The rosier but irretrievable past of workers in manufacturing
You were sixteen, my village queen, by the old mill stream. ~ Tell Taylor
For much of our nation’s first
century, loads of manufacturing occurred in water-powered mills on streams and rivers.
We have always had a soft spot for the hard work of manufacturing things. Nostalgia
about manufacturing runs deep way beyond the nation’s old mill streams. Images
of American blacksmiths are enduring ones. The picture below shows three blacksmiths
at work in 1893. The “black” in blacksmith may come from black metal, an
ancient name for iron. Thousands of blacksmiths forged, welded and finished
many vital items for our growing economy including parts for Conestoga wagons. Presently,
there are perhaps 500 artisanal blacksmiths remaining, who make items like
custom railings and artistic hardware for homes.
Modern US manufacturing has
nothing to do with streams, blacksmiths or wagons, but nostalgia about its
origins carries far more reverence and importance than actual numbers. Manufactured goods are created from
the conversion of tangible raw materials into consumable or useful products. If
you drop one on your toe, it could certainly hurt on impact.
The US manufacturing sector comprises 86 unique industries; everything
from fabric mills, bakeries and tortilla products, soaps and cleaning compound
makers to ship and boat builders. Random examples of manufactured goods
include: Boeing 787s, baseball bats, flip-flops, Corvette ZR1s, laptop computers,
dishwashers, canned onion soup, moly-bolts, insulin pumps, Porsche GT3s, t-shirts and radial
saws.
From the latest available data
there are 254,941 manufacturing firms in the US. In terms of firm size, this
sector is dominated by small companies. Over 60% of these companies have ten or
less employees; only 5% have more than 100 workers.
It’s been nearly 50 years since
even one-quarter of US workers were employed in manufacturing. Despite numerous
promises about improving manufacturing employment, our current president has
not increased manufacturing’s share of total employment. It is currently at the
lowest-ever portion of total nonfarm employees, 8.43%. However, manufacturing
output has steadily increased; from 2009 through 2017 (latest data) it rose 13.7%,
slightly less than real GDP growth.
How has output grown while
employment dropped? Manufacturing technology has vastly changed over the past decades.
US manufacturers have heavily invested in fewer higher-skilled workers using
more productive, computer-controlled machinery as well as fully-automated
machines. Manufacturing “assembly lines” are now populated both with better-skilled
workers and an increasing number of industrial robots. In Oct. 2019 there were
12.88 million workers in manufacturing, about the same as in Jan. 1946. Between
Jan. 1946 and Oct. 2019 manufacturing output increased more than 850%. That is
impressive productivity growth.
What’s the most manufacturing-intensive
state in America? Indiana. The Hoosier state has 28.6% of its output coming
from manufacturing and over 17% of its workforce, the highest percentages in
the nation. Another mid-western state closely follows Indiana. Michigan,
traditional home of the US auto industry, has 19.1% of its output from
manufacturing using 14% of its labor force.
Manufacturing workers receive much
higher compensation than other industries, reflecting their skills. Indiana’s
average annual compensation for manufacturing was $77,235 in 2017, which is 60%
higher than the average per capita income for the US. California produces the
largest amount of manufacturing output, over $300 billion in 2017 and on
average pays the highest compensation to such workers, $105,320. Both these
statistics reflect the high value-added of California’s expertise in producing military
aircraft and aerospace technology among other items.
Speaking of the auto industry,
manufacturing cars is slowly becoming much different than it has ever been. Making
electric vehicles (EVs) is more straightforward than assembling vehicles with
internal-combustion (IC) engines. The Chevy Bolt, GM’s most popular EV, has 80%
fewer moving parts than comparable IC-powered vehicles.
Last year, a study by a German
research institute found that by 2030 just a moderate shift to EVs could leave
75,000 Germans out of work—even after accounting for the creation of 25,000 new
jobs. That’s because batteries and electric motors are far simpler machines
than IC engines. They’re made with only a few hundred parts instead of a few
thousand.
Many large challenges remain in convincing
lots more regular folks (living beyond Palo Alto, Berkeley or San Francisco) to
buy/lease EVs, as I’ve mentioned.
EVs now account for a slender 1.9% of US vehicle sales, and an even tinier 0.4%
of total registered vehicles. But if states like California are to meet their
ever more stringent environmental standards, sales of many, many more EVs will
need to be amped up, quite soon. By
2025, sales of EVs are required to dramatically expand to about 7% to 10% of
total sales in at least the 11 states that have zero-emission vehicle mandates,
including California, Colorado, New Jersey, New York and Oregon. Whether that
will actually happen is another matter, as changes in buyer preferences may not
coincide with mandated environmental requirements. California’s zero-emission
vehicles (ZEVs) mandate requires 1.5 million ZEVs to be sold by 2025. In the
first half of 2019 100,600 ZEVs were sold in California.
Increased EV sales are good news
for the environment, but not for the UAW, the union representing most US automotive
workers. Because EVs have fewer parts, and crucial components like battery
packs are now mostly imported, the number of workers needed to manufacture EVs
is far smaller than IC vehicles. CEO Jim Hackett last year told investors that
Ford could reduce time spent building EVs by 30% compared with conventional IC
vehicles. Last week Ford made a media splash by announcing the 2021 Mustang
Mach E, its first “expansion of the Mustang family.” The Mach E will be a
4-door crossover SUV, probably selling from $45,000 to over $60,000. Owners of
the soon-to-be traditional Mustang two-door sports cars likely cringed. So it
goes.
Public officials always celebrate
manufacturing’s rosy past and, during campaigns, applaud even minor additions
to manufacturing employment. It feels good and carries a long history. But the
times when labor-intensive manufacturing was a keystone of the economy are irretrievably gone, not to be re-created.
Eighty percent of current US employment and GDP comes from service industries.
No old mills remain commercially operating in villages on any proverbial American
stream now. Promises to enlarge manufacturing employment sound lovely, but all
too often are hollow. An Obama administration leader aptly stated we would need
a magic wand to truly bring back lots of manufacturing jobs. There is most certainly
no Merlin in the White House or alas, anywhere else.
