Re: Manufacturing Jobs are Never Coming Back

March 22, 2016

On Friday, Ben Casselman of FiveThirtyEight.com's blog published a "Manufacturing Jobs are Never Coming Back" article. It is amazingly insightful, but I would add "like they used to" at the end of that title. Here are my 3 bullet points.

1. Manufacturing has grown in the US in the past years, however, actual people working on production lines haven't been hired, because the jobs are automated - requiring less factory line workers.

According to the US Bureau of Labor Statistics, since the last recession, domestic manufacturing output has risen over 20% while manufacturing jobs have increased by just over 5%.

"In recent years, factories have been coming back, but the jobs haven't... a small but growing group of companies are shifting production back to the U.S. But the factories they build here are heavily automated, employing a small fraction of the workers they would have a generation ago."

Continuous growth in sectors like manufacturing will require more training and know-how that extends beyond a traditional line worker. Engineers and robot operators will be in demand. We know that with each new update, they will need to train and retrain as efficiency is demanded.

2. "Candidates like Bernie or Trump love to focus on manufacturing, trade, and put other countries as a scapegoat."

The US also had inexpensive labor in the 1800's and 1900's. We had terrible working conditions(which is why we have unions at all) that improved over time. Europe walked this path before us. After us, it is Asia, and recently, Brazil. Each industrializing country begins with manufacturing because it puts unskilled workers on a track to succeed. As these workers earn more wages than their norms, they are lifted out of poverty and enjoy better living standards. Hopefully, their children become the "middle class." Global manufacturing has helped lift people out of poverty in the last 25 years, from an estimated 40% in 1990 to below 10% in 2015. As a child of immigrants myself, I am glad to see it pay off for people around the world.

Thanks to lowered costs, the US companies have also benefited from the rise in income, just in different sectors. We see a flip in the number of jobs and pay provided between front end (retail/marketing) and production. Additionally, the mark-up and profit margins between manufacturing and retail are worlds apart. On a $100 shirt at the mall, the mark-up is anywhere from 5-10x manufacturing cost. Because the factory margins were about 10% of cost, the factory received about $1-2 of that hundred dollars. So, the gains are almost entirely local.

3. We Need to Educate for Jobs that will be IN DEMAND.

The first step toward recovery is admitting we have a problem. Technology is advancing at a faster rate than ever and improving multiple sectors at a pace never seen before. Though the US leads every significant breakthrough, we can't find the workers to fill the jobs.

Education needs to be reformed to give people true vocational skills when they complete the programs. Even the majority of students in college go in lost and unsure. If they knew the cost of living they'll graduate into, the decisions on how to spend their college days would change.

The kumbaya-do-what-you-love-you'll-figure-it-out mantra does not work for the majority of students. The universities' competition for "a better student experience" should instead focus on how well their students fill the needs of our society.

Now that I'm a decade out of college, I've found that going through college without a survivalist mentality is a luxury of families with means. When one year at a private college costs $50,000 per year, and your family mortgaged the home to pay for it, wouldn't you expect a starting salary close to what you've payed?

On the other hand, apprenticeships in technology cost $10,000 for 6 months of code school, and graduates are earning $80,000. The ROI for this type of schooling is instantly beneficial to the family and economy.

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We can also see that there is an interest in other types of apprenticeships. There's been a growing boutique beer market, growing arts market, and growing preference for organic foods. Why aren't the schools that are training people to be master builders, competitors, and ultimately, winners being trumpeted?

Bernie and Trump's voices speak loudly to a huge part of America that feels disenfranchised and left behind. Many of our Americans are hurting so much that the idea of a common enemy is uniting them. Facts may state nearly half of Fortune 500 companies are started by 1st/2nd generation immigrants and they are 30% more likely to start a business that provides jobs, but fear speaks louder. If our fellow Americans had confidence in their ability to not only cope, but succeed in the evolving markets, the elections wouldn't be influenced by fear, like it is now.