Author: Neil Harrington
The story of US Manufacturing in recent decades has largely been one of employment decline and the resulting economic, political, and cultural impacts in our communities. That’s certainly true in North Carolina as well, but Manufacturing’s experience since the 1990s also includes strong economic growth and rising productivity, especially leading up to the Great Recession. But, since the 2008 financial crash, Manufacturing’s economic output, productivity, and employment growth have been relatively flat, which points toward the benefits innovation could unleash for the industry. This second blog in a series on Manufacturing details how the industry has changed over the last few decades, while identifying Industry 4.0 technologies and trends that could shape the future.1
Industry employment drastically declined over last 30 years
Manufacturing’s employment decline over the last three decades is well known to observers of North Carolina’s economy and the thousands of workers and communities impacted. Globalization, trade deficits, and, to a lesser extent, enhancements in process efficiency and automation during that time decimated industry employment in North Carolina and across the country. Employment in North Carolina’s Manufacturing sector declined by about 400,000 jobs or 48 percent between 1993 and 2010, shortly after the Great Recession. Since 1993, employment in North Carolina’s Manufacturing sector has decreased by nearly 360,000 or 43 percent. As the economy began recovering from the Great Recession, employment in the sector increased gradually but largely stayed around the same level. The national industry saw similar employment trends during these periods, albeit with a less severe decrease between the early 1990s and Great Recession and stronger growth since 2010.
As the number of jobs has changed drastically in manufacturing over the last 30 years, so has North Carolina’s Manufacturing industry mix. In 1993, Textile Mills, Apparel Manufacturing, and Furniture and Related Products Manufacturing dominated the industry’s employment, providing more than 40 percent of all Manufacturing jobs. By 2022, these “big three” Manufacturing subsectors employed only 13.6 percent of all workers in the industry. Between 1993 and 2022, employment in Textile Mills and Apparel Manufacturing declined 85 percent and 94.4 percent, respectively, while employment at furniture factories fell by 59.4 percent. Today, Furniture and Related Products Manufacturing and Textile Mills still rank in the top ten Manufacturing subsectors by total employment, but lower than their previously exalted spots.
More educated workers on the rise in Manufacturing
Employment itself isn’t the only thing that has changed in the industry in the last three decades. The types of workers at Manufacturing establishments in North Carolina also shifted. Workers with a high school degree or equivalent still hold a plurality of Manufacturing employment, but these workers’ share of total employment has declined over time as the share of workers with some education beyond high school has increased. As companies implemented automation technologies over this period, their labor needs evolved, requiring workers with more technical skills, credentials, or degrees often offered through the community college and university systems.
Worker educational attainment shifts are even more pronounced among the manufacturing subsectors that have seen the largest employment losses since the 1990s. The percentage of workers with a bachelor’s degree or higher in Textile Mills, Apparel Manufacturing, and Furniture and Related Products Manufacturing all doubled or nearly doubled between 1993 and 2022. The percentage of workers with some college education or an associate degree in these industries also increased by a larger amount than in the larger Manufacturing sector. Textile Product Mills—another industry subsector that saw employment cut by more than 75 percent between the 1990s and 2022—similarly experienced these sizeable workforce shifts, even more so than the “big three.” The share of workers with some education beyond high school in all four sectors increased more than nearly every other manufacturing subsector.
The shifts in educational attainment among the Manufacturing workforce reflect companies’ innovating their production lines during this period, and, as a result, the demand for workers that historically worked these lines changed. According to Lightcast data, employment in production occupation in North Carolina Manufacturing declined by 35 percent or about 132,000 jobs between 2001 and 2022, the largest numeric decline among all occupation groups in the industry. As North Carolina’s manufacturers embrace Industry 4.0 technologies, we should anticipate similar evolving labor needs and ensure education and workforce systems are prepared to meet new demand.
Economic output among NC manufacturers slowed since the Great Recession
While Manufacturing saw deep employment losses over the last 30 years, economic output in the industry continued to grow, albeit at a slower pace than total gross domestic product (GDP) growth in North Carolina. Between 1997—the earliest data available—and 2022, real GDP in the state’s Manufacturing sector expanded by about 23 percent, compared to inflation-adjusted GDP growth of 77.3 percent across all industries. Over the same period, Manufacturing’s contribution to North Carolina’s real GDP fell from about 22 percent to 15 percent.
As figure three above shows, Manufacturing’s economic growth really diverged from the output of the rest of the state in the aftermath of the Great Recession. The much steeper decline in output during the Great Recession isn’t terribly abnormal for the sector, as it typically does suffer worse in recessions than other industries. Nationally, the industry’s recovery in the immediate aftermath of the Great Recession was stronger than the overall economy, but that hasn’t been the case in North Carolina. The state’s Manufacturing sector still hasn’t reached real GDP levels seen before the Great Recession and output has gradually declined since 2007.
