Skip to comments.Sorry Mr. President, Manufacturing Will Not Save Us
Posted on 02/13/2013 4:18:12 PM PST by blam
Sorry Mr. President, Manufacturing Will Not Save Us
Feburary 13, 2013
In last night's State of the Union address, President Obama said: "Our first priority is making America a magnet for new jobs and manufacturing." He added:
After shedding jobs for more than 10 years, our manufacturers have added about 500,000 jobs over the past three. Caterpillar is bringing jobs back from Japan. Ford is bringing jobs back from Mexico. After locating plants in other countries like China, Intel is opening its most advanced plant right here at home. And this year, Apple will start making Macs in America again.
While there is much to applaud about the recent revival of American industry, manufacturing is simply insufficient to help revive lagging industrial regions or power the job creation the nation so badly needs. Here's why:
1. Manufacturing does not generate a lot of jobs: American manufacturing is making a comeback, but is remains an anemic job creator. Manufacturing output is projected to grow from $4.4 trillion in 2010 to a projected $5.7 trillion by 2020, according to the Bureau of Labor Statistics. But this increased manufacturing output which stems from improvements in technology, greater use of robots and automation, and improved production organization will not necessarily translate into a whole lot more jobs. In fact, the BLS projects the U.S. will lose another 73,100 manufacturing jobs by 2020, as manufacturing falls to just seven percent of total employment.
2. Not all manufacturing jobs are good jobs: Americans often think of manufacturing jobs as good, family-supporting union jobs, but unfortunately that's not actually the case. Production workers across the United States average just $34,220 per year according to the BLS, less than half that of knowledge, professional and creative workers ($70,890) and not that much more than what low skill service workers in fields like food preparation, clerical work and retail sales ($30,597) take home. Pay varies considerably across different types of manufacturing jobs. As I noted here last March:
The 66,530 tool and die makers or the 36,200 aircraft assemblers have great jobs earning - $48,710 and $45,230, respectively. But the nearly 150,000 sewing machine operators average just $22,630 a year, or $10.88 per hour.
While we like to think manufacturing jobs are secure, they are actually among the most vulnerable to the ups and downs of the business cycle. As I noted on Cities this past October, the unemployment rate for workers in blue-collar jobs increased to 14.6 percent during the economic crisis, more than three times the rate of 4.1 percent for knowledge, professional, and creative workers, and considerably higher than the 9.3 percent rate for workers in low-skill service jobs which we typically think of as more vulnerable.
Also, many manufacturing jobs that are being brought back onshore offer substantially lower wages then existing manufacturing jobs. "U.S. manufacturing wages have come under further pressure as large established companies like General Electric, Ford and others have instituted two-tier pay practices," I wrote on Cities last year based on a report by the New York Times, which found new hires making just $12 to $19 per hour compared to $21 to $32 per hour for established employees.
3. Manufacturing jobs are concentrated in only some parts of the country: According to a recent Cleveland Fed study, manufacturing remains massively concentrated in the United States. Manufacturing makes up an 11 percent share of U.S. employment. But as the graph below (from the report) shows, the distribution of manufacturing employment in the U.S. is highly skewed. As the report notes:
The top 25 percent of counties in terms of their share of manufacturing employment derive about 18 percent or more of their employment from manufacturing. While these counties contain about one-fourth of the manufacturing employment in the United States, they contain only one-eighth of the U.S. population.
As the map below (also from the study) shows, manufacturing jobs are overwhelmingly concentrated in the middle of the country, not just in the industrial Midwest but in adjacent parts of the Sun Belt, especially along Interstate 75 in the states of Kentucky down to Georgia, forming a southern industrial heartland. There are only a few red spots in the West.
4. Manufacturing does not translate into local economic growth and development: While many continue to pin their hopes on manufacturing revival, the Cleveland Fed study finds that the counties with high concentrations of manufacturing activity experienced low rates of economic growth over the past decade. According to the report:
Since 2000, this set of high-manufacturing-share counties has usually experienced lower employment growth than the rest of the counties in the United States. This was particularly true during the recent recession, when employment losses reached almost 6 percent per year in these counties compared to a peak employment loss of only 3.7 percent per year in the rest of the country.
The study finds that while high-manufacturing share counties did rebound during the economic recovery, in the "last year or two employment growth has been roughly the same in the high-manufacturing-share counties as it has been in the rest of the country."
The chart above from the report makes this abundantly clear, comparing the trend in employment growth for high-manufacturing counties compared to all other counties. Employment in high-manufacturing counties experienced a five percent decline, employment in the rest of the nation's counties increased by five percent "revealing a stark divergence," according the report.
