Celebrate the Facts!
Corporate media, also known as Hate, Inc., values shareholder value primarily, not fidelity to facts, and as such panders to their specific tribal audience, and the narrative is never starker than in the discussion of manufacturing in the United States. However, the facts are murkier than either side presents. They present a future landscape of more of the same, however, this time with some hope for worker wage increases and benefits, if only because of labor shortages. The crucial value is productivity, and that will determine the future.
The purpose of this series of investigations is to provide an unbiased review of areas of interest, presenting primary data, not tribal political views or political candidate ‘talking points.’ For this edition, the data source is the United States Federal Reserve Bank of St. Louis, and the currency values are 2012 dollars, inflation-adjusted. The future is murky and dependent a great deal on good government policy.
Gross output is a measure of an industry's sales or receipts, including sales to final users in the economy (GDP) or sales to other industries (intermediate inputs). Gross output decreased during the pandemic but was on an upward trend; however, there are reasons to suspect that upward trend may not continue over the long term, primarily due to productivity issues.
Manufacturing workers' average hourly wages were about $18.60 in 2010 and approximately $22.80 in 2020, a significant increase. It is impossible to argue, however, that those values make manufacturing a destination for a career.
Productivity is the efficiency at which labor hours produce goods and services, measured as output per hour of labor. However, since 2011 there have only been two years of productivity growth in the manufacturing sector, suggesting endemic issues in the manufacturing sector’s approach to labor management, automation, training, compensation, or, more likely, a combination of all the above.
This aspect is of genuine concern for the maintenance and growth of American manufacturing and should be at the core of discussion for government and private industry. Absent improvement in productivity and arguably dramatic improvement rates, the country's welfare, workers, and shareholders are in jeopardy.
The manufacturing unemployment rate is lower than the general unemployment rate. The August 2021 prevailing unemployment rate declined to 5.2%, and the trendline is down, indicating rates will soon approach pre-pandemic values. The August 2021 unemployment rate for manufacturing was 3.6%, already approaching the theoretical lower efficiency limit at a 3.5% unemployment rate.
There is likely to be upward pressure on wages at these lower unemployment rates, perhaps providing some much-needed relief for workers. However, this data also suggests that giving benefits such as subsidized child care might be a requirement to bring more labor into the workforce.
Manufacturing as a percentage of GDP has declined but not as precipitously as the standard media representation. For example, in 2010, manufacturing was 11.9% of GDP at the end of the Great Recession, and in 2021, emerging from the pandemic recession, it was 11.1% of GDP.
The pandemic revealed specific problems with a free market economy with the shortages of strategic manufactured items such as computer chips, medical supplies, and medical equipment; however, whether the lessons learned from such can break partisan political logjams in Washington and result in long-term strategic policy change is doubtful.
The total number of workers in manufacturing was about 11.5 million in January 2010 and was about 12.4 million in August of 2021, about an 8% increase.
Investment in manufacturing has been declining since 2015, with a slight increase in 2019, possibly attributable to the corporate tax cuts in the 2017 tax bill, although the amount of investment has decreased by annual average calculations. The 2017 tax bill channeled money into shareholders’ accounts and did not increase investment as promoted by the proponents of the policy. Corporate welfare programs, like social entitlements, are most difficult to reverse.
The future of American manufacturing lies in productivity increases. Perhaps impending labor shortages will result in higher wages for workers, more benefits, better job training, and improved productivity. However, stagnant corporate investment rates in new plants and automation hinder the process.
Michael Donnelly investigates societal concerns with an untribal approach - to limit the discussion to the facts derived from primary sources so the reader can make more informed decisions.