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Obama’s Valentine to Manufacturers

In last week’s State of the Union address, Obama announced plans to encourage manufacturers to return to the United States and reverse a decades-long trend of offshoring manufacturing jobs to low-wage Asian countries. The devil is in the details, but the concept is not wrong. As Via Meadia has noted before, American manufacturing has had something of a resurgence of late, as rising wages in Asia have reduced the allure of offshoring.

This is a good first step, but the Administration could be doing more, particularly when it comes to energy. Ensuring a cheap and reliable energy supply is one of the best things the Obama Administration can do to lure factories back to America, and there is no shortage of tools to do so. Fracking, the expansion of offshore oil drilling, and the construction of new pipelines all have the potential to revolutionize America’s energy outlook; if Obama embraced these policies, it would send a strong signal to manufacturers that he’s serious about making America as hospitable to them as possible. And reviving the mining and extracting industries in the US would create domestic customers for the kind of specialized equipment that is most likely to be made in the US.

But while this is well worth pursuing, it’s no panacea for America’s economic woes. Manufacturing may see signs of life, but as the Times points out, it won’t be the kind of employment engine it was in the 20th century.  American manufacturing has become increasingly automated over the past few decades, and this trend will only accelerate going forward. More than offshoring, this is the true reason for the decline of manufacturing jobs, and the high-tech, low-hiring factories of the future will continue that trend. Daydreams about an American manufacturing boom won’t put Americans back to work or save the middle class.


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  • thibaud

    There is growth in US manufacturing employment, but it’s at the high end, where skilled labor is scarce. The reason it is scarce is our foolish insistence on putting every high school student through the same curriculum, on the presumption – heartily advocated by our current president – that “everyone should go to college.”

    This recalls the last decade’s insane notion that everyone should own a home – despite the fact that more than half of US households had negative net worth at the time.

    Likewise, not more than 15%, or maybe 20% if you stretch it, of American HS students are even remotely capable of real college-level study. Which is why so few US college students even graduate, let alone graduate and go on to careers in their chosen fields of study.

    Solution? As with the idiotic bipartisan push for near-universal home ownership, Obama’s foolish push for 40%+ college enrollment needs to be resisted. And replaced, with a robust system of early tracking – yes, tracking, putting kids on different tracks based on demonstrated interest and ability, at an early age – and vocational education that imparts mastery of high-demand trades.

    The Germans have shown how to do this successfully, in a way that does not increase inequality – in fact, vocational tracking would significantly DECREASE American income inequality – while preserving and advancing social solidarity.

    Long past time we restored vocational ed, and gave it a major push, abetted by the specialty and high value-added manufacturing industries that are desperately seeking trained workers in this country today.

  • Luke Lea

    According to standard Heckscher–Ohlin (ie, neoclassical) trade theory, the U.S should be specializing in capital intensive industries such as automobilte production, letting the Chinese and other low-wage countries do the labor-intensive manufacturing. This is well and widely understood.

    What is not understood is that the same theory predicts a shift towards relatively more labor-intensive production methods in those very same capital-intensive industries. Why? Because as wages fall robots that made sense back when auto workers were getting paid twice what they are now, no longer make sense.

    You might keep this in mind when you think about the future of auomation and employment in our most capital intensive industries.

    (Of course tariffs on low-wage imports from China would increase employment even more, just not in those same capital-intenive industries. By insisting on a balance of trade, not an end to trade, US manufacturing employment would take a big jump. This is going to happen sooner or later whether the Chinese like it or not. They better prepare.)

  • Aly

    Hi there – I work for a titanium components manufacturer here in Houston, TX. While the focus on manufacturing is something that is seriously welcome, you’re right in stating that there is some discrepancy between speeches and policies. Also, @thibauld and @LukeLea both make excellent points – well said, gentleman.

    Anyhow, thanks for sharing! – Aly

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