Sunday, January 26, 2014

The Myth of a U.S. Manufacturing Revival

Fracking and abundant energy will not bring manufacturing jobs back to the U.S.  This is the important message in Steven Rattner's The Myth of Industrial Rebound in the Sunday New York Times.  Interesting points in the article:
  • Wages in blue collar automotive manufacturing jobs have dropped 10% since the recession ended in June 2009.
  • Some jobs have come back to the U.S.  Six million manufacturing jobs were lost in the great recession - but only 568,000 have been created.  Many are low wage - the $13.50 per hour variety.
  • The challenges are enormous.  In Mexico, an automotive worker earns $7.80 per hour.  Productivity is inline with a U.S. worker.  The total compensation for a U.S. worker is $45.34 per hour.  The ratio doesn't scream out manufacturing renaissance.  The rise of the machines is taking also taking aim at the $45.34.  In 1950 it took 85 workers to make a widget.  In 2014 the company only needs nine workers.  Cheap natural gas doesn't impact that rise in productivity.
  • Only 1/10 of U.S. manufacturing  involves significant energy costs - and many engineers are working today to reduce this number.
  • Manufacturing accounts for only 12% of our economy - in 1953 the number was 28%.
  • In the age of advanced manufacturing and "manufacturing with code" we have the grossly overqualified (15% of cabbies have college degrees) while many companies cannot find the quality of workers needed to operate and maintain advanced manufacturing equipment.

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