Slow Productivity Growth in the U.S. Footwear Industry--Can the Federal Government Help?

FGMSD-80-3: Published: Feb 25, 1980. Publicly Released: Feb 25, 1980.

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Since the late 1960's U.S. footwear manufacturers have experienced a steady economic decline. In the 10 years between 1968 and 1978, domestic shoe production dropped 37 percent, imports rose 106 percent, and nearly 76,000 people lost their jobs. The number of shoe manufacturing firms decreased by almost half from 1967 to 1977. GAO undertook a study of the footwear industry to explore the effects of recent importing, buying, and manufacturing trends on one American industry. The objectives of the study were (1) to identify the causes of the industry's economic decline and determine if the decline was related to low productivity; and (2) to ascertain what competitive advantages foreign manufacturers had and how the Federal Government could help U.S. footwear manufacturers improve their productivity.

Domestic maunufacturers must now devise strategies to compete effectively with imports to prevent further deterioration of their market position and to raise their productivity growth rate. It will be especially important for small and medium-sized manufacturers to enhance their manufacturing methods and acquire a better understanding of domestic and international markets. Automation may offer an opportunity for manufacturers to increase their productivity and gain a competitive advantage over foreign producers. U.S. producers need to consider technologies available from traditional and nontraditional suppliers. Thus, mechanisms must be cooperatively developed by the Government, industry, labor, and universities which can bring about the use of sufficient productivity-enhancing technologies to sustain the viability of the industry. Government assistance in the form of trade adjustment assistance programs has not been effective in helping the industry to adjust to import competition. The Government-initiated Footwear Industry Revitalization Program has been particularly important in helping manufacturers improve their productivity and competitive position. However, the program is scheduled to expire in July 1980. A stronger Government effort to improve this industry's productivity growth could dissipate pressure for increased protectionism, reduce the future cost of trade adjustment assistance, improve the position of U.S. footwear maunfacturers in international trade and enhance the industury's prospects for long-term survival.

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