The Hidden Microlevel Crisis in U.S. Manufacturing

Abstract

Manufacturing plays a central role in promoting economic growth, but recent decline in this sector has spelled trouble for the economy. A key reason for this decline is the growing tendency of manufacturing firms to outsource production, both to domestic and overseas locales. In response to these trends, the IAM has used its collective bargaining agreements and relationships to engage employers in productive discussions about the economic value of outsourcing. On the basis of years of negotiations and ongoing consultation with employers on this issue, we conclude that outsourcing decisions are often based on unreliable data and/or faulty analysis and hence are more likely to be driven by noneconomic factors than economic ones. We propose a tripartite effort—involving companies, unions, and neutrals—to improve the quality of make/buy analysis. These efforts will promote better decision making on the firm level with respect to outsourcing decisions, helping to strengthen the manufacturing sector as a whole.