U.S. Factory Jobs are Gone?

JANUARY 30, 2014

bmwThe headline in the latest BusinessWeek article (Jan.27-Feb. 4, 2014) reads: Factory Jobs are Gone. Get Over It. The magazine writes: “Politicians think creating millions of high-tech manufacturing jobs is the answer. It isn’t.”  Over the past 60 years, U.S. GDP increased from $2.6 trillion to $15.5 trillion, which means that absolute manufacturing output more than tripled. Those goods were produced by fewer people. The number of employees in manufacturing was 16 million in 1953 (about a 1/3 of total nonfarm employment), 19 million in 1980 (about a 1/5), and 12 million in 2012 (about a 1/10). Service industries have taken up the slack. Even much of the value generated by U.S. manufacturing involves service work—about a 1/3 of the total. More than 1/2 of all people still employed in the U.S. manufacturing sector work in such services as management, technical support, and sales.

Over the past 30 years, manufacturers have spent more on labor-saving machinery and hired fewer (but more skilled) workers to run it. From 1980 to 2012 across the whole economy, output per hour worked increased 85%. In manufacturing output per hour climbed 189%. The proportion of manufacturing workers with some college education has increased from 1/5 to 1/2 since 1969.

Developing countries have taken over much of the low-skilled, low-capital production once done in the U.S. Consider the garment industry or tire manufacturing. Such low-tech work is even more mind-numbing and poorly paid than it was when the work was done in the U.S. through the 1970s. Many of the workers killed in the recent Rana Plaza garment factory collapse in Bangladesh earned just $3 a day. Some politicians have regretted the loss of similar jobs in the U.S. The question is: Do we want such jobs here now?

For every $1 spent by the federal government on retraining workers and helping them find jobs after they lost theirs to trade competition, the U.S. spends about $400 on Social Security and disability payments for those who exit the workforce rather than seek new work. So perhaps retraining programs are the solution.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.comProfessors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

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