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23 July 2018

Global manufacturing scorecard: How the US compares to 18 other nations

Darrell M. West and Christian Lansang

Manufacturing is enjoying a resurgence in the United States. After years of falling output and a diminishing percentage of the labor force, the last few years have seen renewed growth. According to PriceWaterhouseCoopers, the catalysts for this revival include factors such as the strengthening economy, workforce quality, tax policies, the regulatory environment, and transportation and energy costs. Yet in order to move forward, it is important to see how American manufacturing compares to that of other nations. In this report, we develop a global manufacturing scorecard that looks at five dimensions of the manufacturing environment: 1) overall policies and regulations; 2) tax policy; 3) energy, transportation, and health costs; 4) workforce quality; and 5) infrastructure and innovation.

For the analysis, we compiled data on 20 indicators and scored 19 leading nations on a 100-point scale. The countries analyzed included Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Netherlands, Poland, Russia, South Korea, Spain, Switzerland, Turkey, United Kingdom, and the United States.

The top ranked nations in overall manufacturing environment were the United Kingdom and Switzerland (both with 78 points out of 100), followed by the United States (77 points), Japan (74 points), and Canada (74 points). We found these nations performed well due to their policies, cost considerations, workforce investments, and infrastructure.

At the low end were nations such as Brazil (51 points), Indonesia (53 points), Mexico (56 points), Russia (56 points), and India (57 points). Generally, these places do not have advantageous tax policies and are not making adequate investments in education or infrastructure.

In addition, we compiled data on manufacturing output, manufacturing employment, and changes overtime. China is the top nation in terms of manufacturing output and the percentage of its national output that is generated by that sector. Poland meanwhile has the highest percentage of its workforce employed in manufacturing, followed by Germany, Italy, Turkey, and South Korea.

China is the top nation in terms of manufacturing output and the percentage of its national output that is generated by that sector. Poland meanwhile has the highest percentage of its workforce employed in manufacturing.

There have been important changes over the past few decades in country rankings based on manufacturing output. Most nations show fairly stable patterns over the past 40 years, but a few have increased their performance. One such example is India, which improved its output ranking from 14th in 1990 to sixth in 2015. In contrast, Spain had dropped in manufacturing performance from ninth in 2005 to 14th in 2015. The same is true for Russia, as it was ranked second in manufacturing output in 1980 but now has dropped to 15th in the world.

Based on our analysis, we make a number of recommendations for improving the manufacturing environment. Our suggestions include: 

Pursue a governance strategy that emphasizes political and economic predictability, and open trade policies. Developing policies that provide access to global markets and facilitate technology diffusion will help the manufacturing sector. 

Provide the proper financial incentives to promote innovation, education, and workforce development. This includes R&D tax credits and equipment expensing tax credits that help companies overcome the fixed costs of production and distribution. Additionally, providing grants and loans to domestic manufacturers can aid in the growth of businesses and their technology innovation. 

Unlock 21st century tools such as Big Data, automation, and artificial intelligence. These forms of technology have the capacity to revolutionize manufacturing from the initial design of goods to the successful delivery of products. 

Help small firms through technology research and workforce development. Technology development and its diffusion into the manufacturing sector leads to the creation of higher paying jobs, and workers with more developed skills. 

Rules that encourage transparency of business practice help to alleviate corruption and its damaging ripple effects. Whistleblower protection and investing in detection capabilities can aid in weakening the roots of corruption. 

Finance the necessary physical and digital infrastructure to support business development. Physical infrastructure such as roads, bridges, dams, and ports are necessary to connect supply chains as is the deployment of digital infrastructure such as high-speed broadband and mobile technology. The creation of adequate infrastructure helps companies operate efficiently and grow overtime. 

China leads the world in terms of manufacturing output, with over $2.01 trillion in output (see Table 1). This is followed by the United States ($1.867 trillion), Japan ($1.063 trillion), Germany ($700 billion), and South Korea ($372 billion).

Manufacturing constitutes 27 percent of China’s overall national output, which accounts for 20 percent of the world’s manufacturing output. In the United States, it represents 12 percent of the nation’s output and 18 percent of the world’s capacity. In Japan, manufacturing is 19 percent of the country’s national output and 10 percent of the world total. Overall, China, the United States, and Japan comprise 48 percent of the world’s manufacturing output.

Table 1: Leading countries on manufacturing output, 2015

Country 

Manufacturing Output (USD in billions) 

Percent of National Output 

Percent of Global Manufacturing 

China 

$2,010 

27% 

20% 

United States 

1,867 

12 

18 

Japan 

1,063 

19 

10 

Germany 

700 

23 


South Korea 

372 

29 


India 

298 

16 


France 

274 

11 


Italy 

264 

16 


United Kingdom 

244 

10 


Taiwan 

185 

31 


Mexico 

175 

19 


Spain 

153 

14 


Canada 

148 

11 


Brazil 

146 

11 


Russian Federation 

139 

11 


Turkey 

125 

18 


Indonesia 

115 

22 


Poland 

100 

20 


Switzerland 

93 

18 


Netherlands 

88 

12 


Source: United Nations Conference on Trade and Development, 2015 

PROPORTION OF WORKFORCE EMPLOYED IN THE MANUFACTURING SECTOR

Poland is the leading country in terms of the percentage of its population employed in manufacturing (see Table 2). A total of 20.2 percent is employed there, followed by Germany (19 percent), Italy (18.5 percent), Turkey (18.1 percent), South Korea (16.9 percent), China (16.9 percent), and Japan (16.9 percent). About 10.5 percent of the American workforce is employed in manufacturing.

