A new manufacturing paradigm

Host Mary Walden quotes economists as saying that manufacturing is in a transition phase; indeed, they say there is a new model or paradigm for manufacturing of the future. She asks her husband, N.C. State University economist Mike Walden, “What is this model and what does it mean for the U.S. and North Carolina?”

Mike Walden: “Well Mary, the old model was that you located your factory particularly where you could get low cost labor. Now that wasn’t the only factor, but that was a big factor. And low-cost labor of course here in the U.S., if you look historically, low cost labor used to be here in the South. That’s why a lot of the manufacturing moved to the South.

“And then in the last 20 years, low-cost labor has been in foreign countries. So for example, here in North Carolina we’ve lost a lot of our manufacturing employment due to movement of factories overseas. Now, however, people who are looking at manufacturing say that how we manufacture products is dramatically changing and it’s actually putting a much lower value on low-cost labor, and it’s putting a higher value on where can you get access to inputs.

“Where can you have access to modern technology in machinery and where are you going to be located so that you’re close to your customers? Customers now want fast response to what they want, and to problems. And so this new paradigm, or model, many say is going to be the manufacturing of the future. In terms of how that affects the U.S. and North Carolina, it should affect us positively. Because if the low-cost labor is no longer what manufacturers look for, and we’re no longer the low-cost labor country or state, then we should be able to compete better on these other factors.

“We’re still the largest market in the world in terms of buying power. We have a lot of our own inputs here, and of course, we’re a technological country and making a lot of advances in technology.  So, this new paradigm – although it may not bring back the numbers of jobs we had in the past in manufacturing – it should be that manufacturing production should look much more positive here in our country and our state.”