The United States is a prosperous nation. Many of the assets that signal this prosperity are a result of the nation’s manufacturing proficiency. Further, companies in the United States have invented and produced goods used to build this nation and have also provided these goods to the rest of the world. Over the past two centuries, manufacturing in the United States has contributed substantially to a steadily increasing standard of living—including improved education, health, economic security, and more leisure—within the United States as well as abroad. In addition, a strong domestic manufacturing base is essential for maintaining national security, to produce both modern defensive weapons and the equipment needed for homeland security and public health. Manufacturing is crucial to U.S. government operations and has been central to the country’s vision of a high-wage, high-value, and high-skills-based economy.

Manufacturing has been a principal driver of productivity growth in the United States. From 1950 to 2000, federal government data show that the average growth of productivity in U.S. manufacturing was 2.8 percent per year. During the past two decades, the growth rate accelerated, with the growth in average manufacturing productivity exceeding that in other sectors by more than 1 percent per year.^1,2 In durable goods, productivity surged 39 percent from 1994 to 2001, more than twice the 16 percent growth of the economy overall.³ The high-tech manufacturing sector experienced rapid growth in output per hour throughout the 1990s, accelerating from 9 to 13 percent per year.⁴

The major improvements and innovations that have occurred in manufacturing processes and that helped power a U.S. economic boom in the 50 years since World War II can be compared in terms of significance with those that took place during the Industrial Revolution. From 1992 to 2000, manufacturing gross domestic product (GDP) grew at 4.6 percent annually, significantly faster than the overall U.S. economy, which grew at 3.6 percent annually. Manufacturing also represented a significant and growing portion of the GDP in the United States, contributing a full 22 percent during this same period. By comparison, the service sector contributed 14 percent to economic growth, while transportation and utilities each supplied 10 percent.⁵

The contribution of manufacturing to the U.S. economy is also important because of its multiplier effect on economic output. For every $1.00 of manufacturing product sold to a final user, an additional $1.26 of intermediate economic output is generated. The manufacturing