Bringing America’s Jobs Back Means Making America’s Factories “Great Again”

Bringing America’s Jobs Back Means Making America’s Factories “Great Again”

Bringing America’s Jobs Back Means Making America’s Factories “Great Again”

$GM, $F, $FCAU

Over that past few year and most recently during the Presidential election campaigning and post-election the Key discussion is about bringing back manufacturing to the US

This was a Key focus of Donald Trump’s campaign for US President. Also, there is the same discussion in other advanced countries.

Teresa May, Prime Minister of Great Britain, has called for an industrial strategy to restore the UK’s manufacturing prowess.

In France, Marie le Pen’s platform includes a “Made in France” policy, which sounds similar to President Trump’s “America First” plan.

It will be difficult to bring back manufacturing to those places where we have know it to thrive in the past, here is why:

  1. Manufacturing has changed. New factories now rely more on robots and automation than blue collar workers. The Big 3 US car manufacturers (Ford, GM, Chrysler) employed about 1.3-M workers at their peak employment. Now the same companies employ about 130,000 workers and manufacture more cars in the US.  Incentivizing investments in manufacturing will not bring back those lost factory floor workers who were relatively unskilled and well paid.
  2. The plants which produce the final product only contribute a limited amount of the product’s final value. Much of the value and the employment which created the value comes earlier in the process as parts are designed, configured, and produced.
  3. Various factories in various countries have developed specialized equipment and expertise which cannot be quickly replicated and is part of an increasingly complex supply chain.
  4. More traditional and vertically integrated factories have been replaced by more efficient production processes, contributing to a scattering of employment globally. This is not going to change back to past less efficient processes.
  5. Mid 20th-Century manufacturing relied on slightly skilled labor coupled with capital investment. 21st Century manufacturing relies more on automation, workers skilled in computers and technology, complicated supply chain management, and technology.
  6. The rusted manufacturing plants referred to by President Trump are not 21st Century plants.
  7. Statistically, many manufacturing jobs will never reappear. In the past, factory jobs included a variety of services such as shipping, cleaning, cafeteria workers, etc. Now these services jobs are typically provided in the plants by other more specialized service firms, and the workers are no longer classified as manufacturing employees. These outsourced service workers are typically paid less and receive fewer benefits.

Nothing ever remains the same and change is constant. This is true with manufacturing. What is an efficient model today will likely be replaced by a different model tomorrow. The use of 3D printers could have a significant effect on the manufacturing model. Advances in artificial intelligence may further alter the automation of factories of the future. What we can be certain of, however, that those former high paying blue collar jobs in the rusting, long vacated steel mills are not coming back.

There are strategies to improve a country’s competitive position and increase employment opportunities in a changing production environment. Improving the quality of education, affordability, and access improves the quality and availability of skilled workers.

Encouraging knowledge workers to immigrate or stay in the US after graduating from a US university also helps in similar ways.

And by providing good infrastructure, negotiating trade agreements which result in more export opportunities, and reducing trade restrictions and tariffs all can contribute to a more robust manufacturing climate.

Reducing business costs including non-essential regulations can help the country’s competitive position at the margin.

All of these factors can and will encourage investment in US based industries, but this is not the same as restoring former manufacturing plants and the jobs associated with these now obsolete facilities.

Have a terrific President’s Day weekend.

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