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The revival of American manufacturing

The Bureau of Labor Statistics collects data on every aspect of our nation’s economy. This includes calculating the GDP, the unemployment rate, as well as tracking how many people work in the various sectors of the economy.  Sadly, one of the most depressing statistics the Bureau monitors, at least until recently, has been the number of Americans employed in manufacturing.  For the past fifteen years, without let up, without regard for the state of the economy, and seemingly unstoppable, this figure has steadily fallen.  However, this decline is part of a larger overall downward trend.  In 1960, 42% of our nation’s work force was employed in manufacturing.  Today, only 11% are employed in actually “making things.”

 This is no surprise to most Americans and it’s hardly news to those of us in the Northern Neck.  Major

manufacturing companies, such as Levi’s, GM, and Sylvania, once anchors in our community, have long since closed their plants.

 But wait; hold on just a minute, something seems to be happening.  It started in late 2010. We were still in the recession, but there were two months in a row, followed a third, and then another and another, that showed a growth in the number of American’s working in manufacturing.  Clearly, something was going on, and economists, having grown used to explaining why this sector was declining, instead, had to explain, why, all of a sudden, it was showing signs of life.  Apparently, “outsourcing,” overseas, the path of American industry for decades, was losing some of its popularity.  As the President said last week, maybe the time is right for “insourcing” and bringing some of our manufacturing base back home.

 We’ve grown accustomed to reading “Made in China” labels attached to the consumer products we buy.  The Chinese, thanks to low wages, few if any workplace rules, and weak or nonexistent environmental laws, were almost always able to outperform American manufacturing plants when it came to costs.  However, this is changing, and so is the perception on the part of American industry of the benefits of making things overseas.

 For years, the pay for industrial workers in China was a fraction of that paid to their counterparts in the U.S.  But this is changing and during the past five years, pay for Chinese manufacturing workers has gone up an average of 17% a year.  Very quickly, though still poorly paid by American standards, they’re not as cost competitive as they once were.  On top of that, with rising fuel costs, the expense of transporting goods thousands of miles from China to U.S. markets is climbing.  Also, there is one more factor that American manufacturers are considering, and that’s their ability to rapidly adapt their products to changing markets.  The lead times required to get a Chinese plant, operating under contract with a U.S. firm, to change or modify a product can be extremely long.  Add to that the six weeks required for shipping and it’s possible, particularly in highly competitive markets that a company making its products overseas could get left behind. Several have had this experience and decided that the best way to get some of this flexibility back was to bring some of their manufacturing home.

 The famous toy company, Wham-O (every baby boomer knows that name) decided it was time to bring some of its manufacturing back to the U.S. and now American workers are producing some of its leading products such as Hula-hoops and Frisbees.  Caterpillar is another company that is bringing a substantial amount of its heavy equipment manufacturing back home.  The cost advantages just weren’t there anymore.   And the same is true for NCR.  Once called the National Cash Register, but now known just by its initials, they make ATM’s and automated check out systems.  They have decided that rather than produce overseas they will open plants in Georgia instead.

This trend is continuing for a host of firms.  But, any revival, while warming the heart of anyone who wants to see America make things again needs to be tempered with the realization that these aren’t the same jobs that went overseas 20 and 30 years ago.  Manufacturing is less labor intensive then it was back then and no matter what, this sector isn’t going to employ the same number of workers it once did.  Also, manufacturing workers in the 21st century require substantially more skills and training. Hopefully, our workforce, and our educational system, is up to the task.     

 It’s hard to say for sure whether this trend will continue, but it seems to be catching on.  However, in a much larger world market place, it’s doubtful there will be a wholesale revival of American manufacturing.  That’s probably not in the cards.  But maybe, the long slow slide in American manufacturing is finally over.  The economics are right, and for once, the market, for a host of reasons, seems to be swaying in favor of producing more products here at home and not overseas.  And that means jobs and opportunities for American workers.

You may reach David Kerr at This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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