In response to numerous organizations performing the design of a product, but then outsourcing the actual manufacturing to another company – they’re currently referred to as “wholesalers” and “factoryless goods producers” – five U.S. government agencies, led by the Labor Department, are considering redefining “manufacturing” to include them, according to an article in the Wall Street Journal.
There’s both advantages and disadvantages to the change. Timothy Aeppel writes in the Journal that “Backers of the change say this would give a truer picture of the nation’s productive capability, because these firms still do most other functions of manufacturing, from designing goods to overseeing their production and distribution.” Supporters also say that the definition would more accurately represent the way manufacturing is currently performed worldwide, and that sticking with the older definition would make it harder to develop government policy to best support manufacturers.
On the other hand, changing the definition would make it harder to keep track of the number of traditional manufacturing companies still in the U.S., because there would suddenly be an influx of new “manufacturing” companies. For that reason, the U.S. government agencies considering the change say that, when possible, they will separate out the new manufacturing companies when compiling statistics. Estimates of how many new “manufacturing” workers the redefinition would add range from 431,000 to nearly two million, as of the 2007 Census survey.
Meanwhile, the agencies involved are considering all the ramifications of the proposed change, which has the potential to affect everything from the monthly jobs report to producer inflation figures, Aeppel notes in his article. For example, the manufacturing sector would suddenly look a lot bigger. In addition, it would change the sector geographically, because locations such as Silicon Valley, which typically design and distribute goods that are actually manufactured in Asia, would take on more prominence, he writes.
However, chances are that the proposed change, if it’s made at all, wouldn’t be made until 2017 – the next time that the Census Bureau does its survey of business, typically conducted every five years. Until then, the agencies will continue to discuss the advantages and disadvantages of the potential change.
What do you think – should the U.S. change the definition of “manufacturing?” We’d love to hear your thoughts in the comments below.
Steve Leavitt, GM of U.S. Cloud Solutions for Exact