Americans Still Believe Manufacturing is the Key to Job Creation
Study after study (after study after study) all reveal that jobs which only require a high school diploma are becoming scarce. While some critics say the U.S. is too focused on four-year degrees, even trade careers require some degree of specialized training. However, many people continue to pin their hopes on the return of manufacturing jobs.
According to a recent Gallup survey, when Americans were asked for suggestions on how to create jobs in the U.S., the top responses were as follows:
|19%||Keep manufacturing jobs here/stop sending overseas|
|12%||Reduce government regulation/involvement|
|10%||Create more infrastructure work|
Wishful – and wistful – thinking?
According to the Economic Policy Institute, between January 2000 and December 2014, the U.S. lost 5 million manufacturing jobs. Meanwhile, as a point of comparison, tech employment has reached 7.5 million. Is it realistic to place so much emphasis on manufacturing as the country’s key to job creation?
Charles L. Ballard, professor in the department of economics at Michigan State University, tells GoodCall®, “I think a lot of it has to do with the fond memory of the time when manufacturing provided entry into the middle class for millions – and that was especially true in the middle decades of the 20th century.”
In fact, Ballard says manufacturing used to provide an avenue for people with modest skills to earn a living wage. “That’s really the story of Michigan in the 1940s, 1950s, and 1960s: workers with only a high-school education – or even less – could get a job in an auto factory and earn enough to own a three-bedroom house and have a cottage at the lake.”
But Ballard is far from sounding the death knell for this industry. “I think manufacturing plays an important role now, and will continue to do so in the future, but it is very unlikely that manufacturing will be the most important source of job growth.” Instead, Ballard says that there are other sectors that have shown rapid and consistent growth, and he believes this trend is unlikely to be reversed.
Ballard points to information from the Bureau of Labor Statistics, which reveals that manufacturing employment has been declining since the Korean War. “Manufacturing employment is almost exactly the same now as it was in July 1941, but total employment has nearly quadrupled since then.” As a result, he says that roughly 1 in every 12 American employees works in the manufacturing sector.
About those overseas jobs and manufacturing
The respondents who pin their hopes on manufacturing also believe that the country should stop sending jobs overseas. According to Ballard, “Much has been made of import competition, and it is true that imports – especially from China, but also from other countries – have led to job losses in the U.S.”
However, he notes that China did not have an impact on manufacturing until the 1980s and it was only in this millennium that the country became a major player. “The relative decline of manufacturing employment had been going on for decades before the expansion of imports from China, Mexico, and other countries made much of a difference.”
If the issue isn’t with imports, what’s going on? Ballard believes there are two contributing factors. “One is a shift in consumption patterns: Americans buy manufactured goods, but they also buy a lot of other things, and services and entertainments have grown much more rapidly than manufacturing.”
And he believes the other factor is an increase in productivity. “Earlier this year, I spoke with Ilyana Kuziemko, an economist at Princeton University: her father emigrated to the U.S. from Poland and got a job at a General Motors factory.” For 30 years, he fastened the left door handle on the cars on the assembly line. “But nearly all of those jobs are gone now; they have been replaced by robots.”
Now, it doesn’t require as many employees to build a car, and Ballard says this story is representative of almost every part of the manufacturing industry. “GM built a new plant about 10 miles west of here, 15 years ago, and it has a much smaller parking lot than previous plants because it doesn’t need nearly as many workers.”
If that’s the case, it seems strange that “keep jobs here/stop sending overseas,” would be the top recommendation while robotics isn’t even on the list. However, Ballard explains, “Part of the excitement about imports is that it is much easier to get angry at foreigners than to get angry at robots.”
Reshoring: a Hail Mary pass?
However, Harry C. Moser, founder and president of Reshoring Initiative® in Kildeer, Ill., believes that since 2000, the U.S. has lost millions of jobs to offshoring, more than have been lost to automation. He tells GoodCall® that it would be feasible to bring back millions of these manufacturing jobs, but admits, “It’s not easy – if it were easy, it would have already happened.”
Moser believes there are two keys to bringing the jobs back. “U.S. manufacturing has to be price competitive or at least total-cost-of-ownership competitive versus offshore sources for products to be sold here.” That might be a tough pill to swallow, but he explains. “That means our price has to come down by about 15 percent to 20 percent versus the price from the offshore sources.”
Also, if the U.S. expects to get 2 million to 4 million of those jobs back, he says companies must be capable of increased production by anywhere from 15 percent to 30 percent overall. “In some product categories, we have to go from zero to self-sufficiency.”
Moser believes that most factories and equipment can be built or installed in as little as 6 to 18 months. However, he says, “A skilled workforce is the challenge, taking years to change the image, recruit, train, and get experience, and this may take 5 to 10 years if we start making it the highest priority now.”