“The Myth of Industrial Rebound” – New York Times, 26 January 2014

There have been countless rumors that manufacturing companies—like Master Lock and Element Electronics—will return to the US from overseas, to boost US manufacturing jobs and the unemployment rate. However, rumors are rumors: these jobs are trickling in at a snail’s pace, and many are being subsidized by local, state and federal government agencies. Moreover, the US must compete with low-wage countries, like China and Mexico, which means less benefits for US manufacturing workers.

Last year, GE opened a new assembly line in Louisville, KY, the first one in over 50 years. However, the baseline hourly wage started at $13.50 per hour, less than $30,000 a year. In 2011, Volkswagon also opened a new plant in Chattanooga, TN. While the plant brought almost 2,000 jobs with it, the starting wage for assembly line workers was $14.50 per hour, half the amount that GM and Ford pay their unionized employees. Volkswagon made the shift to America from Germany, where the median income for their employees is $67.

This effectively means that America is now a low-wage country. Since the end of the recession in 2009, wages for the automotive industry have fallen by 10%, and wages for manufacturing fell 2.4%. These wage trends are inextricably linked to the US’s sluggish economic recovery—with dropping wage rates, consumers won’t, and can’t, spend. Americans also pay for the subsidies that government agencies provide for companies like Volkswagon.

Since January 2010, the US has picked up 568,000 manufacturing jobs, a very small portion of the almost six million lost from 2000 to 2009 and a very gradual recovery in comparison to the growth of nonmanufacturing jobs. Competition with manufacturing countries like Mexico is growing—Mexico pays its workers less than the US, while producing more than the US. If the US wants to keep up, then production will have to increase. This means more efficient workers.

Other more advanced industries, like aerospace, are also losing to less developed countries: Bombardier is producing Learjets in Mexico and Cessna will begin to assemble Citations XLS+ business jet in China.

The US also can’t count on the energy boom to save manufacturing. A 2009 study reported that only one-tenth of US manufacturing came from the energy industry. However, we can count on our service industry, which provides gainful employment in education and medicine, and can also assist in the US’s balance of trade.

Research and development (R&D) is something that we should invest in—R&D lends to more innovation and jobs. Obama’s second-term goals for America was to create one million manufacturing jobs and special subsidies for manufacturing. While that seems fairly improbable, his goals of increased training for skills required by employers and spending on R&D were very wise.

Developed and Written by Dr. Subodh Das and Tara Mahadevan

March 25, 2014

Phinix LLC

Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

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