Darrell M. West and Christian Lansang
Manufacturing is enjoying a resurgence in the United States. After years of falling output and a diminishing percentage of the labor force, the last few years have seen renewed growth. According to PriceWaterhouseCoopers, the catalysts for this revival include factors such as the strengthening economy, workforce quality, tax policies, the regulatory environment, and transportation and energy costs. Yet in order to move forward, it is important to see how American manufacturing compares to that of other nations. In this report, we develop a global manufacturing scorecard that looks at five dimensions of the manufacturing environment: 1) overall policies and regulations; 2) tax policy; 3) energy, transportation, and health costs; 4) workforce quality; and 5) infrastructure and innovation.
For the analysis, we compiled data on 20 indicators and scored 19 leading nations on a 100-point scale. The countries analyzed included Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Netherlands, Poland, Russia, South Korea, Spain, Switzerland, Turkey, United Kingdom, and the United States.
The top ranked nations in overall manufacturing environment were the United Kingdom and Switzerland (both with 78 points out of 100), followed by the United States (77 points), Japan (74 points), and Canada (74 points). We found these nations performed well due to their policies, cost considerations, workforce investments, and infrastructure.
At the low end were nations such as Brazil (51 points), Indonesia (53 points), Mexico (56 points), Russia (56 points), and India (57 points). Generally, these places do not have advantageous tax policies and are not making adequate investments in education or infrastructure.
In addition, we compiled data on manufacturing output, manufacturing employment, and changes overtime. China is the top nation in terms of manufacturing output and the percentage of its national output that is generated by that sector. Poland meanwhile has the highest percentage of its workforce employed in manufacturing, followed by Germany, Italy, Turkey, and South Korea.
China is the top nation in terms of manufacturing output and the percentage of its national output that is generated by that sector. Poland meanwhile has the highest percentage of its workforce employed in manufacturing.
There have been important changes over the past few decades in country rankings based on manufacturing output. Most nations show fairly stable patterns over the past 40 years, but a few have increased their performance. One such example is India, which improved its output ranking from 14th in 1990 to sixth in 2015. In contrast, Spain had dropped in manufacturing performance from ninth in 2005 to 14th in 2015. The same is true for Russia, as it was ranked second in manufacturing output in 1980 but now has dropped to 15th in the world.
Based on our analysis, we make a number of recommendations for improving the manufacturing environment. Our suggestions include:
Pursue a governance strategy that emphasizes political and economic predictability, and open trade policies. Developing policies that provide access to global markets and facilitate technology diffusion will help the manufacturing sector.
Provide the proper financial incentives to promote innovation, education, and workforce development. This includes R&D tax credits and equipment expensing tax credits that help companies overcome the fixed costs of production and distribution. Additionally, providing grants and loans to domestic manufacturers can aid in the growth of businesses and their technology innovation.
Unlock 21st century tools such as Big Data, automation, and artificial intelligence. These forms of technology have the capacity to revolutionize manufacturing from the initial design of goods to the successful delivery of products.
Help small firms through technology research and workforce development. Technology development and its diffusion into the manufacturing sector leads to the creation of higher paying jobs, and workers with more developed skills.
Rules that encourage transparency of business practice help to alleviate corruption and its damaging ripple effects. Whistleblower protection and investing in detection capabilities can aid in weakening the roots of corruption.
Finance the necessary physical and digital infrastructure to support business development. Physical infrastructure such as roads, bridges, dams, and ports are necessary to connect supply chains as is the deployment of digital infrastructure such as high-speed broadband and mobile technology. The creation of adequate infrastructure helps companies operate efficiently and grow overtime.
China leads the world in terms of manufacturing output, with over $2.01 trillion in output (see Table 1). This is followed by the United States ($1.867 trillion), Japan ($1.063 trillion), Germany ($700 billion), and South Korea ($372 billion).
Manufacturing constitutes 27 percent of China’s overall national output, which accounts for 20 percent of the world’s manufacturing output. In the United States, it represents 12 percent of the nation’s output and 18 percent of the world’s capacity. In Japan, manufacturing is 19 percent of the country’s national output and 10 percent of the world total. Overall, China, the United States, and Japan comprise 48 percent of the world’s manufacturing output.
Table 1: Leading countries on manufacturing output, 2015
Country
Manufacturing Output (USD in billions)
Percent of National Output
Percent of Global Manufacturing
China
$2,010
27%
20%
United States
1,867
12
18
Japan
1,063
19
10
Germany
700
23
7
South Korea
372
29
4
India
298
16
3
France
274
11
3
Italy
264
16
3
United Kingdom
244
10
2
Taiwan
185
31
2
Mexico
175
19
2
Spain
153
14
2
Canada
148
11
1
Brazil
146
11
1
Russian Federation
139
11
1
Turkey
125
18
1
Indonesia
115
22
1
Poland
100
20
1
Switzerland
93
18
1
Netherlands
88
12
1
Source: United Nations Conference on Trade and Development, 2015
PROPORTION OF WORKFORCE EMPLOYED IN THE MANUFACTURING SECTOR
Poland is the leading country in terms of the percentage of its population employed in manufacturing (see Table 2). A total of 20.2 percent is employed there, followed by Germany (19 percent), Italy (18.5 percent), Turkey (18.1 percent), South Korea (16.9 percent), China (16.9 percent), and Japan (16.9 percent). About 10.5 percent of the American workforce is employed in manufacturing.