The findings from the Cleveland Fed's report are in line with two related studies by Bill Testa of the Chicago Fed, which found the heavy concentration of manufacturing in the Midwest actually hindered the economic development of its cities and metros (I wrote about this study last year on Cities). Testa's detailed research concluded that "even after accounting for the influence of educational attainment, a historical manufacturing orientation tended to depress subsequent growth" - an effect which was felt for the better part of two decades. As Cities contributor Micheline Maynard pointed out last year, betting on manufacturing's revival is likely to be a "big economic miscalculation" for Midwest cities, ultimately doing "more harm than good."
President Obama should know better. It's time for our leaders to stop looking backward, trying to breathe life back into an economy that no longer exists, and develop an economic and job's strategy for the one that actually exists and will shape our future.
When all is said and done, it's not manufacturing that drives economic growth and creates new jobs, but innovation, creativity and talent. The big job generators for the past several decades and for the foreseeable future remain high-skill, high-pay knowledge jobs and low-pay, low-skill service jobs. We need to leverage and deepen the former, investing in the knowledge, technology and skill that drive innovation and economic growth. At the same time, we need to transform the more than 60 million low-wage service jobs into good family-supporting jobs like manufacturing jobs used to be.
That's the State of the Union we're still waiting to hear.
As opposed to what? More gay bars, art schools, rock festivals, video gamers, and bike paths?
Between Richard Florida and Alexander Hamilton, I guess I've got to go with the guy on the sawbuck.
Not only the wealth, but the independence and security of a country, appear to be materially connected with the prosperity of manufactures. Every nation, with a view to those great objects, ought to endeavor to possess within itself all the essentials of national supply. These comprise the means of subsistence, habitation, clothing, and defense. The possession of these is necessary to the perfection of the body politic, to the safety as well as to the welfare of the society; the want of either is the want of an important organ of political life and motion; and in the various crises which await a state, it must severely feel the effects of any such deficiency. The extreme embarrassments of the United States during the late War, from an incapacity of supplying themselves, are still matter of keen recollection: A future war might be expected again to exemplify the mischiefs and dangers of a situation, to which that incapacity is still in too great a degree applicable, unless changed by timely and vigorous exertion. To effect this change as fast as shall be prudent merits all the attention and all the zeal of our public councils; tis the next great work to be accomplished.
Another example of a highly educated person totally lacking in real world life on the street.
OK, so if you are a worker in a manufacturing plant, you do not get Bill Gates pay.
But you do get an opportunity to advance to management.
Most who end up with high paying jobs started at the lowest paid job.
Go to any town that was once a manufacturing town and you will see kids in their late teens, older people in their late 20’s, walking the streets at three in the afternoon, hats turned backwards, pants about to fall off, shirt tails hanging out.....who 20 years ago would have been working in one of the plants and off the streets.
And with the opportunity to advance.
Sneer at the low wages if you like, but I can show you plenty of nice houses, small farms, paid for by men and women working by the hour.
And in addition, they saved enough to retire comfortably.
The bottom line is whether you would rather have a job or a handout.
There are no handout promotions. Handouts are a dead end.
There was a series of stories (surprisingly in the local Gannett generipaper) about a fellow who worked in a bakery who quit to start his own donut bakery.
He rented a building and the first thing that happened was a visit from inspectors who decreed he had to make the place handicap accessible (+$15,000) even though his three employees weren’t handicapped and there was no retail trade at this location.
Those are the kind of things that doom manufacturing vs. competitive countries.
However, this does not mean that manufacturing employment is strong, or is ever going to be strong again. The biggest factor in the decline of U.S. manufacturing jobs was never foreign competition, but automation. The days of having a massive manufacturing facility with several thousand employees who walk to work from the surrounding town are over -- and this will be for good, until we have some kind of "Year Zero" type of armageddon and we go back to the Stone Age to start all over again.
We have simply reached a point in human history where human labor and the human mind are actually the weakest links in any complex process -- whether it be producing widgets or flying an airplane.
Bring those manufacturing jobs back and creating new ones here can reverse our economic decline.
There are a only limited number of jobs any economy can absorb from folks in the “service” sector that produce nothing and add only paper value to an economy.
People who think any nation can remain strong with out strong manufacturing base are sadly deluded...
The truth. Few want it.
Thanks for pointing out the flaws in Richard Florida forever trying to make every American city into San Francisco with his “creative class”, i.e. homosexual lifestyle. The guy is totally a one-note johnny and I’m embarassed that my former home town in a 100% red state allowed him to try singing that song there.
