28 May, 2012

Manufacturing still matters - the 3rd Industrial Revolution

I've said before that most service jobs are created directly or indirectly by those who make stuff.  Until the 18th Century, manufacturing was essentially a cottage industry.  Between 1750 and 1850, the 1st Industrial Revolution saw the rise of machine-based manufacturing (especially textiles), enabled by innovations in energy (coal-powered steam engines), materials (especially large-scale iron-making and casting) and logistics (notably canals).  The 2nd Industrial Revolution - also known as the Technological Revolution - gave us low-cost steel,  new materials and chemicals, effective railroads, electricity, mass production and the assembly line.

Last month, in a special report on manufacturing and innovation, The Economist pronounced the world to be in a 3rd Industrial Revolution. Additive manufacturing (3D printers), flexible smart production equipment capable of runs of one unit, super-modular design concepts, design visualisation tools, new composite and nano-materials, micro-organisms that manufacture materials - it's a whole new wave of technology innovation that's dramatically transforming the capability, convenience and cost of manufacturing and makes possible new or radically different products.

The labour required per unit of production will fall dramatically, and manufacturing jobs will shift from low-cost workers to fewer highly skilled ones. These flexible, low-labour factories are likely to be sited within markets as inventory and shipping costs become much more significant than the cost of labour.  Production can be highly responsive to local tastes at minimal cost.

Countries that previously lost low-wage jobs should see growth in high-wage manufacturing jobs.  Already, the US average wage is higher in manufacturing than in services, despite the earlier effects of outsourcing and offshoring.  Who knows what creative talent will be unleashed when product designers have low-cost tools akin to those used by software designers today?  Instead of teachers warning children to "do your homework or you'll end up working in a factory" (which wrongly maligned factory work and wages), the manufacturing jobs of the future should be amongst the most sought after.

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