We Can't Make It Here Anymore: A Different Take On American Manufacturing

We Can't Make It Here Anymore: A Different Take On American Manufacturing

Throughout the Presidential campaign, you’ve probably heard something about China stealing American manufacturing jobs. You’ve heard it from both sides. Donald Trump says “ They’re using our country as a piggy bank to rebuild…We have to stop our jobs from being stolen from us.” Bernie Sanders made waves in the Democratic Party saying things like, “Corporate America said, ‘Why do I want to pay somebody in Michigan a living wage when I can pay slave wages in Mexico or China? We’re going to shut down, we’re going to move abroad, we’re going to bring those products back into this country.”

Though the rhetoric differs in who to blame (China or Corporate America), the scapegoating is essentially the same: manufacturing jobs are leaving America, and we need to put a stop to it! It’s an appealing sentiment and one that seems to captivate the minds of voters. But, and there’s a big but here, it simply isn’t true.

Let’s dispense with two falsehoods. First, that manufacturing is going to be the salvation of American industry, and second, that manufacturing is a dead horse that deserves flogging.  

Manufacturing is down in America, that much is certainly true. According to some reports, as many as five million manufacturing jobs have been lost since 2000. However, that loss is part of a much larger trend. In 1960, one in four American jobs was in manufacturing – by 1980, it was one in five, by 2000 it was one in seven. America has been losing manufacturing jobs at an alarming rate since the Kennedy administration- this is hardly news. It is also hardly the fault of a single corporate enterprise or president, rather, it represents a transition of production from high-cost American jobs to lower-cost overseas equivalents. Yes, it’s true, most of these jobs did go to China. It does, however, seem unfair to lay the blame at China’s feet in retrospect. They were a nation with an economy in dire need of stimulation that capitalized on the resource at their disposal- not exactly the kind of initiative we can fault them for.

For better or worse, this effect is called offshoring, the farming out of manufacturing to cheaper labor markets. It was only natural that production shifted. It was expensive to build things in America, and from 1960 until 2013, that was true.

However, that is no longer the case. In the last few years, there has been a steady increase in manufacturing jobs in the United States. Some information points to as many as five million new jobs in manufacturing since 2010. This coincides with China’s exports to the U.S. falling by as much as 25% in recent years. The reality is, despite all the bluster, that China has reached a plateau of production. Wages there have risen, markets become more competitive, such that many companies have begun to return production to U.S. soil.

This is due in large part to reshoring, championed by Harry Moser, founder of the Reshoring Initiative. In partnership with corporations, the foundation has been able to return jobs like water heater and lightbulb manufacturing back into American hands – production by General Electric, distribution by Wal-Mart.

This all ties into a larger trend of consumers being more interested in buying domestic products than in previous decades, which happens to coincide with an all-time low in production cost.

Things are simply less expensive to produce than ever before. In the words of General Electric president Jeff Immelt, “Today, the product is the process, more or less. If you look at an aircraft engine, the content of labor is probably less than five per cent. We have two hours of labor in a refrigerator. So, it doesn’t matter if you make it in Mexico, the U.S., or China. Today it’s about globalization, not about outsourcing; it’s how do I capture markets faster than the competition?”

Which brings me to the second point: Manufacturing is going to be a global undertaking, each nation building what it can, at the cost that the market will bear. So, if it’s not about manufacturing then what is it about?

America needs to focus on service and administration. For example, in 2015, one in five Americans were employed in a  call center, indicating that the service economy is alive and well.  In other fields, such as healthcare, construction, and retail, employment is also at record highs. These industries have a proven ability to grow the economy and are clearly stable for the near future.

I get it. America built its image as the land of opportunity where the lowliest immigrant could obtain a good job in manufacturing and build a life for his/her family. This is no longer the reality. However, if you sub out manufacturing for retail, service, construction or healthcare the future isn’t nearly so bleak. Even in terms of manufacturing, it’s less bleak than the last thirty years. Maybe it’s time to put this fantasy to bed and see it for what it is: vote pandering, and nothing more.