Table 2: Proportion of workforce employed in the manufacturing sector
Country
Total Number Employed in Manufacturing Sector
Percentage of Population Employed in Manufacturing
Poland
3,540,000
20.2%
Germany
7,911,000
19
Italy
4,090,000
18.5
Turkey
5,012,000
18.1
South Korea
4,499,000
16.9
China
128,869,000
16.9
Japan
10,958,000
16.9
Mexico
9,154,000
16.3
Russian Federation
10,260,000
14.4
Indonesia
16,363,000
13.5
Switzerland
612,000
13
France
3,396,000
12.4
Spain
2,332,000
12.3
Brazil
10,388,000
11.4
India
57,244,000
11.4
United States
16,381,000
10.5
Netherlands
898,000
10.4
United Kingdom
3,069,000
9.5
Source: International Labour Organization, 2017
CHANGES IN REGIONAL MANUFACTURING EMPLOYMENT, 1970-2011
There have been significant shifts in manufacturing employment between 1970 and 2011 (see Table 3). In developed countries, manufacturing comprised 16.8 percent of the workforce in 1970, but only 12.8 percent in 2011. In contrast, several regions have increased their focus on manufacturing. For example, manufacturing in East Asia (including China and South Korea) totaled 13.9 percent of the workforce in 1970, but 21.5 percent in 2011. Southeast Asia went from 11.4 percent in 1970 to 14 percent in 2011. India increased from 9.4 percent in 1970 to 11.6 percent in 2011.
Table 3: Percent of workforce employed in manufacturing, 1970-2011
Region
1970
1980
1990
2000
2007
2011
Developed Countries (U.S., Europe, Japan)
26.8%
23.9%
20.7%
16.9%
14.3%
12.8%
East Asia (China and South Korea)
13.9
22.5
24.3
20.9
21.2
21.5
Southeast Asia (Indonesia, Malaysia, Philippines, Thailand)
11.4
14.4
15.6
16.3
15.4
14.0
India
9.4
9.1
10.5
11.4
11.9
11.6
Latin America
15.5
15.4
15.3
13.2
12.4
11.5
North Africa
12.6
13.8
14.4
14.0
12.9
11.9
Sub-Saharan Africa
5.8
7.2
8.3
8.3
8.6
8.4
Source: United Nations Conference on Trade and Development, 2016
CHANGES IN COUNTRY MANUFACTURING OUTPUT, 1970-2015
Most countries have been fairly stable in their manufacturing output over the past few decades, but there have been some shifts since 1970. For example, in 1970, the top countries were the United States, USSR, Japan, Germany, China, the United Kingdom, France, Italy, and Canada (see Table 4). However, by 2015, the leaders had shifted to China, the United States, Japan, Germany, South Korea, India, Italy, the United Kingdom, and France.
Table 4: Changes in country rank ordering on manufacturing output, 1970-2015
Year
U.S.
Russia
Japan
Germany
China
U.K.
France
Italy
Canada
Spain
1970
1
2
3
4
5
6
7
8
9
10
1980
1
2
3
4
5
8
6
7
11
10
1990
1
7
2
3
8
6
5
6
11
10
2000
1
16
2
3
4
5
7
7
9
11
2005
1
14
2
4
3
7
6
5
10
9
2006
1
14
2
4
3
7
6
5
10
9
2007
1
12
3
4
2
8
6
5
13
10
2008
1
9
3
4
2
7
6
5
14
11
2009
1
17
3
4
2
10
6
5
14
11
2010
2
11
3
4
1
10
8
6
14
12
2011
2
11
3
4
1
10
9
6
14
15
2012
2
10
3
4
1
11
8
7
14
15
2013
2
9
3
4
1
11
8
6
14
15
2014
2
11
3
4
1
9
8
7
14
15
2015
2
15
3
4
1
8
9
7
13
14
Year
Taiwan
India
Brazil
Mexico
Switzerland
Turkey
South Korea
Thailand
Indonesia
1970
11
12
13
14
15
16
17
18
19
1980
14
13
9
12
15
16
17
19
18
1990
17
14
9
13
16
15
12
19
18
2000
14
13
12
10
17
15
8
19
18
2005
15
12
10
11
17
16
8
19
18
2006
16
12
10
11
18
17
8
19
15
2007
17
9
11
14
18
16
7
19
15
2008
17
12
10
13
18
16
8
19
15
2009
16
9
8
13
18
18
7
19
15
2010
16
9
7
13
18
17
5
19
15
2011
17
8
7
13
16
18
5
19
12
2012
16
6
9
12
18
17
5
19
13
2013
16
7
10
12
18
17
5
19
13
2014
16
6
10
12
17
18
5
19
13
2015
16
6
12
10
17
18
5
19
11
During this time period, one nation that improved considerably is India. It raised its output ranking from 14th in 1990 to sixth in 2015. In contrast, Spain dropped in manufacturing performance from ninth in 2005 to 14th in 2015. The same is true for Russia, as it was ranked second in manufacturing output in 1980 but now has dropped to 15th in the world.
May 9, 2018.
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