Table 2: Proportion of workforce employed in the manufacturing sector

Country 

Total Number Employed in Manufacturing Sector 

Percentage of Population Employed in Manufacturing 

Poland 

3,540,000 

20.2% 

Germany 

7,911,000 

19 

Italy 

4,090,000 

18.5 

Turkey 

5,012,000 

18.1 

South Korea 

4,499,000 

16.9 

China 

128,869,000 

16.9 

Japan 

10,958,000 

16.9 

Mexico 

9,154,000 

16.3 

Russian Federation 

10,260,000 

14.4 

Indonesia 

16,363,000 

13.5 

Switzerland 

612,000 

13 

France 

3,396,000 

12.4 

Spain 

2,332,000 

12.3 

Brazil 

10,388,000 

11.4 

India 

57,244,000 

11.4 

United States 

16,381,000 

10.5 

Netherlands 

898,000 

10.4 

United Kingdom 

3,069,000 

9.5 

Source: International Labour Organization, 2017 

CHANGES IN REGIONAL MANUFACTURING EMPLOYMENT, 1970-2011

There have been significant shifts in manufacturing employment between 1970 and 2011 (see Table 3). In developed countries, manufacturing comprised 16.8 percent of the workforce in 1970, but only 12.8 percent in 2011. In contrast, several regions have increased their focus on manufacturing. For example, manufacturing in East Asia (including China and South Korea) totaled 13.9 percent of the workforce in 1970, but 21.5 percent in 2011. Southeast Asia went from 11.4 percent in 1970 to 14 percent in 2011. India increased from 9.4 percent in 1970 to 11.6 percent in 2011.

Table 3: Percent of workforce employed in manufacturing, 1970-2011

Region 

1970 

1980 

1990 

2000 

2007 

2011 

Developed Countries (U.S., Europe, Japan) 

26.8% 

23.9% 

20.7% 

16.9% 

14.3% 

12.8% 

East Asia (China and South Korea) 

13.9 

22.5 

24.3 

20.9 

21.2 

21.5 

Southeast Asia (Indonesia, Malaysia, Philippines, Thailand) 

11.4 

14.4 

15.6 

16.3 

15.4 

14.0 

India 

9.4 

9.1 

10.5 

11.4 

11.9 

11.6 

Latin America 

15.5 

15.4 

15.3 

13.2 

12.4 

11.5 

North Africa 

12.6 

13.8 

14.4 

14.0 

12.9 

11.9 


Sub-Saharan Africa 

5.8 

7.2 

8.3 

8.3 

8.6 

8.4 

Source: United Nations Conference on Trade and Development, 2016 

CHANGES IN COUNTRY MANUFACTURING OUTPUT, 1970-2015

Most countries have been fairly stable in their manufacturing output over the past few decades, but there have been some shifts since 1970. For example, in 1970, the top countries were the United States, USSR, Japan, Germany, China, the United Kingdom, France, Italy, and Canada (see Table 4). However, by 2015, the leaders had shifted to China, the United States, Japan, Germany, South Korea, India, Italy, the United Kingdom, and France.

Table 4: Changes in country rank ordering on manufacturing output, 1970-2015

Year 

U.S. 

Russia 

Japan 

Germany 

China 

U.K. 

France 

Italy 

Canada 

Spain 


1970 










10 


1980 









11 

10 


1990 









11 

10 


2000 


16 








11 


2005 


14 







10 



2006 


14 







10 



2007 


12 







13 

10 


2008 









14 

11 


2009 


17 




10 



14 

11 


2010 


11 




10 



14 

12 


2011 


11 




10 



14 

15 


2012 


10 




11 



14 

15 


2013 






11 



14 

15 


2014 


11 







14 

15 


2015 


15 







13 

14 


Year 

Taiwan 

India 

Brazil 

Mexico 

Switzerland 

Turkey 

South Korea 

Thailand 

Indonesia 

1970 

11 

12 

13 

14 

15 

16 

17 

18 

19 


1980 

14 

13 


12 

15 

16 

17 

19 

18 


1990 

17 

14 


13 

16 

15 

12 

19 

18 


2000 

14 

13 

12 

10 

17 

15 


19 

18 


2005 

15 

12 

10 

11 

17 

16 


19 

18 


2006 

16 

12 

10 

11 

18 

17 


19 

15 


2007 

17 


11 

14 

18 

16 


19 

15 


2008 

17 

12 

10 

13 

18 

16 


19 

15 


2009 

16 



13 

18 

18 


19 

15 


2010 

16 



13 

18 

17 


19 

15 


2011 

17 



13 

16 

18 


19 

12 


2012 

16 



12 

18 

17 


19 

13 


2013 

16 


10 

12 

18 

17 


19 

13 


2014 

16 


10 

12 

17 

18 


19 

13 


2015 

16 


12 

10 

17 

18 


19 

11 


During this time period, one nation that improved considerably is India. It raised its output ranking from 14th in 1990 to sixth in 2015. In contrast, Spain dropped in manufacturing performance from ninth in 2005 to 14th in 2015. The same is true for Russia, as it was ranked second in manufacturing output in 1980 but now has dropped to 15th in the world. 

May 9, 2018.

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