The Manufacturing Decline in America

Even the most casual news reader has noticed the increasing number of headlines focusing on the loss of manufacturing jobs. Each article presents a different reason for the decline. These catalysts range from dissolution of job functions to outsourcing. The effects of the manufacturing decline in America are felt most in the range of states between New York in the east and Wisconsin and Illinois to the west, now known as the Rust Belt. Below, we examine the true causes of the decline.

Outsourcing & Offshoring

Over the past 15 years, offshoring has been the largest area of growth in the outsourcing market. The leading country in terms of offshore manufacturing is China. Reports show that there are a lot of manufacturing jobs that have left, but manufacturing output is higher than ever. How can this be the case?

Manufacturing covers a wide range of products, some parts are so cheap that individual unit costs are a fraction of a penny. Big ticket items, such as aircraft like the Boeing 787-10 Dreamliner are priced at $306 million USD. The majority of offshore manufacturing jobs involve production for low cost items. While these types of low-cost manufacturing did create many jobs, the overall impact on GDP was low. One of the key differences here is that the activities that might take place to produce raw materials or early pieces of the supply chain have been offshored.

Efficiency & Productivity

One of the overall goals of manufacturing processes over the past century is to accomplish more with less. In an effort to drive down costs, manufacturing companies have looked for ways to make products in a more efficient manner. Each individual task is scrutinized to look for areas of improvement. Many findings resulted in a culmination of jobs into one role.

For example, consider plastic extrusion workers and quality assurance. Plastic extrusion workers produce parts to fill customer orders, doing a very quick inspection every 10 minutes to ensure parts are in conformance. In addition, a team of quality personnel are employed to inspect finished product before packaging. The quality personnel have more time to analyze finished parts because they are not also responsible for production. To save costs, the company begins to have the plastic extrusion workers inspect and verify conformance of their own parts. The plastic extrusion worker now performs both job functions and the quality team is no longer needed. The resulting savings come from the subtraction of quality workers salary, benefits, training, and other associated costs.

Automation

Job loss due to automation or robotics is a large concern pertaining to the manufacturing decline in America. Replacing workers with machines is easy when job functions are routine and repetitive, similar to what may be seen on an assembly line. Factory floors are changing, in many shops you can find computer screens every few feet that run machines or illustrate real-time performance. While automation has many benefits in manufacturing, it comes at a price. These types of machines are expensive, costs can amount to millions of dollars, and many companies won’t have the capital to invest in this technology any time soon.

Automation does replace some jobs, but it creates jobs too. Equipment requires engineers, developers, and production personnel, just to name a few, in the creation of the machine itself. On the shop floor, workers are still needed to monitor machine performance and keep orders running. Economists argue that automation may create more jobs than it replaces.

Only time will tell whether manufacturing creates more jobs in the US. We will keep you posted!