![[Case Western Reserve University -- Toolbar]](/pix/lowpro.gif)
Posted 11-30-98
CLEVELAND -- Contrary to conventional wisdom, manufacturing in the United States is alive and well. It just looks somewhat different than it used to.
A new study from the Weatherhead School of Management, "Manufacturing in Decline? A Matter of Definition" argues that the nation's manufacturing base is not eroding, but has evolved in response to worldwide competition and advances in technology. Consequently, the definition of manufacturing activities should be broadened to include "production services" such as engineering, research and development, industrial marketing, and quality control -- in other words, service occupations which are closely tied to manufacturing.
Under this expanded definition, the report points out, producer services' and manufacturing's combined share of the economy has declined only slightly since the late 1970s, from 54.6 percent of GDP in 1977 to 51.6 percent in 1990. Similarly, manufacturing's share of total employment declined from 23 percent in 1975 to 15 percent in 1995. But employment in manufacturing and producer services together declined from 44.7 percent in 1975 to 41.2 percent in 1995.
The authors of the study, Dilek Cetindamar Karaomerlioglu, a post-doctoral student at the Weatherhead School, and Bo Carlsson, professor of economics, maintain that manufacturing and producer services ought to be considered together because "in many respects they are complementary and interdependent industries." Producer services depend on manufacturing because their activities are largely geared to complementing the production of manufactured goods.
Conversely, producer services can improve productivity and add value to manufacturing. Between 75 percent and 85 percent of the value added and costs in manufacturing come from service activities. Producer service firms also play an important role in innovation, especially for small manufacturing firms, by providing information and expertise that may not be available elsewhere.
The growth of producer services, the authors believe, has been due largely to "unbundling," or the trend of manufacturers to subcontract services such as accounting, logistics, communications, and marketing. Manufacturers have done this, say the authors, because of "market uncertainty and increased competition, which force firms to subcontract their services in order to decrease their economic burdens in case of crisis."
Click here to read the full text of "Manufacturing in Decline? A Matter of Definition."
![[Toolbar]](/pix/ribbon.gif){kind=small}