factor productivity” you get a different
story. Multifactor productivity takes into
account how efficiently a factory uses all its
inputs—not just labor but also equipment,
buildings, energy, purchased parts and services, software, and research and development. Because it includes a wider scope of
inputs and costs, multifactor productivity
is a better indicator of how innovative and
competitive an industry really is.
Since 1994, multifactor productivity
has declined in nine out of 18 domestic
manufacturing industries. And if domestic manufacturing can’t become more
efficient, it will have a tough time competing in the global economy and an even
tougher time adding jobs.
But we’re in luck—there’s a simple
way that domestic factories can increase
their productivity, expand their market
share, and hire more workers. The answer
(perhaps surprisingly) is to invest more in
U.S. manufacturers currently put only
10 percent of their capital spending into
tech equipment and software, according to data from the Bureau of Economic
Analysis. That’s down from 15 percent in
2000 and 12 percent as recently as 2007.
Even if we add robots to the picture, the
figures don’t change much. North American purchases of robots amounted to only
$1.6 billion in 2015, or less than 0.3 percent of total investment by manufacturers.
Compare that with the economy as
a whole, where computers, peripherals,
communications gear, and software make
up 22 percent of nonresidential capital
spending. Manufacturers fell behind in
the information revolution.
In part, that’s a reflection of how much
harder it is to digitize the production of a
physical object such as a machine than an
“information object” such as a newspaper.
But recent advances in technology mean
manufacturers are finally getting low-cost
wireless sensors that can report back on
the state of physical processes, computing
systems that can process data in real time,
and the algorithms to quickly act on that
data to cut costs and improve quality.
Perhaps most important, domestic
manufacturers won’t just be producing old
products more efficiently; they’ll also be
using cutting-edge technology and smart
design to create products that were impossible to make before—things like artificial
organs and “smart” furniture that adjusts
itself to the contours of the people using it.
New production capabilities will unleash
a flood of creativity that will benefit both
consumers and companies.
We’re about to find out that innovation in domestic manufacturing isn’t a job
destroyer at all—it’s a job creator.
Michael Mandel is chief economic strategist
of the Progressive Policy Institute.
Wind on the Upswing
As it gets ever cheaper, wind energy will play
a huge role in our clean-power future.
Last May I attended an international
meeting on wind energy in Portugal, where
100 percent of that country’s electricity
demand was met by renewable energy—a
combination of solar, wind, and hydro—for
four days. There have also been several
short periods in which wind generation
alone has exceeded 40 percent of demand
in U.S. regional systems in places like
Texas, Oklahoma, Kansas, Nebraska, and
Some people think wind has value
only in limited locations and will play a
small role in meeting our overall energy
needs (see “The One and Only Texas Wind
Boom,” page 40). Instead, a history of cost
reductions combined with decades of
deployment and operating experience are
bringing wind power to the cusp of transforming our electricity industry.
Yes, there are challenges. Wind is
unlikely to ever be our sole source of electricity. Because the wind is variable, it creates some problems for the electric grid,
but they’re not insurmountable. My organization has done studies that have looked
into what would happen if wind and solar
generated a third to a half or more of U.S.
annual electricity demand, and we’ve
found that there are ways to mitigate this
natural variability by using flexible generators, such as natural gas or hydropower
plants, and by coördinating operations
over large geographic areas. In places like
Denmark, Portugal, and Ireland, operators are already successfully managing the
variable power generation that comes from
wind and solar plants.
Thanks to research and development
programs and policy incentives, the cost
of wind has dropped by an order of magnitude since the early 1980s. Today there
are long-term electricity price agreements
in the U.S. supplying utilities with wind
power at prices that are lower than operating costs for natural-gas plants, leveraged
by technology advancements and favorable tax policy.
A recent survey of 163 industry experts
found that the cost of wind energy is likely
to drop 24 to 30 percent by 2030. They
attribute this to a variety of technology,
design, manufacturing, construction, and
operational changes. Larger rotors, taller
towers, and rotor design advancements
should allow land-based wind technology
to capture more energy at lower cost. Offshore wind technology will take advantage
of larger turbines, better designs for foundations and support structures, and economies of scale through larger project size.
We’ve been waiting for low-carbon
technologies to transform the power sector. We may finally be seeing it happen.
Maureen Hand is a senior engineer with
the Strategic Energy Analysis Center of the
National Renewable Energy Laboratory.