Advanced Manufacturing Is a Key Cog in U.S. Economy

March 29, 2018
Engineers discuss plans in factory

Despite a long-term decline in its workforce, U.S. manufacturing remains one of the nation’s largest and most productive sectors. And within that sector, “advanced” manufacturing has an outsize impact on U.S. output, wages and trade, according to an article in the Regional Economist.

Although the industries that make up advanced manufacturing historically have employed only about 45 percent of manufacturing employees, their output makes up to 53 percent of manufacturing output, noted Regional Economist Charles S. Gascon and Senior Research Associate Andrew Spewak.

They defined advanced manufacturing as those industries that:

  • Spent more than $450 per worker on research and development
  • Employed at least 21 percent of the workforce in jobs that require a high degree of technical knowledge

“These two metrics quantify the high level of development, design and technical work that is needed to initially develop advanced products,” the authors wrote. And these products drive productivity gains throughout the economy, they added.

Gascon and Spewak identified 35 manufacturing industries—ranging from auto manufacturing to fuel production—that meet this definition. They also noted that a firm is classified as a manufacturer if its main purpose is to make goods, regardless of how much it actually participates in the production process.

“Consider Apple: Its purpose is to produce electronics, so it is a manufacturing firm even though it contracts production to other suppliers and has many employees developing software,” they wrote.

Employment and Output

From January 1997 to the end of the Great Recession in June 2009, advanced manufacturing lost over 2 million jobs, with the bulk of these losses coming from computer and electronics manufacturing (720,000 jobs) and primary metals manufacturing (450,000 jobs), Gascon and Spewak wrote. As a result, advance manufacturing’s share of U.S. private sector jobs fell from 7.5 percent to 4.9 percent during this period.

From June 2009 to March 2017, advanced manufacturing employment increased 6 percent, though its share of private sector jobs edged down to 4.5 percent.

Despite this drop in jobs, output by these industries rose due to productivity gains. From 1997 to 2015, real output increased by over 50 percent. In fact, advanced manufacturing was 40 percent more productive than the private sector as a whole, Gascon and Spewak noted.

At the same time, these industries represented a disproportionate share of the country’s exports. In 2016, advanced manufacturing accounted for 60 percent of the dollar value of U.S. exports, they added.

Wage Premium

Manufacturing is made up of two types of workers:

  • Production workers, those who actually make the goods
  • Nonproduction workers, those who work in administration, management and other occupations, the authors wrote

Gascon and Spewak said wages in advanced manufacturing are high, with the average worker (both production and nonproduction) earning more than $1,600 per week. Wages were highest in computers and electronics manufacturing ($2,300) and chemical manufacturing ($1,900), they noted.

“Today, the average advanced manufacturer makes $1.53 for every $1 that the average private sector worker makes,” Gascon and Spewak wrote.

In contrast, workers in nonadvanced manufacturing sectors earn essentially earn the same wage as other private sector workers, they noted.

“Advanced manufacturing employment as a share of private employment has steadily declined over the years, but the sector remains a significant cog in the U.S. economy,” Gascon and Spewak concluded.

Additional Resources

This blog offers commentary, analysis and data from our economists and experts. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

Email Us

Media questions

All other blog-related questions

Back to Top