Manufacturing is growing, but not fast enough to recover the jobs lost over the past 10 years. That makes it imperative for federal and state governments to nurture growth of manufacturing so companies want to do business in this country.
The manufacturing industry, from textiles to cars, sustained major hits in the 1990s. High employee costs and overhead of stateside plants made overseas production more attractive. The smaller and mid-size operations could not compete with larger ones who outsourced product manufacturing and kept overall pricing ridiculously low, so they closed shop. Times have changed and there is an interest in – not only American companies returning – but also in foreign companies investing here. Some foreign companies, like Mercedes and BMW, have found doing business in the United States is more suitable because it is cheaper to produce vehicles here with all the automation available than to produce them in Europe and ship products here. All in all, America’s manufacturing sector has grown by a half million jobs. That puts it back in the same spot as before the Great Recession. According to economy experts, companies returning to America account for 15 percent of this growth.
The key is high-tech automation. Even with low wages overseas, America is the best at automation. Workers in this country use technology to produce more every day than outsourced workers produce with manual labor. Company presidents and chief executive officers are seeing how that is affecting the bottom line. The other key component in this is all high-tech automation requires those with equivalent skills to run and fix it. America stands a better chance at having people with those skills than those in other countries.
Another primary factor in companies returning to the United States is Americans’ need for expediency in getting products. With all of the online ordering boom, Americans have come to require delivery of products within a day or so. That requires storage and an updated logistics system that many overseas manufacturing facilities do not have.
A third factor in the manufacturing boom in this country is overall operational costs. Overseas companies are learning what it takes to be competitive. China is beginning to invest in automation to keep up with demands and overseas workers are now demanding better pay, so companies are raising costs to American manufacturers who outsourced the work. Frankly, overseas outsourcing is not so cheap anymore.
The American public, in recent years, has led a grassroots effort to avoid products made overseas and has concentrated on buying American-made products. Campaigns to buy American, with companies proudly displaying the “made in the U.S.A.” logo have created a sense of pride in supporting companies doing business here. The American public has made it clear that they will support government efforts to nurture manufacturing growth.
Even with all this good news, America’s manufacturing industry is not on firm footing yet. Economists state that America has 5.1 million less manufacturing jobs than it did at the beginning of the millennium, even with the post-recessional growth in manufacturing. This is where the economy needs a jump-start from both federal and local governments.
President Barack Obama sees this and did speak to this in 2013, stating he wants to see a focus on vocational education to ensure there is a skilled workforce to attract manufacturers back home. This is probably the most important thing that can happen to escalate growth. State governments should develop initiatives to both young people and out-of-work adults to go into high-tech vocational training. That could be state scholarships or some form of tax relief for enrolling in that type of education. The federal government can do its part by financially supporting states with grants and other forms of aid to update vocational schools with the latest and best equipment so students can learn these high-tech skills of the future. Additionally, both federal and state governments need to offer incentives to companies moving back home. That can be corporate tax reductions or other tax breaks that many currently give to other companies.
This is the path out of the recession. This is how American can create an industrial boom that reduces unemployment and provides opportunities for young people. Elected officials would be best served to take it. Governments need to nurture growth in manufacturing so companies will want to do business in this country. That will make America strong again.
Opinion by Melody Dareing
Photo by Cory M. Grenier – Flickr