Manufacturing: Core of Regional Economic Growth - Essay Sample

Introduction

The manufacturing industry is a branch of trade and manufactures that deals with the fabrication, processing, or production of finished goods from raw materials. It is a broad industry with many categories: fabricated metal, chemical and allied, apparel, leather, and electronics industries, among others. The sector provides critical data and statistics reflecting the economic condition of a region, country, or sector that forms a significant basis of different macroeconomic indicators. One of the major macroeconomic indicators influenced by the manufacturing industry in any country is the unemployment rate. The unemployment rate is the share of the jobless labor force that is actively seeking employment (Khan & Turowski, 2016). The size, category, and the number of manufacturing firms have significant impacts on the rate of unemployment in the economy.

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The manufacturing industry is the primary source of employment in economies. Countries whose manufacturing sectors involve a combination of categories within the industry require immense labor to transform raw material into finished products. As a result, many people in such countries secure employment, unlike those from nations with few manufacturing activities. The rate of employment if even higher if the products manufactured are in high demand in different countries (Khan & Turowski, 2016). Countries that depend on manufacturing sectors from other nations have a high unemployment rate compared to the producing country. This variation in unemployment rate evident between states with the large manufacturing industry and those without or with limited manufacturing firms is because the process of transforming raw materials to finished products is labor-intensive (Pierce & Schott, 2016). The production process involves several steps and processes whose implementation depends on human inputs. The best example of the industry's impact on the unemployment rate is the changes in the manufacturing sector in the United States. The rise of China as a global manufacturer because of the low cost of production has forced many manufacturers from the U.S. to relocate their production factories to China. As a result, the rate of unemployment in the U.S. rise because jobs are exported to China.

The main reason for the high rate of unemployment in developing countries is due to the lack of manufacturing firms. For example, in 2019, Kenya's unemployment rate was 9%, with China reporting 3.62% (Lea, 2019). Kenya is a developing country that acts as a significant market for Chinese manufactured goods, particularly the electrical and electronics, and textile products. Since these imported products flood the Kenyan market at lower prices, the country cannot produce similar products (Caggiano et al., 2017). Kenya has a high potential for producing textile products; however, due to the competition caused by imported products, the apparel industry grumbled, leading to a high unemployment rate in sectors associated with textile production (Fort et al., 2018). The same case applies in the continuous shift in the U.S. automotive manufacturing factories to Mexico, resulting in a massive unemployment rate in Detroit, the country's automotive production hub (Pierce & Schott, 2016). Since the vehicle cost of labor in China is low, the vehicles produced are sold at lower prices compared to those manufactured in the U.S.

The manufacturing industry plays a critical role in determining the unemployment rate in any country. A country with many competitive manufacturing firms has a low unemployment rate because the production process is labor-intensive, leading to employment opportunities. On the contrary, developing countries with fewer manufacturing activities have a high rate of unemployment because they consume products produced by other nations, thus exporting their employment opportunities. As a result, the rate of unemployment in a country is a macroeconomic indicator of the condition of the manufacturing industry.

References

Caggiano, G., Castelnuovo, E., & Figueres, J. M. (2017). Economic policy uncertainty and unemployment in the United States: A nonlinear approach. Economics Letters, 151, 31-34. https://www.sciencedirect.com/science/article/pii/S0165176516305018

Fort, T. C., Pierce, J. R., & Schott, P. K. (2018). New perspectives on the decline of U.S. manufacturing employment. Journal of Economic Perspectives, 32(2), 47-72. https://www.aeaweb.org/doi/10.1257/jep.32.2.47

Khan, A., & Turowski, K. (2016). A survey of current challenges in the manufacturing industry and preparation for industry 4.0. In Proceedings of the First International Scientific Conference, "Intelligent Information Technologies for Industry”(IITI’16) (pp. 15-26). Springer, Cham. https://link.springer.com/chapter/10.1007/978-3-319-33609-1_2

Lea, R. (2019). The World Bank is the latest international body to downgrade growth prospects. Arbuthnot Banking Group, 10(3), 23-40. https://www.arbuthnotlatham.co.uk/wp-content/uploads/2019/06/10th-June-2019.pdf

Pierce, J. R., & Schott, P. K. (2016). The surprisingly swift decline of U.S. manufacturing employment. American Economic Review, 106(7), 1632-62. https://www.aeaweb.org/articles?id=10.1257/aer.20131578