Study examines productivity dynamics, drivers in U.S. manufacturing
The manufacturing sector, a traditional driver of overall productivity, has seen its pace of productivity growth slow over the last 15 years.
A new study by the Manufacturers Alliance for Productivity and Innovation (MAPI), Arlington, Va., analyzes productivity growth in a range of manufacturing subsectors over the past 25 years, and provides statistical evidence on the importance that capital investment and educated labor have on productivity performance.
The research explores the drivers of productivity performance on subsectors. In particular, the study looks for ways that manufacturers who have already invested in capital equipment can increase productivity and innovation.
The report, “Productivity Dynamics in U.S. Manufacturing,” is the first in a series on productivity that the MAPI Foundation is producing this year.
Produced by Cliff Waldman, director of economic studies at the MAPI Foundation, and sponsored by Rockwell Automation, Milwaukee, Wis., the study uses well-accepted theory and regression analysis of several decades’ worth of data to illuminate evidence that innovation and capital investment play a significant role in driving multi-factor productivity growth (i.e., output per unit of a combined set of inputs, including labor, materials and capital) in a wide range of manufacturing subsectors. Capital investment is the mechanism by which productivity-enhancing innovation spreads through companies, supply chains and the broad economy.
"In the manufacturing sector, strong productivity performance is needed to meet the globally driven challenges of cost pressures and competitiveness," Waldman says. "For both manufacturing and the economy as a whole, the recent slowdown in productivity causes concern because it contributes to both slow output and wage growth."
"Isolating the critical investments required to improve productivity performance is an important foundational element in the MAPI Foundation's first study," adds Joe Kann, vice president of global business development at Rockwell Automation. "We look forward to the conclusions regarding industry-specific productivity drivers that will be identified in the remaining studies."
Waldman's research finds that another key link to productivity performance is the labor force participation rate of the population holding a B.A. degree or higher, in effect the economy's supply of educated labor.