Only a few industry subsectors really drive the nearly $11 billion net decrease in North Carolina Manufacturing’s inflation-adjusted economic output since the Great Recession. Declines in real GDP have been particularly large in the state’s Chemical Manufacturing, Food Manufacturing, and Textile Mills and Textile Product Mills subsectors. Large decreases in these Manufacturing subsectors since 2007 were offset somewhat by notable increases in real GDP in Transportation Equipment Manufacturing (primarily non-motor vehicle parts production), Computer and Electronic Product Manufacturing, and Machinery Manufacturing. In general, economic output from the production of durable goods in North Carolina has grown since the Great Recession, while the contributions to real GDP from the production of non-durable goods has shrunk.
Productivity surged up until the Great Recession, but somewhat stagnant since
Gains in productivity are perhaps the brightest development in Manufacturing over the past few decades and the clearest indication of producers implementing new technologies.2 Compared to the 1990s, North Carolina manufacturers are doing more with less. As noted above, employment in the sector has declined drastically in the last 30 years, but the value of goods produced by manufacturers has increased considerably. Thus, workers’ productivity in Manufacturing has also risen sharply since the 1990s, with real GDP per worker more than doubling between 1998 and 2021 (the earliest and most recent years available). The sector’s $182,287 real GDP per worker in 2021 was also more than twice the productivity across all industries in North Carolina.
As with economic output, productivity grew steadily until around the Great Recession but has basically flatlined since then. Stagnant and even slightly declining productivity has resulted in North Carolina Manufacturing’s rank in real GDP per worker among other states dropping in the past 10 years. At the peak of the measure in 2010, North Carolina ranked fourth among all states. In 2021, our state slid to 12th out of all 50 states and DC. This most recent rank still represented progress relative to the 20th spot North Carolina held in 1998. But lagging productivity growth since 2010 does suggest there’s room for employers to enhance production and operations with new, industry 4.0 technologies, enabling manufacturers to be globally competitive and grow North Carolina’s economy.
A glimpse of the future: higher productivity with increased automation?
The most productive industry subsectors in North Carolina have also changed during this 20+ year period, with some indications that the subsectors with the highest real GDP per worker have automated. Productivity increases were strongest between 1998 and 2021 among North Carolina’s transportation equipment manufacturers—especially the Other Transportation Equipment Manufacturing subsector—and in the Computer and Electronic Product Manufacturing industry. These two industries were also the state’s most productive in 2021 using the real GDP per worker productivity measure.
North Carolina’s most productive Manufacturing subsectors are the same industries investing the most in automation technologies worldwide. According to the World Robotics 2021 and 2022 Industrial Robots reports, electronic and automotive manufacturers installed the most industrial robots of all manufacturing industries globally. In both years, the metal and machinery industry ranked the third highest in number of industrial robot installations. North Carolina’s Primary Metal Manufacturing subsector similarly posted the third strongest productivity growth since 1998. The industries that are investing in these automation technologies reap the benefits of that investment through higher productivity. As more companies in North Carolina make similar and other investments in Industry 4.0 technology, productivity increases should continue and unlock new, better paying jobs for workers in the industry.
Embracing Industry 4.0
Today’s Manufacturing industry in North Carolina certainly looks different than the sector that modernized the state’s economy in the 20th century. The industries that dominate employment today are different than those of the 1990s and earlier. Even in the traditional industries, new production processes and machines have changed the workplace, employee skills, and education and training needs. But Manufacturing’s experience in the last 30 years can also be fit neatly into two periods. From the early 1990s up to around the Great Recession, economic output and productivity grew steadily as employment in the industry declined. In the 10 to 15 years since, GDP, productivity, and employment growth in Manufacturing have been relatively flat, with North Carolina trailing the US in each and slipping in state-by-state rankings.
The trends in real GDP and productivity growth in recent years point toward the potential benefits and threats of inaction that Industry 4.0 and other automation technologies present for the industry and our state. As noted above, the industries with the highest productivity levels and strongest productivity growth in North Carolina are the same ones installing the most industrial robots globally. Technology allows firms to produce more and increases economic output, while often raising worker wages as tasks and occupations in factories change. Like the global trade disruptions of the 1990s and 2000s, businesses, state program directors, and policy makers have little ability to halt or pause current and future changes coming to the Manufacturing industry. However, with the right policies, education, and workforce training, North Carolina can position our current and future employers and their employees to receive more of the economic benefits of the 4th industrial revolution.
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1 Industry 4.0 refers to the so-called fourth industrial revolution, or the next phase of digitization in manufacturing, which includes incorporating new AI technologies, interconnectivity, advanced analytics, and more into production processes.
2 For the purposes of this article, we measure productivity as real GDP per worker. Most economists measure productivity by dividing economic output by hours worked in an industry. Due to data limitations at the state and at the industry subsector level, we opt for a simpler approach that allows us to compare productivity across different types of manufacturers.