The “Weighty” Manufacturing Sector

The manufacturing sector encompasses a diverse set of industries that are involved in the transformation of raw materials into physical goods. Over the last two decades, the U.S.’s manufacturing value added (MVA) has slightly grown, however, the U.S.’s percentage of global MVA has declined due to China’s exponential rise. The U.S.’s relatively high R&D spending on manufacturing (66% of industrial R&D) and comparatively low manufacturing value added (14%) can in part be explained by foreign multinationals’ globalization of manufacturing facilities in the last decade. As a whole, the manufacturing sector involves higher value added per capita employed, a greater proportion of the labor force with education at the high school level or below while having on average higher wages for that labor force, higher industry spending on R&D, and fewer private equity/venture capital deals financing new ventures than non-manufacturing industries such as services (including software). The above said, drawing implications from sector-wide trends can be misleading because of the variation in these indicators across sub-sectors. Considering the sector’s diversity will be critical to understanding productivity and labor outcome effects, and appropriate policy responses, if any.