Part 3: Manufacturing and Economic Revitalization

We’ve looked at the slow repatriation of jobs from abroad. We’ve examined what’s missing in the middle path for American manufacturing. Now it’s time to go up against all the mythology directly. Even if manufacturing is headed in the right direction, does the promise of economic prosperity hang in the balance? There are still quite a few questions for those who argue that a rising manufacturing tide will necessarily lift all boats.

Brockton Mill
Factory buildings in Lowell, Mass, 1940 Dec. Photo: Jack Delano, Library of Congress

Will manufacturing employ as many, and as many unskilled, workers as it used to?

Probably not and definitely not, respectively. See my previous post on workforce mechanization for more: the strictly manual labor of yesteryear’s factory is on its way out the door, if not down the street already. That will definitely mean fewer unskilled manual workers, and probably fewer overall. Even if there’s a renaissance in manufacturing, it may be a form of jobless recovery, with expanded output but not jobs.

That being said, employing as many people isn’t really the best measure of success. High quality, well-paying and fulfilling work is what really matters. I’d certainly rather work in the manufacturing industry of the 21st century than the 20th century. New manufacturing work is likely to be more intellectually engaging and safer than ever before. The stop in the freefall of manufacturing jobs is in itself an accomplishment. Even if jobs are created slowly, hopefully their quality will set them apart from other growing sectors of the US economy.

Is the industry stable? Will it lose 2.5 million jobs during the next recession? 

There is no question that manufacturing is susceptible to a downturn; when demand shrinks, so does production of consumer goods and all the supplies that go into their production. It’s impossible to say that the jobs that are developing now will be immune from shocks. This is why we need to keep in mind the growing importance of economic resilience. Economies built around a single variable (the price of oil, the ever-increasing value of homes, the demand for goods in China) are always more vulnerable than those that have flexibility and backup plans. Manufacturing redevelopment should be built around this principle, and in turn it can help provide resilience to local economies.

New Balance
New Balance shoes are one of the few clothing companies to manufacture widely in the US, although not every element is produced here.
Source: Made in the USA – New Balance Factory: Skowhegan, Maine by Flickr user David Salafia

The reasons for manufacturing’s current ascendance are fickle. Energy costs could go up. Wages could go up. Overseas transport costs could go down. If this resurgence is built merely on cost comparison, it will inherently be a footloose sector. What we need is an industry and a public that have made the connection between the products they buy and the work that goes into them. “Made in America” is one of the vanishing number of ideas with bipartisan supporters. The problem is that we have to get people to back up with their dollars what they say is important.

What about other countries? Will companies move to Cameroon when their labor costs become 5 cents cheaper than China’s?

In terms of flight to other countries, I think the news is relatively good (at least in comparison to the onslaught of the 90s and 00s). As technological innovation becomes more important, the cost of labor declines as a part of manufacturing costs. Although this means fewer people will be employed, it also means that having rock bottom wages matters less in the final calculus. It’s difficult to gaze in the crystal ball and see exactly what’s next, but mass production under sweatshop conditions is probably less likely in the future, not more likely. Robot sweatshops, maybe.

How long do we have to wait for this to take off?

Lawrence Factory
Railroad cars and factory buildings in Lawrence, Mass. 194[1] Jan. Photo: Jack Delano, Library of Congress
There’s a lot of preliminary groundwork for manufacturing, something the cheerleaders rarely acknowledge. There’s the workforce issues (in post 1). There’s the critical mass of flexible medium sized businesses (post 2). There’s the declining rates of entrepreneurship and support for research and development in the US, both of which form the basis for innovative manufacturing. There’s no agreement on which of these issues is the chicken or egg, and you’re likely to see a lot of dithering while people argue about it.

But since you come to this blog for easy answers, I’d say that it will be decades before we know if this thing is for real. As I’ve argued in other posts, we need to say a qualitative rather than a quantitative shift. Success will not be based on numbers of jobs coming back from overseas; success will be in the form of a robust cluster of industries that supports communities and is working hand-in-glove with institutions to create a highly technical workforce.

Can it turn around the fortunes of a place where everything has gone wrong?

This is a tough one. Will manufacturing have the power to help a place that is badly economically dislocated (often, because of the previous flight of manufacturing)? If the renaissance is going to be real, will it help not just a Worcester, MA, but a Gary, IN?

The status quo isn’t entirely encouraging. The current beneficiaries of a manufacturing revival, such as it is, are the places with rock bottom wages – that is, usually the South. People in these areas need jobs, no doubt. The problem is that the combination of relatively low wages and fewer jobs overall isn’t the sort of economic activity that helps a community rebound.

A further question is whether developing this type of labor is inherently unstable, which will be even more destructive for long suffering regions. Again, competing on cost alone is a dangerous precedent. If wages start to rise too fast, the companies will leave, making meaningful economic development and private sector success at odds with one another. Take a brief moment to envision how China’s feeling right now: the primary reason for the momentum in manufacturing towards the US is because Chinese workers are quickly entering the middle class and demanding awful things like a living wage and benefits.

Mt Holyoke Rubber Factory
Mt. Holyoke, Massachusetts – Paragon Rubber Co. and American Character Doll. Pressing rubber bodies, 1936. Lewis Hine, U.S. National Archives

Can it support a community?

This, to me, is the ultimate question. Can manufacturing be the base of broad community resurgence, the way it was, however imperfectly, in the past? There’s some good news here: the historic perception of manufacturing companies as greedy robber barons exploiting immigrant labor is extremely outdated and is belied by the connectivity of many small and medium enterprises that take pride in their work, their workers, and their community.

In my experience, the manufacturers that haven’t left (or couldn’t) are some of the most engaged, passionate businesspeople out there. This is especially true in Massachusetts, which is not a low cost state. They’re not running a charity, but if they were looking to cut costs to the bone they’d at least start by moving to New Hampshire (if not Alabama, if not China).

If manufacturing is to surge again, it has to be of the community, with the interests of the community in mind. We need to avoid creating company towns in the mold of the 19th and 20th centuries. An American Mittelstand can and should be built on the base of the companies that have remained.

Conclusion: The Promise of Manufacturing

As I look back on this series, I think I’ve probably come off a bit harsh on manufacturing. While I do have a lot of questions, digging in to what’s happening in the sector has certainly give me a lot of hope as well. That might not come across because I’ve never had any patience for silver bullet solutions – that “all we need” is “insourcing”  to “put America back to work.” That kind of platitudinous promises is rife in political conversations. “All we need” is to break up teachers’ unions for schools to thrive. “All we need” is to subsidize wind power to solve climate change. In a similar vein, big promises abound in manufacturing.

But just because manufacturing isn’t all we need doesn’t mean that it won’t be a vital sector of the American economy again, one that will generate a lot of wealth, jobs, and social advancement. My big takeaway from this series is that the next decade or two is a crucial time for these trends to take shape, and that the path is not yet well determined. Most of all, it will take more than haphazard economic planning for the sector to make an impact.