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October is Manufacturing Month: A Productivity Problem

The relevance of worker productivity has been renewed in the last few weeks due to the United Auto Workers (UAW) strike. One of the common sentiments held by supporters of the UAW strike goes something like this: due to the large increase in worker productivity over the past few decades, plant workers deserve more money. Without getting into the weeds on the productivity or profitability of the big three automakers, many agree with that sentiment and assume U.S. manufacturers as a whole are in fact more productive today than they were a decade or two ago. After all, the thinking goes, with the massive technological advances over that span of time, there must be a comparable rise in productivity.

Manufacturing Productivity Stagnates

In reality, according to the U.S. Bureau of Labor Statistics, labor productivity in the manufacturing sector has remained relatively level since the Great Recession.

Labor productivity tracks the changes in output per hour worked. This trend indicates that despite U.S. manufacturing investing significantly in technology and automation, roughly the same number of widgets per hour are being manufactured today as they were fifteen years ago. What is perhaps equally surprising is that this lack of progress appears to be more of a national issue than a global issue, as a recent Wall Street Journal article notes:

Since 2009, manufacturing output per hour in the U.S. has grown just 0.2% a year, well below the economy as a whole and peer economies in Europe and Asia, except Japan.

Why Are We Not More Productive?

Several hypotheses have been made as to why U.S. manufacturing has not continued its former trend of productivity growth.

  • One suggestion is that over the last decade, there have been significant disruptions in the supply chain which delayed the manufacturing process. This is, no doubt, true of the last few years. However, this does not explain why there was a decade of flat productivity that immediately preceded the supply chain woes of late. Furthermore, it would not explain why U.S. productivity is lagging peer economies in Europe and Asia who also endured supply chain issues over the last few years.
  • Another suggestion is that the U.S. has been slower to adopt robotics and other advanced technologies in manufacturing when compared to countries such as Germany, Singapore, and China. This seems to explain the discrepancy between the U.S. and peer economies; however, it doesn’t explain why U.S. productivity is flat as opposed to simply growing slower than other countries. After all, if productivity is directly linked to automation, then the U.S. should have seen moderate growth in productivity over the last 15 years as U.S. manufacturers have made significant investments in automation during that time.
  • Finally, it has been suggested that the number of newly filled U.S. manufacturing jobs is leading to inefficiencies which slow productivity progress. From 2000 to 2010, the U.S. saw significant cuts in manufacturing jobs from approximately 17 million to 11 million. We have begun to bounce back as there are currently approximately 13 million U.S. manufacturing jobs filled. In the last three years alone, U.S. manufacturers have filled 1.5 million jobs. While the growth in U.S. manufacturing jobs is good news, it comes at a cost as significant time is invested in training each new hire.

Whether it’s due to supply chain disruptions, lagging investment in automation, or additional time spent training new employees, it is clear that U.S. manufacturing has a productivity problem that deserves our attention. Consider to what extent you are measuring productivity, which factors have historically impacted your productivity, and what investments you can make today in order to improve tomorrow’s productivity. What would even a small increase in productivity mean to your employees and your bottom line?

For more information regarding our manufacturing experience, be sure to visit our Manufacturing Services page and don’t hesitate to reach out to a member of our manufacturing team.

About the Author

Brett Bauer

Brett joined McKonly & Asbury in 2011 and is currently a Principal with the firm. As a member of the firm’s Audit & Assurance Segment, he serves clients in the manufacturing and distribution industry. At McKonly & Asbury, Bret… Read more

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