The Jobs Multiplier Effect
Jobs created from manufacturing ventures lead to the creation of even more jobs. Manufacturers need the support of other companies, as they typically do not make all that is needed to create the finished product by themselves. They need companies that harvest, mine, make, and supply the materials and other inputs. They also need the businesses that will transport both the materials and finished goods into and out of the plant, then to the distributor, and then to the final customer.
Industrialization furthers this follow-on multiplier effect. Supply chains are developed to support the manufacturing company, its suppliers, and its competitors. Competition creates a battle over prices, which leads to a drive to increase efficiencies. This drive leads to more rigorous analyses and decisions regarding what the company should make or do itself–vertical integration–versus hiring the support of an external company with greater efficiencies and lower costs. The demand for these adjacent companies for outsourced services also creates opportunities for entrepreneurs. Whether the work is done in house, or done more efficiently by locally outsourcing, net jobs are created.
As new sectors of manufactured products are entered this process repeats, again and again, and can lead to a virtuous cycle. The culture of producing products can be infectious. Making things is part of human nature. Success in one product segment will encourage entrepreneurs to pursue manufacturing and industrialization in other segments. Success will also attract investors, whose capital will enable industries to build and achieve scale and an accelerated pace. Invariably, over time, some businesses will fail due to market missteps and changes in customer preferences. Manufacturers that build skills in innovation will quickly adapt to these changes and be ready to produce the next wave of desirable products. Innovating, building products, and creating jobs makes an economy vibrant!
New Skills Used in Many Ways
Developing the skills to manufacture one type of product can give a person, community, or region the potential to apply those skills to the creation of other related or unrelated products. Examples and descriptions of various manufacturing processes and the types of products that are made using them are as follows.
Beyond Manufacturing
In addition to the production skills and capabilities that are learned, developed, and perfected over time, industrialization gives regions the opportunities to participate and earn through other value-added work as well. Bringing a manufactured product to market essentially involves three steps: 1) developing the product, 2) making the product, and 3) selling the product. While there are many sub-steps and detailed actions within each step, they can all primarily align under one of these three broad categories of actions. More than likely, the African nation or region is already doing step three, selling the products; the products are more than likely being created someplace else and imported. Implementing an industrialization strategy moves the region to step two, making the product locally. Along with setting up the manufacturing operations and hiring and training workers, supplier networks need to be developed, and transportation and distribution service providers brought on line.
After conquering step two, making the product, the natural progression is to step one, creating, designing, and developing the product. Demands for design capabilities, engineering skills, and product testing capabilities will grow, as will the need for schools to educate and train the local workforce with these skills. An interesting point to add is that many developing nations already have strong educational infrastructures. The problem is that there are limited employment opportunities for the graduates across skill levels. With the local introduction of each step for bringing a product to market, new opportunities for entrepreneurs develop, more jobs are created, product creation and production skills are mastered, and more profits are retained in the region.
New Money…New Consumers
As the company becomes more efficient and successful, it can offer even greater varieties and quantities of desirable products to the local customer and the export market. That’s right, not only can local demand be met without importing, but companies that efficiently build quality product can access the export market. The business grows, the virtuous cycle repeats, and the community benefits. Successful businesses consistently create two things: employees who want to buy things (consume), and employees who recognize other needs in the marketplace and are motivated to start businesses themselves. This yields more entrepreneurs, more jobs, more saving, more consumption, and more economic benefits to the community and nation.
Henry Ford famously benefitted from this principle in the early 1900s in Detroit, when he doubled the wages of the workers in his car assembly plants from $2.25 to $5 per day.7 While the increase was primarily to increase employee loyalty and reduce turnover, it is hard to argue that it did not have a positive impact on the number of employees who were then able to become car owners. While the Ford wage increase seems sizable at twofold, moving from a retail sales or commodity-based local economy to an industrial economy can enable even higher multiples of wage increases, and for a greater number of people. The higher the skill level, typically, the higher the wages. “The way to significantly improve your life is to increase the demand for your labor,” as heard on the news show "CBS This Morning." Work that creates more value demands more wages. Higher employment levels and higher incomes lead to higher consumption. Higher consumption leads to greater demands for goods and services, which leads to additional opportunities for entrepreneurs, business leaders, and investors.
Making a Positive Difference
Businesses that are performing well and profitable are in a position to be better stewards of their local communities. Companies and their employees are able to invest in schools, community centers, churches, parks, the arts, and cultural activities. Their support of the local community creates a further sense of pride in the residents, which can lead to additional support of the local business. This support can come in the form of additional sales or higher quality employees. Businesses that are both doing well and doing good tend to attract the best people, and the best people typically generate the best business results. Again, the virtuous cycle continues.
In 2015 the United Nations adopted seventeen goals in support of its objectives to end poverty, protect the planet, and ensure prosperity for all. The UN believes that stability in one’s home creates the ability to provide for one’s self and family and reduces need for migration.
The 17 Sustainable Development Goals (SDGs)
Source: www.sustainabledevelopment.un.org
Goal 1. End poverty in all its forms everywhere
Goal 2. End hunger, achieve food security and improved nutrition, and promote sustainable agriculture
Goal 3. Ensure healthy lives and promote wellbeing for all at all ages
Goal 4. Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
Goal 5. Achieve gender equality and