Well, it got President Skidmark Obama into office, didn't it?
I thought Baraq was going to solve that with the stroke of a pen - raising the min wage.
We need millions of jobs that will overpay the underqualified so they can afford their taxes and union dues. It’s our birthright as Americans. /s
They have. Eventual reduction of the population to a few million Eco-sensitive "lightworkers" through birth control, abortion, death panels, and Waco-ing the recalcitrant, with robots doing the work.
And, somehow,, every single liberal thinks they will be among the Elect.
Explain why we have a colossal trade deficit and why our war machines are being built overseas for the second time in history.
With the EPA and OSHA etc squeezing the life out of American Business, NOBODY can compete. Our company got a $500 fine for having a trash can with a paper cup in it with no lid on the can by MSHA. We can run a mine, just cant pump water out of it. Spill a gallon of diesel fuel, pay to fly a 55 gallon barrel of dirt out to be incinerated in a “Hazardous Waste Disposal Site”. Cant use the incinerator here...
Any honest business foolish enough to open a plant here is too STUPID to compete in a Global market. Unless of course you bribe the Democrats by putting money in their coffers. Then they will give you money.
Obama is a obsessive liar, but, “What difference does it make?”
Gee, I wonder how much they make compared to brain surgeons. That too would be a valid comparison. /sarc
Precisely. The very things that leftists point at the GOP over and call “unfunded mandates” ironically.
The left has been hollowing out the manufacturing base of the USA for decades. They know it’s one of the ways to bring the country down. All about international socialism and making the USA too weak both morally and financially to resist it. Problem is, the backlash will come in the nuclear age . . .
This Richard Florida is completely wrong.
Consumers get their income mostly from jobs.
So businesses who sell directly to consumers are limited in how much revenue they can generate; the limit is how much money people earn in their jobs.
An economy where there are only consumer companies is not a very healthy one, since employee paychecks must be less than the revenue of their employers.
The revenue of businesses that sell to other businesses, on the other hand, is not limited by how much money people earn in their jobs; it’s limited by what businesses spend.
Manufacturing makes up what is actually several levels of the economy where businesses sell to other businesses. Some of the key areas of manufacturing are tools and materials. Tools and materials are manufactured by one business then purchased by other manufacturers to enable them to manufacture their products. All those manufacturing jobs do not require direct corresponding increases in consumer spending in order to pay the manufacturing employee - yet they directly provide consumers with paychecks.
Unfortunately, machine tools and many other types of tools are imported far more than they used to be, and, of course, companies at the “top of the ecosystem” who manufacture and sell to consumers, have in many cases outsourced their manufacturing entirely.
If we look at business to business sales that are for services or products that are not physically manufactured, we find that often there is a great deal of variability in price and actual usefulness to the customer. An important point to consider in consumer prices is that any money that is wasted by a consumer business or one of their suppliers is passed through to the consumer in the form of higher prices. “Soft” goods like licenses to use “high-tech” products and services provided to businesses are quite easy to inflate by deft marketing and sales teams. “Hard” goods, like machine tools, do have a much more clearly defined benefit in cost-benefit analysis: the machine has a certain production rate, accuracy, and lifespan, and if those numbers are improved by a competitor, they will have actually had to do the work to build a better machine tool. And the company who provides a machine tool of lower quality will find great headwinds in the marketplace if they try to increase their prices too close to competitors selling higher quality products.
If one studies global flows of investment, sales and payments, just from a very rudimentary point of view, it does not take long to start understanding that what are often branded as “wacky conspiracy theories” are actually born out in the data.
There is only one way, based on the math, for privately-owned business to turn the tide, and that’s for more people to start their own privately-owned businesses.
The only other possibility for America is a globalist-backed statism that grows to the point where America looks like the communist states of today. Contrary to what so many keep repeating, this will not, IMHO, be an issue for our children and grandchildren; it will be upon us much sooner than we think, and will happen step by step, slowly encroaching as our standard of living deteriorates.
IMHO, forget prepping, forget forming a “militia”, start your own business - and promote the idea as much as you can - we need millions of new privately-owned businesses in order to raise awareness of reality.
America had it’s political revolution to break free governmentally from Europe. Most people don’t realize it, but they’re ultimately yoked with the burden of working for international elites in the form of lower standard of living and government borrowing from elites. All this is forced by government which has been turned into the handmaiden of the elites. The next revolution that’s needed is for people to break free from economic slavery and defeat the elites and break their hold on the people and government.
Gee, I wonder why;
This has to be the most ignorant article I've seen posted here in some time.
