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‘Factory-less’ Manufacturing Undercounted 

The United States lost 6 million manufacturing jobs between 2000 and 2009. At least, that’s the official count from the Bureau of Labor Statistics. But could the official count be missing something?

In a new paper, two economists point out that nowadays there are lots of companies in the United States that aren’t counted as manufacturing by the government but are still heavily involved in the manufacturing of goods.

The prevalence of these “factory-less goods producers” — Apple is a prime example — suggests that the country might have more manufacturing capabilities than official statistics suggest.

The authors, Andrew Bernard and Teresa Fort, of Dartmouth College’s Tuck School of Business, define a factory-less goods producer as a company that designs and coordinates the manufacturing of various goods. It just doesn’t have an actual factory or assembly plant; that part is usually contracted out. Apple, for instance, does just about everything else in the United States except stitching its iPhones and iPads together. That’s outsourced to China.

Right now, the Census Bureau counts these U.S. companies as wholesale firms instead of manufacturers. But that’s certainly an arguable point. After all, many of the engineers and designers at these firms would count as manufacturing workers if their company happened to have a factory in-house, even though they’d be doing the exact same job.

And this could make a difference in the labor statistics. Bernard and Fort estimate that if all factory-less goods producers had been reclassified as manufacturers, that would have added from 431,000 to 1,934,000 workers to the U.S. manufacturing sector in 2007. (The United States officially had about 14 million manufacturing jobs that year.)

There are a few caveats, however.

In an interview, the authors stressed that they weren’t able to tell how these numbers have changed over time — in part because the historical data on factory-less goods producers is inconsistent. So it’s hard to tell how much of the manufacturing job loss since 2000, say, is attributable to a shift toward factory-less goods production. Researchers would like to explore that aspect in the future.

Bernard also noted that the rise of factory-less goods producers can’t account for the entire decline in U.S. manufacturing jobs, which have fallen from 17 million in the 1990s to 11.9 million today.

“We can safely say that the decline of manufacturing jobs is a true decline,” he said. “But that decline may be mitigated by the fact that some of those jobs and capabilities have still stayed within the country.”

The upshot, he said, is that “we may have to rethink our knowledge of what manufacturing firms do.”