What the U.S. must do to help manufacturing

Unfortunately for the worker, manufacturing has found that the best way to control benefit costs and healthcare costs is to eliminate the worker. The need to minimize the adverse effect of rapidly escalating benefit costs has been a driving factor for investment in manufacturing technology. That is the only way we can remain competitive and this is happening around the world.

Countries around the world are losing manufacturing jobs and the only way we’re going to change that in the U.S. is to increase exports, or find ways to become more competitive so we can reduce imports. And when you look at the U.S., there is a transition occurring in the U.S. industrial base.

First, there’s consolidation. You see it not only in the automotive industry, but in the aircraft industry. Twenty years ago, how many companies in the U.S. made commercial aircraft? Today, it’s essentially Boeing.

There’s also a migration of manufacturing to the Tier One and Tier Two suppliers. You’re seeing this in the automotive industry. And Boeing will tell you they are not a manufacturer. They are a designer, integrator and marketer of commercial aircraft.

There is a continuing outsourcing of low-skilled jobs overseas. The day of paying a textile worker $12 to $14 an hour is over. And there is a geographic migration of manufacturing facilities within the U.S.

I grew up in Demopolis, AL and graduated from Auburn University with a degree in Industrial Engineering in 1969. Alabama was a textile and agricultural economy, and the only job I could find in the state of Alabama was with the telephone company. So I went to work for Texas Instruments in Dallas.

In 1992, the state of Alabama gave Mercedes Benz $1 billion in tax abatements to build a facility in Tuscaloosa. And what happened? Between 1992 and 2002, the State of Alabama lost 100,000 textile jobs, and they gained 87,000 auto manufacturing jobs. Now, do you think they’re better off? Sure they are. But the significant increase in transplant automotive manufacturing in the South has been at the expense of Northern and upper Midwest automotive manufacturing.

And there has been a change in the makeup of the labor force. Today almost 50% of people going into manufacturing have some college, and 25% have a college degree.

And why are manufacturing jobs important? One, they’re the highest paying jobs in the economy. Second, 56% of workers in the U.S. have healthcare coverage through their jobs. That varies by occupation: 30% in recreation, hotel and food; 52% in retail and wholesale; and 70% in manufacturing.

Manufacturing has the highest multiplier effect in the economy, by far. When you look at auto manufacturing, each assembly job generates about six manufacturing jobs in the supply chain and about 10 jobs in the entire economy, so it has a dramatic impact.

The National Association of Manufacturers and the Manufacturers Alliance/MAPI did a study in 2003. When compared to our nine largest trading partners, they found that we have a 22.4% competitive disadvantage, so all of these great things that we did in manufacturing just kept our head above water.

We must recognize that this 31.7% competitive disadvantage was caused by the laws that were enacted by our state, local and federal governments, not by the Chinese government or the EU. And we’re the only ones that can change it.

So that’s the question we must answer. It’s not what everyone else in the world should do to help U.S. manufacturing. It’s what the U.S. should do to help U.S. manufacturing.

Editor’s Note: The full text of John Byrd’s article, U.S. Manufacturing, Challenges and Opportunities, is available at www.PlantEngineering.com under “White Papers.”