If you read the headlines, listen to the pundits and the president, you would think that we are about to enter into a manufacturing renaissance in this country. Suddenly, it has dawned on many companies that this country might actually be a pretty good place to make things after all.
Well, we’ve been that good place all along. It’s just that companies have to be smarter to play smarter in a manufacturing environment in the United States.
This blog will be an extenuation of last weeks’s blog, “Where the Buffalo Roam: Observations on Manufacturing.” Forgive me, but I feel I needed more space to keep on observing.
If you read last week’s blog, you might recall that I am a son of manufacturing, and that I only sought out a college education to escape the prospect of being permanently maimed in the foundry.
A locomotive bell housing did the convincing. It fell off a pallet while being moved by a fork lift truck. I happened to be nearby, grinding away on castings when I suddenly found myself pinned under said bell housing on a black, sandy floor.
Soon afterwards, I enrolled in a major midwestern university where I majored in beer. It seemed like the right thing to do at the time.
I probably should not tell that story, even if it is true, because it perpetuates what is largely a myth about working in manufacturing. People often conjure up ideas that factories are something out of Dante’s Inferno.
A Need for Talented Piddlers
But the truth is that today’s factories are much different. Now, we let the machines do most of the work, and we piddle around to make sure they stay working, spitting out widgets.
So if you have the technical skills needed, which is no small feat, and have a talent for piddling and thinking on your feet, well then you might be well suited to a career in manufacturing. And if that happens, there is a good chance that you will make more money than many white-collar service jobs.
I’m sorry but the Joe Lunchbucket in me would like to see a world in which factory workers, people who actually make things, would make more money than banksters maneuvering the credit default swaps market. Silly me.
So I knowingly celebrate and even romanticize manufacturing, knowing full well that it will not even come close to being what it once was in this country. Never. Still, some people continue to fool themselves with wishful thinking, like the Plains Indians who pine for the return of the great herds of buffalo.
A short recap from last week. Manufacturing employment in 1979 at 19.6 million workers. Today, factory jobs number about 11.8 million, a decline of 40 percent from the high and representing about 9 percent of all jobs in America.
The Bombshell We Know
Much of the blame for the implosion has been placed on a phenomenon that has been taking place since the 1960s. That’s when corporate executives started adjusting their global sourcing, with the goals of reducing costs and maximizing profits.
And as everyone who hasn’t been living under a rock knows, there was a large shift from suppliers in the US and other high-cost countries to suppliers in low-cost countries. This thing called “off-shoring” has been a bombshell to many communities.
But as I suggested in last week’s blog, I believe the main real culprit to lost manufacturing jobs is not off-shoring but rather technological advances that increases productivity. Translation: More automation, less people.
Worldwide manufacturing jobs have been falling while industrial output has been increasing all because of advances in productivity. Even China has been losing manufacturing jobs.
Now, I know what you are thinking. You would say that we have been growing manufacturing jobs in this country steadily for the last two years to the tune of 334,000 jobs. And you would be correct – 23,000 factory jobs were created just last month. The Center for Automotive Research predicts that the auto industry and its suppliers alone could add 167,000 American jobs over the next three years.
Let’s hear it for a renaissance. But consider for a moment that manufacturing may be rebounding precisely because it was so badly hammered during the recession. Yes, 334,000 factory jobs sounds great, but keep in mind that it follows a decline of 2.3 million manufacturing jobs in the two years before that.
Decades of Dawning
If we could somehow magically bring all the off-shored manufacturing jobs back to the United States, it would be but a fraction of the jobs already lost, most of which, again, are due to investments in technology requiring fewer people on the plant floor.
Manufacturing may comprise 9 percent of all jobs today, but eventually that number will erode to 7 percent, and then 5 percent, and then 4 percent, all because of productivity efficiencies as the result of innovation and technology. It that sense, manufacturing will mirror farming, which was also once also a dominant sector for jobs.
The truth is that manufacturing, while vital in terms of national security, as is agriculture, will never be the jobs panacea that it once was. A new age has dawned. Actually, it’s been dawning for decades now.
And it is also important to note that most U.S. multinational corporations have been adding jobs in other countries partly because that’s where an increasingly large share of their sales are. Companies in the Standard & Poor’s 500 index now earn more than half of their revenue from overseas.
So it’s not always about chasing cheap labor. It’s also about chasing customers.
Admissions of Guilt and Failure
Still, the idea of re-shoring remains a popular notion and certainly makes sense for some companies. Hey, I want to see it happen as much as anybody else. Certainly, President Obama in an election year wants that.
This past week, the president hosted a high profile event at the White House, to demonstrate that re-shoring was happening and that he was all for it. Ford was there, as was Intel and Master Lock, all with stories to tell about how they had seen the light and it was shining bright over the good ol’ US of A.
And, yet, that may entail an admission of sorts of failure. Nobody wants to especially look foolish – “Well, we really botched things up by opening that plant in Becki, Becki, Beckistan, but we now we know better. We should have listened to Herman.”
Surrounded by representatives of more than a dozen companies, the president pledged that he will propose new tax incentives to reward companies that invest in U.S. expansion or bring back jobs from overseas and eliminate of tax breaks to companies that move jobs outside the country.
We don’t yet know the details of this tax initiative, which will be part of the fiscal 2013 budget plan that is to be sent to Congress the first week of February, but the attending business execs seemed pleased.
“We are in a unique moment, an inflection point, a period where we’ve got the opportunity for those jobs to come back,” Obama told the group at the White House. “The business leaders in this room, they’re ahead of the curve. They recognize it.”
At least some execs may be recognizing it precisely because their plant in Becki, Becki, Beckistan (a country that Herman Cain knows all too well) turned out some real junk that caused them all sorts of grief. And now they are facing workers there that are demanding higher pay because camel feed has hit the roof. So why not bring operations back home, where they know that they’ll have a more productive and skilled workforce.
Besides, those Beckistans have a different word for everything.
Among the business executives present at the White House was Mary Murcott, CEO of Fort Worth-based NOVO 1. Her company is dedicated to bringing offshore call centers jobs back to the US, a trend she says is already happening.
“They’re coming back, but nobody’s talking about it,” she said during the CEO panel and as reported by the Fort Worth Star Telegram. “Nobody wants to talk about the mistakes they’ve made.”
It’s times like these that I cannot help but think of Forrest Gump: “Stupid is as stupid does.”
Ms. Murcott said the number of high tech call center jobs that were offshore has dropped from 30 percent to 12 percent, with the realization that customers in this country were not being well served.
“I think people have done a lot of brand damage by putting their call centers over there,” she said. “The fact that they pay half the cost in labor costs doesn’t make any difference if it takes three calls to get the job done.”
So what does this all mean? I will grant you that there will be a re-shoring of some jobs back to the sweet shores of America and that will benefit certain communities. No question about it. But it won’t change the tide. Those forces are too great.
Manufacturing employment has been declining steadily for three decades in absolute numbers, and as a share of total employment for six decades. That megatrend will continue as we continue to automate.
For unskilled workers, it means that manufacturing will no longer be that ticket to ride to the middle class. That train has left the station.
Need a partner in results-oriented site selection? Contact Dean Barber at 972-890-3733 or at firstname.lastname@example.org Barber Business Advisors, LLC, is a site selection and economic development consulting firm based in Plano, Texas. Please visit our website at www.barberadvisors.com