The Surprising Key to the Future Growth of U.S. Manufacturing


The future of American manufacturing won’t look like the past. Then, again, the perception of what manufacturing was like in the past doesn’t necessarily sync with reality. When people think of manufacturing companies, they associate them with large-scale plants with huge smoke stacks and that employ thousands of workers. In reality, the size of a typical U.S. manufacturer is quite small. Around 20 employees, according to the National Association of Manufacturers


The vast majority of manufacturing firms in the United States are small

251,901 | U.S. companies in the manufacturing sector
20 or less | Average number of employees in 75 percent of manufacturing companies
3,749 | U.S. manufacturing companies with over 500 employees

(Source: U.S. Census Bureau, Statistics of U.S. Businesses)


Don’t look for a renaissance of U.S. manufacturing to be in the form of large-scale plants. Look for a blossoming of manufacturers that are leaner, smaller and pay better than many of the monolithic operators from the past. If America is to bring back manufacturing jobs to historical levels, small-scale manufacturers will likely play a pivotal role, according to Johnny Magdaleno, a fellow at Next City, a non-profit urban development advocacy organization.

Misdirected industrial recruitment?

For the past few decades, city and state industrial recruitment efforts have focused on attracting large manufacturing companies — the kind that chases off-shore lower wages on a whim — through the use of tax abatements and other incentives.

But a growing number of state and local governments are beginning to focus more on “community development enterprises,” local financing institutions that back small-scale manufacturing projects and can qualify for federal government programs that focus on job creation and other economy boosters. For example, on November 17, 2016, the U.S. government’s Community Development Financial Institutions Fund announced it was awarding an unprecedented amount of tax credits to investors (community development enterprises) focused on such projects.  The amount of the credits, known as New Markets Tax Credits, totaled $7 billion, with about 60 percent of that going to urban areas.

“It makes me almost hopeful that community development enterprises understand there’s a connection between placemaking and the location of these small-scale manufacturing businesses,” says Ilana Preuss, founder of small-scale manufacturing resource center Recast City. “I think economic development leadership in many communities were taught to chase the smokestacks,” she says. “You know, find one big company, give them lots of subsidies to stay and keep them as long as you can, where lots of research shows that that doesn’t really price out in the end for neighborhoods.”

“They’re starting to realize that there are a lot of benefits to homegrown businesses,” she says.

VIA | Next City

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