Why would anyone call the Muslim POS Mr. under any circumstance?
Keep in mind that our trading partners can't eat U.S. dollars, so they have to do something with them that circulates the money back into the U.S. We're basically buying oil from the Middle East and cheap crap from China, and they're turning around and using the cash to buy U.S. Treasury bills that are paying ridiculously low interest rates.
The only reason we’re importing anything is due to overregulation and overtaxation for domestic production (the deal that FDR cut with the House of Saud notwithstanding, in regards to oil). We have not built a new refinery here since 1976, and all due to the “environmentalist” Gaia-worshipers on the left.
And the days of our enemies buying T-bills from us are coming to an end. That was part of the means to the end of making the USA collapse. If you don’t believe that, then look at how they are talking.
Unmitigated bullcrap. The worlds #1 trading nation, Red China, has the most advanced manufacturing facilities in the world. So much so that the US doesn't even have the capability to produce the high end electronics that are made there. There are tens of thousands that work at the Foxconn factories making Apple products. The number of Red Chinese workers involved just in manufacturing is four times the number of ALL the workers in the US.
This "automation" canard is just part of the conjob Free Traitors have used to move US manufacturing to Red China and other Third World pits. Free Traitors have ruined this country and deserve to be sent to the gallows.
This is what high tech manufacturing that used to be done in the US has allowed Red China to accomplish.
My son Visited Shanghai last year and was quite impressed.
That picture is beautiful.
You're oversimplifying this. Things like over-regulation and over-taxation are just two elements of many, many things that drive up costs here in the U.S. Regardless of what is involved in making the cost to manufacture something in the U.S. $X, as opposed to some fraction of $X elsewhere, the point is that these costs are real.
A cost item is a cost item. Any intelligent business owner will seek to reduce costs to the extent possible.
Do the research on any figures related to manufacturing output, and you'll see how contradictory your post is. You claim the Red Chinese have four times more manufacturing workers than the entire U.S. labor pool, and yet the industrial output of the two nations is almost the same. I find it hard to believe that China has the most advanced manufacturing facilities in the world if their productivity is so poor.
The U.S. isn't really selling out to these competitors at all. The U.S. is simply being eclipsed by them, as many of these larger, faster-growing nations will likely surpass the U.S. over time almost as a natural series of events. When you refer to "high-tech manufacturing that used to be done in the U.S.," you speak as if the U.S. had some kind of manifest destiny that would have kept it at the forefront of the world until the end of time. That's just delusional thinking. One of the dirty little secrets of our modern world is that a lot of the manufacturing that is done in Asia isn't even aimed at supporting a major consumer market in the U.S. anymore. Some of these countries are exporting more to other Asian trading partners than they are to us.
The firearms industry is massively expanding.
3D printers are an exploding new industry.
Problem is they are viewed as a direct threat to the progressive agenda.
Any state that creates a specific industry that is for the most part directly in opposition to Obamas agenda will create a better local economy. Unfettered by EPA and federal restrictions.
Obamas agenda is to find out what the people of the nation MUST have on a daily basis, just so he can restrict it, control and tax it. Its just a fishing expedition. He cares NOTHING about America.
The U.S. isn't really selling out to these competitors at all.
Competitors!?! Its US Corporations that are shutting down operations in the United States and moving overseas and using US taxpayer money to do it! A Sunoco refinery near where I live was shutdown recently. The now jobless men were on TV crying, wonder how they were going to feed their families. The refinery is to be dismantled and rebuilt in India all with a helping hand. These are American corporations and American politicians that are screwing over American citizens!
you speak as if the U.S. had some kind of manifest destiny that would have kept it at the forefront of the world until the end of time.
You're goddamn right we did and it was the job of the federal government to protect it the best it could not use taxpayer money to give it away to our enemies.
a lot of the manufacturing that is done in Asia isn't even aimed at supporting a major consumer market in the U.S. anymore.
US consumers don't have the purchasing power they once did because their jobs were shipped to Asia.
Some of these countries are exporting more to other Asian trading partners than they are to us.
The Asians have the purchasing power because they have the jobs that we used to.
Free Traitors have ruined this country. All you have to do is look around and see whats happening here and see whats happening in the countries the Free Traitors sent the jobs to. When American Patriots take the federal government back there are going to be mass trials and Free Traitors are going to be put in the dock, found guilty of treason, and sent to the gallows.
I’d also point out that Germany has not sold out its people by moving its jobs to Red China. She has kept its high tech “automated” manufacturing, has high employment, and has a trade surplus. What’s the difference between Germany and the USA. Free Traitors have not ruined Germany.
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