Tags: manufacturing | US | middle class | wages

Fortune: Manufacturing Comeback Won't Rebuild Middle Class

By Michelle Smith   |   Thursday, 22 Aug 2013 08:30 AM

The United States spent decades watching manufacturing jobs go overseas as the sector contracted. Now, some are projecting a renaissance, but perhaps the middle class shouldn't get too excited.

Experts and industry insiders point to indications that manufacturing activity is returning to the United States bringing long-lost jobs with it.

For example, Motorola Mobility plans to assemble smartphones in the Texas, Apple has announced plans for a Mac production line also in Texas, which will use components and equipment from Illinois, Florida, Kentucky and Michigan, and the Lenovo Group has opened a plant in North Carolina making Thinkpads, USA Today reported.

Editor’s Note: Obama Blunder Spawns Massive Profit Opportunity

About 2 million U.S. manufacturing jobs were lost during the recession, according to USA Today.

Stephen Gold, president of the Manufacturers Alliance for Productivity and Innovation, said manufacturing has already "75 percent recovered from the recession." By the fourth quarter of 2014, he foresees the sector returning to pre-recession levels, USA Today noted.

Over the next seven years Gold's organization projects that U.S. manufacturing could create 2.5 million to 5 million factory and service jobs, according to Fortune.

It's understandable why people get nostalgic upon talk of a revival of the industry, the magazine stated. Because there was a time when the average American could buy a house, raise a family and retire from the local factory.

But it's unlikely that that trend will return with new manufacturing activity, some warn.

One of the main drivers of the resurgence of manufacturing interest in the United States is the attractively low production costs. And one of the reasons that costs are low is because labor is cheap.

Fortune explained the average hourly earnings of production and non-supervisory employees were $8.43 for 2012, lower than $8.70 in 2009 and $8.75 in 2003, according to data from the Bureau of Labor Statistics.

Boston Consulting claims that by 2015, average labor costs will be about 16 percent lower in the United States than in the United Kingdom, 18 percent lower than in Japan, 34 percent lower than in Germany and 35 percent lower than in France and Italy.

U.S. manufacturing is becoming increasingly reliant on machines, which produce more for less. As manufacturing jobs faded, the bargaining powers of U.S. unions also waned, leaving them less equipped to help workers earn more in the future.

Stagnate wages will not renew the shrinking middle class, Fortune stated.

That's not the only problem the blue-collar labor force faces. It appears the roles in manufacturing are also changing.

USA Today says the Congressional Research Service found less than 40 percent of manufacturing employees are directly involved in actually making things. About 31 percent of people in the industry hold management and professional jobs.

The days of cavernous factories hiring thousands of workers are gone. "We have to moderate our expectations," James Manyika, director of the McKinsey Global Institute, told USA Today.

That means recognizing that manufacturing may create more jobs, but it probably won't rebuild the middle class, Fortune noted.

Editor’s Note: Obama Blunder Spawns Massive Profit Opportunity

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