When we listen to the news, whether television, radio or
newspapers, we hear many reporters and columnists state that U. S. manufacturing has turned the
corner and is on the rise once again. The days are over when manufacturing jobs
were sent overseas and ‘lost’ to foreign competitors. The argument by these commentators is that
due to increasing foreign labor costs, cheap oil and automation jobs are
returning to American, making America
the manufacturing center of the world.
The term “manufacturing re-emergence is the new terminology
coined for this event. However, a recent
study by the Information Technology and Innovation Foundation paints a
completely different picture. According
to this report real manufacturing value added is still at 3.2 percent, far
below 2007 levels. In addition there remain
two million fewer jobs and 15,000 fewer manufacturing companies than there were
in pre-2008 levels. A good part of the
growth since 2010 is due to a cyclical recovery, specifically in the automobile
and durable goods industries.
While it is true some companies have reshored some jobs they
are very modest and companies continue to send manufacturing jobs
overseas. While this symmetry between
companies coming and going is an improvement it is hardly a re-emergence.
Much of the hoopla concerning this so-called comeback is a
misreading about U. S.
cost advantages, such as Chinese wage growth, global shipping costs, the U.S.
dollar, the shale-gas boom and American productivity growth. The persistent belief that these factors are
the drivers that will return production to the United States without real
legislative action is naïve.
There are five myths that need to address. They are the following:
1- China’s rising labor costs will soon match U.S. wages
2- Global
shipping costs are unusually high so U. S.
can produce more for U. S.
and European markets.
3- The
Shale Gas boom gives U. S.
a great advantage.
4- Currency
fluctuations will fix the trade deficit.
5- Superior U. S.
productivity growth will restore jobs.
Let’s address these one at a time:
1- Chinese
wages are still just 12 percent of the average U. S. wages for 2015. Chinese push to open the interior to
manufacturing will reduce the growth in wages.
2- Undersupply
led to skyrocketing global shipping costs in 2008. Today shipping costs are more in line by
falling 93 percent since 2009.
3- Reduced
costs for shale energy have only benefited the petrochemical and drilling
operations.
4- The
United States
has had a trade deficit since 1975 and the trade imbalance is just growing and
growing.
5- U. S.
productivity is not increasing faster than any other industrial country. In fact, it is growing slower than China’s or Korea’s.
The examination on U. S. manufacturing should not be
conversant upon subjective evidence, promotional consulting reports or reports
from think tanks whose agenda is to keep bad news from dampening further global
integration support. From an in depth
analysis of available data on U. S.
manufacturing workforce, value added productivity, U. S. manufacturing is not in
re-emergence but rather a recurring growth mode.
