America’s Manufacturing Renaissance?

Jobs in manufacturing are high productivity ones, typically making them the sine qua non for economic prosperity. The return of these high-value jobs to American shores in recent years should be a harbinger of good news for the U.S. workforce.

Alas, that is not how it has turned out. It’s just a further symptom of the nation’s leaders seemingly determined to unwind and shrink its middle class.

Nearly six million higher-wage jobs in U.S. manufacturing were lost since 1999, mostly to offshoring. The replacement jobs created in the recovery since 2008 have been lower wage ones in service sectors such as retailing.

In a hopeful sign, the outflow of manufacturing jobs was reversed in recent years. More than 200 companies — including Ford, Toyota, Whirlpool and Siemens — moved more production onshore. So far, it’s only a tiny trend, with perhaps 500,000 jobs returning, about 8% of the jobs lost.

Corporate hype

Even so, the trend is unceasingly lauded by the U.S. business community as a harbinger of better days to come. Corporate leaders like GE CEO Jeffrey Immelt don’t miss any opportunity to declare offshoring “outdated as a business model for GE appliances.”

It may mean better days to come for industry. The improvement in the manufacturing sector will certainly aid sagging U.S. productivity a bit. But contrary to all the rosy claims, inshoring holds little benefit for employees or the middle class. Indeed, rather than a panacea, inshoring looks a lot like something best described as “in-country offshoring.”

The U.S. has become a low-wage nation

Pardon the creation of yet another technical sounding phrase to capture a key trend in the U.S. economy. What do I mean?

The reflow of industrial jobs to the United States reflects two trends: the stagnation of U.S. median real wages for a generation, while real wages have been bid up in Latin America and Asia.

At the same time, real wages in other rich democracies – noticeably outside the Anglo-Saxon nations — have continued to increase.

In-Country offshoring means low-wage insecure jobs

New hires filing into reopened U.S. assembly lines are not being offered jobs paying union scale, beginning at $22 an hour and rising to $40 per hour or more. And they don’t come with solid benefits. The growth of two-tier wage scales has meant that 70% of jobs, for example, at GE plants today are low-wage, paying less than $14 an hour to start.

And those people are the lucky ones, with company slots.

In contrast, most new hires in the U.S. manufacturing sector are temps. Why would that be the case? Because anti-union states such as Tennessee have attracted the bulk of new multinational manufacturing investment.

There and elsewhere, new hires hold “on-demand” jobs – that is, temporary slots offered by contractors that carry few if any benefits. No sick pay, no vacation and no seniority protections. In fact, their hours of work are set each morning.

These temps work side by side with company employees. The only difference is they lack Nissan or GE logos on their shirts. And the pay? Temps working ten-hour shifts in new factories like the Nissan plant in Smyrna, Tennessee earn $10 – $18 an hour, or half of their fathers’ wage a generation ago.

The wrong kind of convergence

This new American paradigm means simply this: New hires in the U.S. manufacturing sector are little different from the commoditized employees common in the U.S. service sector at call centers, coffee bars and warehouses.

In fact, employers such as Amazon or Apple view them no differently from workers in Guangzhou. Their jobs in manufacturing are more productive than baristas, but their employment is legally downgraded even so, classified as independent contractors with scant worksite rights.

The anti-union leadership in states like Tennessee denies temps the normal option available in other democracies of worksite activities to fight for better work conditions.

Nations like Germany have struck a better balance between employees and employers. Its leaders, families and voters firmly resist efforts of companies such as Amazon endeavoring to export their U.S. antics – mainly to operate on the basis of a fully contingent workforce – to its operations there.

Less than meets the eye

The impact of these new trends on the overall plight of the U.S. middle class is evident. The U.S. Census Bureau reports that U.S. families in 2013 earned less than in 1989 — and 8.3% less than during the peak year 2007.

Looking to the future, policymakers in the United States need to acknowledge that there is less than meets the eye in the manufacturing revival being touted by the business community.

There are three pivotal elements needed to drive a genuine revival of American manufacturing: solid profits, briskly rising productivity and wages that rise apace with productivity like they do in other rich democracies.

Thus far, the American manufacturing renaissance is batting just one-for-three.