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Productivity rose in 13 of 15 economies in 2004

July 1, 2006

5 Min Read
Productivity rose in 13 of 15 economies in 2004

Productivity is increasingly becoming a defining factor of economic growth, and increasing productivity is one of the primary challenges for U.S. manufacturers.

That was the message delivered by Eric Mittelstadt, chair of the Advanced Leadership Forum of the National Coalition for Advanced Manufacturing (NACFAM), in his presentation, "The Future of U.S. Manufacturing," given to attendees at the Annual Convention of the American Mold Builders Assn. Mittelstadt points out that increasing productivity is one the big challenges for U.S. manufacturers.

"Productivity improvement gains were up 263% between 1961 and 2004, and manufacturing isn''t in any worse shape than agriculture-it''s all in how you measure it," he stated. While there are fewer family farms today than 50 years ago and agriculture exports represent only 2% of the GDP, the U.S. has some of the highest food production ratios in the world thanks to technology and productivity gains, he explained.

Indeed, while productivity may be up for U.S. manufacturers, it would seem they still have a long way to go to catch up with some other countries''. A recent Bureau of Labor Statistics report shows that in 2004, the U.S. increase of 5.2% was the sixth highest among 15 global economies measured. Korea and Sweden had the largest productivity increases (12.1% and 9.8% respectively). Australia and Italy were the only economies showing declines in manufacturing productivity.

For most countries, the increases in labor productivity in 2004 were a combination of greater manufacturing output and fewer aggregate hours worked. Manufacturing hours worked increased in Australia and Italy, but output declined or remained unchanged, resulting in static labor productivity in those two countries. Average hours worked tended to increase among the measured economies and Korea, Sweden, and Taiwan showed the highest manufacturing output rates. U.S. output increased at a revised 4.8% in 2004, up from a preliminary estimate of 4.3%, and was the fifth fastest among the 15 economies. Hours worked in U.S. manufacturing declined 0.4% in 2004, less than the decline recorded in 2003 (-4.9%) or the average annual declines in the period after 2000 (-4.8%). Total manufacturing hours worked also fell in nine other countries, the largest decline occurring in the Netherlands (-3.9%). Manufacturing unit labor costs declined in the U.S. in 2004 (-2.9%), as they did in 10 other economies, when expressed in national currency units.

Manufacturing employment fell in the U.S. (-1.2%) in 2004, as it did in most other economies except for Taiwan, Australia and Korea. The largest decline was in the Netherlands (-4.0%). For most countries however, the declines in employment in 2004 were smaller than in 2003.

"Increased productivity to meet customer demands for more functionality and greater customization while maintaining our standard of living and the environment, is a huge challenge," said Mittelstadt, who noted that greater emphasis will have to be placed on technology to boost productivity and reduce overall costs-to-manufacture. "Manufacturing will ultimately go to countries who embrace lean, robots and automation, reduce production costs while improving quality," he concluded.

Skills shortage hurting employers globally

A survey of nearly 33,000 employers across 23 countries and territories in late January by Manpower Inc., revealed that 40% of employers worldwide are having difficulty filling positions due to the lack of suitable talent available in their markets. Manpower Inc. wanted to determine the extent to which talent shortages are affecting today''s labor markets. Manpower Inc. is a world leader in the employment services industry.

"The talent shortage is becoming a reality for a larger number of employers around the world, and this is only going to get worse over the next several decades, as demographic shifts and other factors continue to reduce the number of people who are willing and able to participate in the workforce," said Jeffrey A. Joerres, Chairman and CEO of Manpower Inc. "The shortages are most acute across North America at this point, with employers in Europe and Asia currently feeling much less pressure to compete for employees."

Eric Mittelstadt, Chair of the Advanced Leadership Forum of the National Coalition for Advanced Manufacturing (NACFAM) points out that talent development will be a major challenge for the future of U.S. manufacturing. He recommends that pull-based education and training will be necessary to fill job availability, and notes that in the U.S. 80% of manufacturing executives surveyed reported a shortage of qualified workers, and 68% reported that this inability to find qualified workers had a negative impact on their business.

Manpower''s Joerres said, "In 10 years, we will see many businesses failing because they haven''t planned ahead for the talent shortage and are unable to find the people they need to run their businesses. This is not a cyclical trend, as we have seen in the past. This time the talent crunch is for real, and it''s going to last for decades."

Mittelstadt agrees and said one solution to the talent shortage is higher productivity. "We''ve got to get more productive," he stated, noting that there will be 30 million fewer U.S. workers by 2018-a deficit arising from just 40 million entering the workforce while 70 million retire. The Manufacturing Skills Council formed in 1998 launched its system and became a separate entity in November 2005. It''s promoting a shift from the traditional occupational approach to a flex-skills approach. Mittlestadt says that the `knowledge worker'' is key, defining this worker as "one that is able to keep pace with technology changes and focus on `foundational skills.''"

Employers having the most difficulty finding the right people to fill jobs are those in Mexico (78% reporting shortages), Canada (66%), and Japan (58%). Talent shortage appears to be least problematic in India, where only 13% of employers reported having difficulty filling positions.

The top 10 jobs that employers are having difficulty filling across the 23 countries and territories surveyed are:

1. Sales representatives

2. Engineers

3. Technicians (primarily production/ operations, engineering and maintenance)

4. Production operators

5. Skilled manual tradespeople

6. IT Staff (primarily programmers/developers)

7. Administrative assistants/personal assistants

8. Drivers

9. Accountants

10. Management/executives

"Across North America and Asia, the top three talent shortages are identical-sales representatives rank number one, followed by engineers and technicians," said Manpower''s Joerres. CG

Clare Goldsberry [email protected]

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