Now that the election’s over, we can stop debating tax rates, repealing Obamacare and whether Mitt’s dog rode on the roof of his car. Aside from gun laws now – which DO require serious consideration, the other key issue both Americans and politicians should be focusing on is job creation. One of the key sectors often discussed is “Manufacturing”. Manufacturing means many things, has many implications and I wanted to provide some insight into what it actually means to spend a career in manufacturing, why certain jobs continue to leave, and why some are coming back.
Manufacturing “High Paying Jobs” – One of the oft-quoted reasons manufacturing jobs are viewed as important to the economy is because they are traditionally referred to as “high paying”. In my assessment, this should be qualified with “high paying compared to other jobs with a similar skill level”. So, an engineer working in a manufacturing plant probably makes roughly the same as an engineer working for a design firm, a nuclear plant, or some other employer in the same locale. However, the unskilled labor can tend to make a killing compared to their peers outside the firm. Take a typical entry level blue-collar manufacturing role with a large multinational. You can basically have a high school degree, often with no prior work experience or no relevant experience for that matter, and make double what someone else working minimum wage in town makes. That’s just starting pay. Often times in manufacturing, there are opportunities for overtime which can widen this gap. And if you’re in a union? Forget about it – the disparity is huge. I’m not exaggerating at all, but I used to work in a plant where non-degreed employees were making well into the six figures in their twenties. Granted, they were often working a lot of overtime to do it, but if you’re pumping gas at the local gas station, you can work all the nights and weekends you want but you’re never going to make that kind of money. This translates into a lot of opportunity for people that wouldn’t have had it otherwise, and a lot of money for the local economy.
Manufacturing is NOT Glamorous – In So Many Ways – Aside from the fact that many manufacturing roles entail physical labor, getting dirty, sweaty, possibly injuring yourself, or just not having a cushy “desk job”, it’s usually not the type of job people think of as “cool” or a hot job. Ask a hundred college-aged kids what they want to do for a career and the answers will range from doctors and lawyers to Silicon Valley-types to marketing to the world of high finance to teachers. But you probably won’t hear many say they’re looking forward to a career in manufacturing. I’ll just say in my early years, I missed tons of social events, family events, holidays and basically, some of the best years of my life working. Sometimes, it was voluntary (like getting double time for working the day after Thanksgiving? why not?); whereas some holidays and many a weekend for mandatory since we just didn’t have weekend or holiday coverage. I traded my career and overtime dollars for experiences. I don’t have a ton of regrets and I’m glad I did it when I was young as opposed to having the same type of direct oversight role as a late thirties dad of three.
Manufacturing That’s Coming and Going –
As you can see, there’s been a long secular trend of declining jobs in manufacturing for decades now. However, with the economy improving slowly, we’re seeing an uptick. There’s the occasional headline like Apple bringing jobs back to the US for some of their units, but that’s purely a gimmick; it’s a few hundred jobs, while each plant that closes takes hundred with it.
The decline in manufacturing jobs isn’t solely due to the proverbial “greedy corporations” but there are numerous causes. For one, productivity continues to increase substantially year over year, meaning it requires fewer workers to produce the same output. We can thank technology, robotics, innovation, and competition for that. It’s a force that will continue unabated as long as there is innovation and competition in the world. The upside is that many jobs that continue to leave are the least desirable in many respects. We now have robotics for lifting, picking and placing, welding, pushing, pulling, sorting, assembling, inspecting and many other physical jobs that are either dangerous or quite boring. This pushes people into higher complexity roles and/or other careers altogether. You might think we’d be in a constant state of decline, but higher tech manufacturing brings jobs that have higher qualifications, higher pay and often provide employees with greater skills they can take elsewhere than if they were just inspecting widgets for defects on a line for 20 years. The other forces driving jobs into or back to the US are some benefits to doing business in the US. Namely, very cheap energy costs, being closer to the customer and lower landed costs (total of shipping, avoiding taxes/duties, etc). Even though Americans demand higher wages and now, with Obamacare, higher costs in general, this can still be offset by having a shorter supply chain, reduced inventory, lower transportation costs, avoiding some of the quality and timeline problems in dealing with China, India, Vietnam, etc. Just look at what’s going on with the port strikes. If you’re manufacturing in the midwest, you don’t have to contend with importing finished product into the US. While there are many headwinds, there are some things we still have going for us – for the people who want to make a career in manufacturing.