sector.
* The balance of trade in goods and services would see a dramatic transition under a manufacturing "renaissance," from its current deficit of $500 billion to a surplus of about $700 billion, including nearly $200 billion in manufactured goods. Under a baseline scenario, the country's balance of trade would continue to run deficits.
* Capital investment in equipment and software, one driver of innovation and productivity growth, would increase by 12.1% by 2025, relative to the baseline.
"At a minimum, this forecasting exercise ought to lend some hope that we can indeed look ahead to a manufacturing resurgence and the sustainable economic gains that it brings, if we choose to follow this path," said Duesterberg.
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