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Another Pillar of the Economy

Today marks 100 days of the Obama administration, so I’m going to join the media pack and make a few comments on what we can learn, specifically about careers, from what has happened so far.

You might think that the most important event of these 100 days, in terms of its impact on careers, is the stimulus package, which was signed into law on February 17. It is true that the recovery act will create and preserve millions of jobs and therefore will have a huge impact on the lives of working Americans. In fact, I wrote a book exclusively about the stimulus plan and its expected impact on jobs.

Nevertheless, I maintain that the really momentous event of the past 100 days was the Obama administration’s release of his budget proposal on February 26, because it laid out his priorities for the next several years. It indicated that the President intends to reshape the U.S. economy along the lines that were initiated by the stimulus plan. In other words, the parts of the economy that are being boosted by the stimulus plan are not just useful in the short run as a way of relieving recession-related unemployment, but are intended to be the foundations of our future prosperity.

In a recent blog, I wrote about a major speech that President Obama gave on April 14 in which he identified five "pillars" that will provide the foundation for our future economy: new rules for Wall Street; new investments in education; new investments in renewable energy and technology; new investments in health care; and new savings in the federal budget.

In that blog, I mentioned that I might want to discuss some additional pillars of the future economy that are foreshadowed by the budget proposal, and I’m going to mention one here.

That pillar is advanced manufacturing. The common wisdom these days is that manufacturing in America is dead or dying. In fact, almost 17 percent of manufacturing jobs that existed in 2000 have disappeared. Nevertheless, manufacturing is still a large industry segment that generates 12 percent of our gross domestic product and is responsible for almost two-thirds of the research and development that goes on here.

Manufacturing has responded to low-wage foreign competition by making great leaps in efficiency—by becoming, in a word, advanced. Over the past two decades, productivity in manufacturing has increased twice as fast as in other private-sector industries. Much of these gains have been achieved through automation, partly by means of robotics, including computer-controlled machine tools. Automation has increased the efficiency of  every phase of production, including design, acquisition of parts and raw materials, and distribution of finished products. It allows rapid production of highly customized products without the need for large inventories.

Another factor that makes manufacturing advanced is input by workers. The old-fashioned production line broke down the process into a series of dumbed-down tasks that could be done mindlessly by unskilled laborers. Nowadays, those low-skill tasks are done by robots, and the remaining high-skill tasks, plus an overall concern for quality, benefit from the workers’ suggestions for improvements. In fact, one of the risks to advanced manufacturing in the United States is a shortage of highly-skilled workers. In this way, this pillar of our future economy depends on one of the pillars that President Obama mentioned: improved education.

You may be wondering where I find evidence in the Obama budget plan that advanced manufacturing is a priority. To be sure, the budget plan seems to assume that most progress in this industry sector will come, as it always has in the past, from the private sector, and I agree that this is appropriate. However, the budget (along with the stimulus plan) does promise funding to encourage manufacturing of products related to greener energy: advanced batteries, which are expected to power plug-in hybrids and improve our electric grid, and wind turbines, which are so bulky that they must be manufactured here in the U.S. even if the company is foreign-owned. The budget plan also proposes increased funding for the Manufacturing Extension Partnership (MEP). MEP centers are nonprofit university or state-based organizations that receive a mix of public and private funding and help manufacturers deploy new technologies.

Another major way that the Obama budget promises to boost manufacturing in the United States is through improvement of our infrastructure. But that, in itself, is another pillar of our future economy, one I intend to discuss in yet another blog entry.